Thorburn Consultants (NZ) Limited v Air Action Installation Limited
[2011] NZCA 317
•8 July 2011
| IN THE COURT OF APPEAL OF NEW ZEALAND |
| CA878/2010 [2011] NZCA 317 |
| BETWEEN THORBURN CONSULTANTS (NZ) LIMITED |
| AND AIR ACTION INSTALLATION LIMITED |
| Hearing: 22 June 2011 |
| Court: Randerson, Winkelmann and Keane JJ |
| Counsel: P J Napier and N J Pye for Appellants |
| Judgment: 8 July 2011 at 3.30 p.m. |
JUDGMENT OF THE COURT
A The appeal is allowed.
BJudgment is entered in favour of the appellant on the respondent’s claim against the appellant as third party.
CThe appellant is entitled to costs against the respondent on the summary judgment application in the High Court, such costs to be fixed by that Court.
DThe respondent must pay to the appellant costs as for a standard appeal on a band A basis together with usual disbursements.
____________________________________________________________________
REASONS OF THE COURT
(Given by Randerson J)
Introduction
Kelly Tarlton’s Underwater World Aquarium is a well known tourist attraction situated on Auckland’s Tamaki Drive. It occupies parts of the pumping station formerly used to discharge the city’s waste water into the Waitemata Harbour. One of the old sewage holding tanks is still used as an emergency facility for sewage overflows.
During 2004, Kelly Tarlton’s underwent a major refurbishment. The owners (Tourism Holdings Ltd) engaged Hawkins Construction Ltd as head contractor. The appellant (Thorburn) was engaged by Tourism Holdings as the lead consultant for the project. Thorburn is a civil, structural and environmental engineering practice. One of its directors, Mr Craig Thorburn, is a marine biologist who once worked as curator at Kelly Tarlton’s.
In the first part of 2005, before completion of the refurbishment, testing showed that the air ventilation systems were not operating satisfactorily. In circumstances we later describe in more detail, the respondent (Air Action) was engaged directly by Tourism Holdings to undertake work designed to remedy the air ventilation issue. This work involved the installation of new PVC ducting to provide an airflow bypass through the holding tank used for emergency overflow purposes. This work was carried out in February/March 2005 by a sub-contractor to Air Action, Plasfab Installations 1977 Limited (Plasfab).
On 12 June 2006, a pumping station operated by Watercare Services Ltd failed during a power cut and sewage flowed into the holding tank. In consequence, sewage and sea water flowed into Kelly Tarlton’s aquarium causing extensive damage. Tourism Holdings later issued proceedings in the High Court claiming damages of $2.9 million from Thorburn, APG Thompson Ltd (Thompsons), the mechanical engineering consultant for the project, Air Action and Plasfab. Tourism Holdings Ltd alleges that the damage to its aquarium was caused by the PVC ducting breaking free from its connection to existing ventilation piping while under pressure from the emergency inflows into the tank, combined with seawater ingress at high tide.
The issue in this appeal is confined to Air Action’s contention (originally included in a cross-claim) that Thorburn owed it a duty of care. The main allegation is that Thorburn should have warned Air Action that the holding tank was part of the emergency overflow system for a sewage pumping station and that the water in the chamber could exceed the high tide mark if the emergency overflow were utilised. It is said that the bypass pipe would have been designed more robustly if Air Action had been aware of the pressures the piping might be required to withstand if the emergency overflow were to occur. It is also said that Thorburn should have informed Air Action that the consent of Watercare Services was required before entering the chamber or undertaking any work within it.
Thorburn sought summary judgment against Air Action, contending that it did not owe a duty of care to Air Action and that judgment should be entered against Air Action on its cross-claim. In a judgment delivered on 3 December 2010, Associate Judge Bell dismissed Thorburn’s application for summary judgment.[1] The Associate Judge could not say conclusively that Thorburn did not have any liability in tort. Any liability on the part of Thorburn would turn on a careful examination of what was said and done by Thorburn at the time it was involved in discussions about the site conditions for the repair work to be undertaken. Whether Air Action would have acted differently if it had been aware of the site conditions was also viewed by the Associate Judge as a question of fact for trial.
