Weaver v HML Nominees Ltd
[2015] NZHC 2080
•28 August 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2013-404-3130 [2015] NZHC 2080
BETWEEN ANN-LOUISE EVELYN CHANTAL WEAVER
and GRAHAM WILLIAM ANDERSON
Plaintiffs
AND
HML NOMINEES LIMITED First Defendant
HELEN MARTHA MOORE
Second Defendant
Continued…
Hearing: 9, 10, 11, 12, 13, 16, 17, 18, 24 and 25 March 2015 Counsel:
T J Rainey and J Heard for plaintiffs
D R Bigio and C I Hadlee for first and second defendants
D J Barr and S Meares for third defendant
No appearance for first and tenth third party
N J Scampion and C Campbell for seventh third party
No appearance for eighth third party
H Rice for ninth third partyJudgment:
28 August 2015
JUDGMENT OF KATZ J
This judgment was delivered by me on 28 August 2015 at 4:30pm Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
Solicitors: Rainey Law, Auckland LeeSalmonLong, Auckland Simpson Grierson, Auckland Wilson Harle, Auckland
Rice & Co, Auckland
Counsel: D R Bigio, Shortland Chambers, Auckland
N J Scampion, Shortland Chambers, Auckland
WEAVER & ANDERSON v HML NOMINEES LIMITED [2015] NZHC 2080 [28 August 2015]
AUCKLAND COUNCIL
Third Defendant
STONESCAPES LIMITED (IN LIQUIDATION)
First Third Party
FLEXCO (NZ