[1]Thorburn Consultants Ltd v Air Action Installation Ltd HC Auckland CIV-2009-404-8051, 3 December 2010.
For procedural reasons we later mention, the Associate Judge ordered Air Action to issue a third party claim against Thorburn. A statement of claim has been filed to comply with this order detailing the allegations Air Action makes against Thorburn.
The issue on appeal is whether the Associate Judge was correct to dismiss Thorburn’s application for summary judgment and, in particular, whether he was correct to find that:
(a)Thorburn arguably owed a duty of care to Air Action; and
(b)The question whether Air Action would have adopted a different design was a matter for trial.
The facts in more detail
It is common ground that there was no contractual relationship between Thorburn and Air Action. The only contractual relationship involving Thorburn was with Tourism Holdings. Thorburn was engaged under an agreement in January 2004 to act as the lead consultant for the refurbishment project at Kelly Tarlton’s. There were a number of other consultants engaged by Tourism Holdings including Thompsons. The scope of services undertaken by Thorburn was relevantly described in the agreement with Tourism Holdings:
Principal Consultant
Liaise between consultants, contractor and client for
·The design of the project deliverables.
·The establishment of the construction contract.
·Attending on the construction phase assisting Hawkins Project Manager.
·Attending on the commissioning of plant.
·Resource Consent work excluded.
As well, Thorburn was to advise on structural issues not relevant for present purposes.
According to Mr Craig Thorburn’s affidavit, Thompsons were the engineers for the mechanical services for the project including air handling plant and control. Mr Gregory Howley was the contracts manager for Air Action. He described Air Action’s business as the supply, installation and commissioning of heating, ventilation and airconditioning systems. Air Action was a sub-contractor to Hawkins for the purposes of the refurbishment project.
Under its sub-contract, Air Action installed new ducting and other equipment to provide ventilation for newly installed toilets. As part of its sub-contract, Air Action undertook airflow tests on 6 January 2005 and noted that the airflows did not meet the levels required in the design drawings. Mr Howley reported the outcome of the tests to Hawkins with copies to Mr Tony Thompson of Thompsons, Craig Thorburn and Gary McMurtrie, who was Kelly Tarlton’s maintenance manager. At the request of Mr Thompson, Mr Howley undertook further pressure readings at different points in the system to establish where the restriction on airflow was located. Mr Howley identified that the problem area was below the road/carpark. He must have communicated the results to Mr Thompson because Mr Thompson sent an email to Messrs McMurtrie, Thorburn and Howley on 26 January 2005 with a drawing indicating the location of the probable cause of the airflow problem. The drawing identified a fitting in the toilet exhaust that needed to be reviewed.
At Mr Thompson’s suggestion, a site meeting was held on 3 February 2005. It is not in dispute that the site meeting was arranged by Craig Thorburn. He met with Mr Thompson, Mr McMurtrie and Mr Howley at the underground chamber entrance to inspect the area where the ventilation problem was thought to be located.
A manhole cover was removed by Kelly Tarlton’s staff to enable access to be gained via a vertical ladder into the underground chamber. All those present at the meeting went into the chamber except Mr Thompson who had a physical disability at the time. Mr Howley’s affidavit then states:
I asked Gary [McMurtrie of Kelly Tarlton’s] what was the highest the water came to in the chamber. Gary pointed to the high tide mark on the wall of the chamber and said that the water did not go higher than that. The existing asbestos cement horizontal pipe was situated above the highest level mark.
There is no evidence that Craig Thorburn made any comment about the advice given by Mr McMurtrie or that anyone present informed Mr Howley that the chamber functioned as an emergency sewer overflow.
Craig Thorburn took photographs of the existing pipework in the chamber and later supplied these to those who had been present at the meeting. When the men reached the surface after inspecting the chamber, it is agreed there was a discussion about how the ventilation problem could be overcome. There is disagreement about the content of that discussion. Mr Howley says Craig Thorburn took part in a discussion in which an agreed solution to the problem was reached. In essence, this involved the installation of an airflow bypass grafted onto the existing concrete pipe above the highest water mark as identified by Mr McMurtrie. Mr Howley accepted it would be necessary for Air Action’s fabricator, Plasfab, to visit the chamber to measure up the work. He observes in his affidavit that this would need either Mr McMurtrie or Mr Thorburn to be present (presumably to allow access to the chamber).
Mr Thorburn disputes that any solution was agreed at the site meeting. He accepts that a number of conceptual ideas were put forward but says no specific solution was agreed. None could be without proper measurements, according to his account. While the installation of the bypass duct at a parallel height to the existing ducting may have been the favoured option by the contractor at the time, Mr Thorburn says no solution was agreed and he did not offer any view on the options proposed.
What happened thereafter is largely undisputed. Apart from sending to the others present the photographs he had taken at the site meeting, Thorburn had no further involvement with the solution and did not take any part in supervising the work. After the meeting, Mr Howley prepared a schematic diagram of the proposed PVC ducting and provided the diagram to Plasfab to price the work. This diagram was not sent to Thorburn at any time.
Thorburn had no further involvement because, with effect from 7 February 2005, Tourism Holdings advised Hawkins and Thorburn that it would deal directly with Air Action and Thompsons in respect of the repair work. Tourism Holdings explained that it did not wish to have the repair work carried out as part of the main redevelopment contract. In order to keep costs down, it preferred to deal directly with Air Action and to pay for the work from a separate maintenance budget.
On 24 February 2005 Plasfab provided Air Action with two options for the work required. Mr Howley discussed these with Mr McMurtrie who decided which option to adopt. Thereafter, Mr McMurtrie and Mr Howley, along with a representative from Plasfab, returned to the chamber to scope the work. Plasfab returned later to measure and then to carry out the installation work in March 2005.
On 2 March 2005, Craig Thorburn emailed various consultants in connection with the redevelopment project noting as one of the items that Mr Thompson was to provide confirmation that Air Action had met the specification supplied by Thompson for the performance of the ventilation system. Mr Thorburn stated that he required each of the consultants to “be responsible for following up in their own areas” with Hawkins and the relevant sub-contractors. At this point, Thorburn was concerned to ensure that the project work as a whole was complete in order to obtain a Code Compliance Certificate from the Auckland City Council.
On 9 April 2005 Thorburn asked Thompsons for confirmation that they were comfortable with the final design of the ventilation system and that it met their design specifications. Thompsons gave that confirmation shortly afterwards.
Mr Howley says that at no time was he informed that the chamber was still connected to the sewage system. He also says he was shocked to learn that, at the time of the site visit on 3 February 2005, Craig Thorburn was aware that the consent of Watercare Services was required before any work or access in the chamber could be undertaken. Mr Howley attaches to his affidavit a letter (apparently obtained on discovery) from Watercare Services to Thorburn dated 5 July 2004 in which Watercare Services is given permission under s 39 of the Auckland Metropolitan Drainage Act 1960 to access and undertake work in the sewer outfall in accordance with plans submitted and conditions stipulated. The letter specifically advises Thorburn that the sewer is an emergency overflow for the Orakei sewage pumping station and would likely operate during a power failure. It is also stated that the conduit is subject to tidal fluctuations. A further requirement was that work inside the sewer required a contractor who was certified to work in a confined space.
Mr Howley said that neither Air Action nor Plasfab were certified for work in confined spaces. He says he would not have gone down into the chamber and Air Action would not have quoted for the work if he had known the chamber was still connected to the sewage system and required specialist contractors to work in the chamber.
The salient features to emerge from the facts disclosed by the affidavit are:
(a)At the time of the site visit on 3 February 2005 and until 7 February 2005, it is reasonable to conclude that Craig Thorburn believed he was attending the site meeting as part of his role as lead consultant in respect of the refurbishment project. In that respect, Thorburn’s role was primarily that of liaison between the consultants, Tourism Holdings and Hawkins. Thorburn had no relevant expertise in ventilation and airflow issues.
(b)Similarly, Mr Howley of Air Action assumed he was being asked to attend as part of his sub-contract with Hawkins. It was not until later that he received any documentation directly from Tourism Holdings about the work.
(c)However, within a few days of the site meeting, the basis on which the work was to be undertaken was clarified. With effect from 7 February 2005, Tourism Holdings advised that it would contract directly with Air Action. Neither Thorburn nor Hawkins were to be involved in the design or supervision of the work.
(d)The discussions which took place at the time of the site visit were necessarily preliminary in nature. As Mr Howley acknowledged, more work needed to be done beyond the broad concepts discussed at the site meeting. The further work included Mr Howley’s preparation of a diagram or plan and further visits to the chamber by Mr Howley, Mr McMurtrie and the Plasfab representative to scope the work required.
(e)Thorburn had no further involvement with any of this further work or with carrying out the repair work except to inquire when it was complete and whether Thompsons’ design specifications were met.
(f)Thorburn was not shown any plan or diagram of the work. The details of the work were settled after the site visit by Air Action, Thompsons and Tourism Holdings.
(g)Given Thompsons’ role as the consultant engineer responsible for mechanical services (including ventilation), the fact that Thompsons had been working with Air Action to seek a solution to the airflow issue immediately before the site visit and Mr Tony Thompson’s attendance at the site visit, it is reasonable to suppose that Air Action would look to Thompsons for advice about the work.
(h)At the time of the site visit, Mr Howley’s inquiry as to the maximum level of high tide was directed to Mr McMurtrie of Tourism Holdings, not to Craig Thorburn. This does not suggest any reliance by Air Action on Mr Thorburn. Indeed, Mr Howley makes no assertion of reliance on Thorburn.
(i)The information Air Action says should have been disclosed was largely factual in nature and did not require any special expertise.
(j)Given the altered contractual arrangements, it was reasonable for Thorburn to assume that it would have no further role in relation to the repair work and that it would have no responsibility to provide Air Action with information about site conditions at the chamber.
The judgment under appeal
The Associate Judge noted the unusual procedural history. Thorburn had sought summary judgment against Tourism Holdings as plaintiff. The application was served on Tourism Holdings but not on the other defendants. Tourism Holdings consented to summary judgment in favour of Thorburn. As the Associate Judge noted, Thorburn was no longer a defendant to the claim by Tourism Holdings but Thompsons and Air Action still had unresolved cross-claims against Thorburn.
Thorburn’s next step was to apply for summary judgment against Thompsons and Air Action in respect of their cross-claims. Thompsons did not resist the application and discontinued their cross-claim against Thorburn. The result of these steps was that Thorburn remained involved in the proceedings only as a result of Air Action’s unresolved cross-claim.
Conceptually, there was a potential difficulty with Air Action’s cross-claim since Air Action sought contribution or indemnity from Thorburn under s 17 of the Law Reform Act 1936. A claim under that provision is available as between joint tortfeasors. However, once Thorburn obtained summary judgment against Tourism Holdings, Thorburn could no longer be regarded as a joint tortfeasor. Since Air Action was not served with Thorburn’s application for summary judgment against Tourism Holdings, Air Action was not necessarily bound by the outcome of that application and, in any event, it could have amended its cross-claim against Thorburn to plead more directly that Thorburn owed it a duty of care. Despite these difficulties, the parties were content before the Associate Judge to proceed on the basis that the real issue was whether there was any arguable basis for Air Action’s contention that Thorburn owed Air Action a duty of care.
A further potential procedural difficulty was whether the summary judgment procedure was available in respect of a cross-claim between defendants. It is unnecessary to decide this point since, faced with this procedural imbroglio, the Associate Judge sensibly ordered that Air Action regularise its position by bringing third party proceedings against Thorburn. No issue is taken with the Associate Judge’s orders in that respect. The Associate Judge noted that a summary judgment application by a defendant should not be granted if the claim against it could be amended successfully. The summary judgment procedure is available in respect of third party claims.[2]
[2] Rule 12.16 of the High Court Rules.
The Associate Judge approached the summary judgment application on the basis of the principles laid down by this Court in Westpac Banking Corporation v M M Kembla New Zealand Ltd.[3] Those principles are not in dispute. In this case, Thorburn has the onus of proving on the balance of probabilities that Air Action’s claim against it cannot succeed. Summary judgment is suitable for cases where abbreviated procedure and affidavit evidence will sufficiently expose the facts and the legal issues. However, summary judgment will be inappropriate where there are disputed issues of material fact or where material facts need to be ascertained by the court and cannot confidently be concluded from the affidavits.
[3] Westpac Banking Corporation v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 at [58].
After reciting the facts, the Judge noted that aspects of the site visit on 3 February 2005 were disputed. He regarded the accounts given by Mr Howley and Craig Thorburn as plausible but said he could not determine which was correct on a summary judgment application. He assumed that, at trial, Mr Howley’s account might be accepted.
The Associate Judge noted that the decision of this Court in R M Turton & Co Ltd (in liq) v Kerslake & Partners[4] suggested that, in construction matters, tort claims outside the framework of the contractual arrangements should not generally be entertained. However, the Associate Judge observed that each case must be determined on its own facts. The Associate Judge then stated:
[38] But there are arguments the other way. Thorburn Consultants was project manager at the time of the site visit on 3 February 2005. It is arguable that a project manager has a responsibility to share with contractors and sub-contractors on site information about unusual conditions that might arise. Taking part in a site visit to address the work to be done on the ducting, when design options are discussed, may trigger a requirement for the project manager to tell the contractors that the ducting may be submerged in effluent.
[4] R M Turton & Co Ltd (in liq) v Kerslake & Partners [2000] 3 NZLR 406.
The Associate Judge noted that, in Rolls Royce New Zealand Ltd v Carter Holt Harvey Ltd,[5] this Court struck out claims in tort which it considered were excluded by the contractual arrangements between the parties but left standing claims relating to physical damage and the claim under the Hedley Byrne principle. In this case, the Associate Judge noted that the claim was not purely for economic loss (as was the case in Turton v Kerslake). There was physical damage to the premises as well. The Associate Judge considered that a determination as to whether Thorburn owed a duty of care to disclose to Air Action that the ventilation piping might be submerged in effluent could only be determined at trial after all the evidence had been heard.
[5] Rolls Royce New Zealand Ltd v Carter Holt Harvey Ltd [2005] 1 NZLR 324.
The Associate Judge went on to refer to Thorburn’s knowledge about the need for the consent of Watercare Services to work in the sewage overflow chamber. The Associate Judge said that Thorburn was carrying out Tourism Holdings’ responsibility under the Health and Safety in Employment Act 1992 to ensure that all practicable steps were taken to ensure that no hazard harmed contractors and their employees. Arguably, he said, informing Air Action about the need for the relevant consent and to comply with the safety requirements laid down by Watercare Services was a practicable step that Thorburn could have taken.
We make four points on the Associate Judge’s observations in relation to safety in the workplace. First, there was no reference to this in Air Action’s cross-claim or in its notice of opposition to the summary judgment application at the time of the hearing in the High Court. The statement of claim subsequently filed by Air Action in the third party proceedings does not suggest Thorburn had responsibility for the safety of persons working in the chamber. Air Action’s counsel did not seek to rely on this before us. Secondly, there is no evidence that Thorburn took responsibility on behalf of Tourism Holdings for safety in the workplace. Thirdly, the responsibility under s 16 of the Health and Safety in Employment Act falls on the person who controls the place of work. There is no evidence that Thorburn was controlling the place of work. At the time of the site visit, the owner’s representative was present and, prima facie, controlled the chamber during the inspection. Fourthly, responsibility under s 18 of the Health and Safety in Employment Act falls upon a “principal” who, in terms of s 2 of the Act, is a person who engages another person (otherwise than as an employee) to do any work for gain or reward. Thorburn was not a principal in the sense used in the relevant legislation.
As already noted, the Associate Judge concluded that he could not say conclusively that Thorburn did not have a liability in tort. As to the submission made by Thorburn that there was no evidence that Air Action would have acted any differently if Thorburn had complied with the duty contended for, the Associate Judge regarded this as essentially a question of fact for trial.
The Associate Judge agreed with Thorburn that the allegations that it was involved in the discussions about the design of the repair work and that it approved the design for the repair work were not sustainable. The Associate Judge noted that Thorburn did not have the expertise to design or approve ventilation designs or ventilation work and that it was not required to do so. He considered Thorburn to be on “safe ground” in saying that it did not have any responsibility for the installation of the PVC piping after 7 February 2005 when Tourism Holdings informed Thorburn that it was not to be involved. Those findings by the Associate Judge are not the subject of any cross-appeal.
Submissions
For the appellant, Mr Napier submitted in reliance on this Court’s decisions in Turton v Kerslake and Rolls Royce[6] that the Courts should adopt a cautious approach in finding duties of care are owed outside the contractual relationships adopted by the parties. He emphasised the absence of any contractual relationship between Thorburn and Air Action, the preliminary nature of the discussions at the site meeting and the absence of any evidence that Mr Howley was looking to, or relying upon, Thorburn for advice. He noted the case did not involve any allegation of misstatement. Effectively, Air Action was alleging a duty to warn. There was, he submitted, no such duty in the present case.
[6] Cited at [32] and [33] above.
Mr Napier also submitted there was no proof that any failure on the part of Thorburn to inform Air Action about the site conditions or the need for a consent from Watercare Services was causative of loss. The evidence from Mr Howley that he would not have gone into the chamber or quoted for the work had he known the true position was, Mr Napier submitted, a classic “but for” argument which this Court rejected in Price Waterhouse v Kwan[7] as a proper basis to establish a causative link.That case is authority for the proposition that the plaintiff must prove the alleged breach of duty caused the loss claimed and did not merely provide the opportunity for its occurrence.
[7] Price Waterhouse v Kwan [2000] 3 NZLR 39.
Mr Turner submitted that the Associate Judge’s decision was correct essentially for the reasons the Judge gave. He emphasised that there were material facts in dispute, particularly the content of the discussion between those present at the site visit. The Associate Judge had correctly concluded that the facts relating to that discussion needed to be explored at trial. As such, summary judgment was inappropriate. While accepting that Thorburn had no responsibility after 7 February 2005, it was in possession of specialist knowledge about the use of the chamber for emergency sewer overflow and this information should have been disclosed to Air Action by Thorburn at the time of the site visit. Mr Turner placed importance on Mr Craig Thorburn’s knowledge of the requirements of Watercare Services which he characterised as specialised knowledge which, on the evidence, was not known by Air Action. Mr Turner finally submitted that the Associate Judge was correct to find the issue of causation of loss was a question of fact properly to be considered at trial.
We record that there was a difference of view between counsel about the proper scope of the issues to be determined on appeal. Mr Napier submitted that the alleged breach of the duty of care should be confined to the allegation that Thorburn failed to disclose that the ventilation pipe might be submerged in effluent whereas Mr Turner submitted that it was appropriate to include consideration of whether Thorburn had breached a duty of care owed to Air Action by contributing to the discussion at the time of the site visit and to the “agreed solution” which included the height at which the additional piping would be fixed.
The evidence relevant to the issues was before the High Court and the notice of opposition to summary judgment filed by Air Action referred to the possibility of a breach of duty arising in the respects identified by Mr Turner. The statement of claim in the third party proceedings does so as well. In the circumstances, we will consider the issues Mr Turner identified.
Did Thorburn arguably owe a duty of care to Air Action?
It is now well settled that, when deciding whether a duty of care should be recognised, the question is whether, in the light of all the circumstances of the case, it is fair, just and reasonable to impose such a duty. In cases where a novel duty of care is suggested, policy considerations are important. But in a case such as this, the principal area of inquiry is the degree of proximity or relationship between the parties. As this Court recognised in Rolls Royce,[8] the inquiry into proximity is more than a simple question of forseeability. Of particular importance in a case such as this is the contractual background as an indication of how the parties intended their relationship to be regulated.
[8] Rolls Royce New Zealand at [58]–[59].
This case does not involve any allegation of negligent misstatement. It is properly characterised as an omission by Thorburn to inform Air Action of the site conditions, in particular that the proposed location of the pipe might be submerged in effluent in emergency situations, and that the consent of Watercare Services was required for site access and for the work itself. In cases such as this, issues of assumption of responsibility and reliance arise. In the most recent edition of Stephen Todd Law of Torts it is said that:[9]
... in cases involving non-disclosure of information or a failure to warn, there may be a duty to disclose or to warn, but only where there has been a voluntary assumption of responsibility and reliance on that assumption.
[9] Stephen Todd (ed) Law of Torts (5th ed, Brookers, Wellington, 2009) at [5.8.04].
Whether a duty to warn should be imposed depends upon considerations not dissimilar to those which are relevant to a Hedley Byrne claim for negligent misstatement. Indeed, Lord Goff has observed that the Hedley Byrne principle could be extended to omissions.[10] Whether there has been an assumption of responsibility and whether the plaintiff has relied on the defendant are critical issues. The ability to provide the advice is not sufficient, by itself, to justify the imposition of liability.[11]
[10]Henderson v Merrett Syndicates Ltd [1995] 1 AC 145 at 181 approving Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp [1979] Ch 384 at 416; Michael Jones (gen ed) Clerk & Lindsell on Torts (20th ed, Sweet & Maxwell, London, 2010) at [8–93].
[11] Stephen Todd (ed) Law of Torts (5th ed, Brookers, Wellington, 2009) at [5.8.04].
There is no absolute duty to warn as William Young P observed in Hobson v Attorney-General.[12]As Tipping J noted in the Supreme Court on appeal:[13]
Strictly speaking the duty is to exercise reasonable care, fulfilment of which may require a warning. A duty to warn is nevertheless a convenient shorthand phrase.
[12] Hobson v Attorney-General [2007] 1 NZLR 374 (CA) at [107]–[108].
[13] Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 (SC) at [83], fn 132.
For present purposes, the court must examine closely the relationship of the parties including the contractual and commercial context. Consideration must be given to whether, viewed objectively, there has been an assumption of responsibility by Thorburn towards Air Action. Whether there is evidence of reliance by Air Action upon Thorburn to provide the information at issue is also an important factor. In the end, the crucial question is whether there is a sufficiently close relationship between Thorburn and Air Action to justify the imposition of a duty of care.[14]
[14]It is sometimes said there needs to be a special relationship – see the observations of Tipping J speaking for himself, Blanchard and McGrath JJ in Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [85]. But this may be simply another way of saying the relationship must be sufficiently close or proximate.
We have concluded that the Associate Judge was in error in finding there was an arguable case that Thorburn owed a duty of care to Air Action. We can state our reasons for this conclusion briefly. Regard must first be had to the contractual relationships. As already noted, there was no contractual relationship at any time between Thorburn and Air Action. Under the refurbishment contracts, Thorburn’s contractual relationship was with Tourism Holdings. Air Action’s contractual relationship was as a sub-contractor to Hawkins as head contractor. While Thorburn was the lead consultant for the project, it had no specific expertise in ventilation issues. Its role was one of liaison or co-ordination between the other consultants, Hawkins and Tourism Holdings. The other consultants to the project included Thompsons who had specific responsibility for advice in relation to mechanical services including ventilation.
Under its sub-contract, Air Action had responsibility to provide ventilation for the newly installed toilets in the Kelly Tarlton’s development. It was also responsible for undertaking airflow tests which it did in early January. But these showed that the airflow pressures were below those specified by Thompsons. It was Thompsons who prepared a drawing in late January 2005 indicating the location of the probable cause of the airflow problem and identifying a fitting that needed to be reviewed. And it was Mr Thompson’s suggestion that the site meeting be held. Mr Craig Thorburn arranged the meeting as part of Thorburn’s liaison role for the project and because it was part of its responsibility to Tourism Holdings to attend on the commissioning of the plant.
Craig Thorburn was only one of those present at the site meeting. Significantly, Mr Howley did not ask Mr Thorburn about the high water mark in the chamber. Rather, he addressed his question to the Tourism Holdings representative, Mr McMurtrie. This gives rise to the clear inference that Mr Howley was not looking to Craig Thorburn for advice but, logically, to the representative of the owners who could be expected to have the most reliable knowledge of such issues. Importantly too, Mr Howley has not deposed to any reliance upon Craig Thorburn or his firm for advice about site conditions.
As to the discussions which Mr Howley said followed at the site meeting when the men returned to the surface, it is unnecessary to resolve the factual dispute which the Associate Judge identified. Accepting, for the purpose of summary judgment, Mr Howley’s version of what took place in this discussion, it was plainly preliminary in nature. Mr Howley himself acknowledged that further work and investigations would be necessary before any repair work could proceed. That this was the case is corroborated by the events which followed, none of which involved Thorburn. Mr Howley prepared a diagram outlining the proposed repair work and sent it to Plasfab to price. If Air Action had been looking to Thorburn for advice, we would have expected Air Action to send the diagram to Thorburn. That did not happen. Moreover, there were further site visits and investigations as Thorburn was entitled to assume would occur subsequent to the site visit. Mr McMurtrie and Mr Howley along with a Plasfab representative returned to the chamber to scope the work after Plasfab had provided to Air Action two options for the work required. Plasfab itself later returned to measure and then to carry out the installation work.
It is also significant that, within four days of the site visit, Tourism Holdings made it clear to Thorburn and Hawkins that they were not to be involved in the repair work at issue. Rather, Tourism Holdings would deal directly with Air Action outside the contractual arrangements for the overall project. Although Mr Howley maintained he did not know this until later, there is no dispute that Tourism Holdings did contract directly with Air Action for the repair work. It invoiced Tourism Holdings rather than Hawkins as head contractor.
As the Associate Judge recognised, Tourism Holdings was just as likely to know of the site conditions as Thorburn. It is also reasonable to infer that Tourism Holdings and Hawkins were aware of the need for the consent from Watercare Services since it had been required earlier for the purposes of the refurbishment contract. Given the preliminary nature of the meeting, Thorburn was entitled to assume that Tourism Holdings would be responsible for providing Air Action with any necessary advice in those respects.
In short, we conclude that the circumstances do not point to any assumption of responsibility by Thorburn. The absence of any evidence of reliance on Thorburn by Air Action (in circumstances which clearly called for some evidence by Mr Howley on this issue) also tells strongly against the existence of any duty of care on the part of Thorburn.
Was the Associate Judge correct to find that the question whether Air Action would have adopted a different design was a matter for trial?
Although it is alleged that a more robust design would have been adopted if Air Action had been aware of the nature of the site conditions, Mr Howley’s affidavit does not make that assertion. Rather, his evidence was that if Air Action had been aware of the content of the letter from Watercare Services to Thorburn about the requirements for working in the chamber, Air Action would not have quoted for the work.
We accept Mr Napier’s submission that Air Action’s case in this respect effectively proceeds on a “but for” basis. Air Action’s submission is that it would never have become involved in the work had it been apprised of Water Care’s requirements. To assert that but for Thorburn’s failure to disclose the relevant information Air Action would not have been involved at all, does no more than raise an evidential basis that Thorburn, by their alleged breach, provided the opportunity for the loss to occur.
Our view on the second issue might not have been sufficient on its own to allow the appeal but, in the light of our firm conclusion that there was no arguable duty of care owed by Thorburn to Air Action, the appeal must be allowed.
In formal terms:
(a)The appeal is allowed.
(b)Judgment is entered in favour of the appellant on the respondent’s claim against the appellant as third party.
(c)The appellant is entitled to costs against the respondent on the summary judgment application in the High Court, such costs to be fixed by that Court.
(d)The respondent must pay to the appellant costs as for a standard appeal on a band A basis together with usual disbursements.
Solicitors:
Keegan Alexander, Auckland for Appellant
Fortune Manning, Auckland for Respondent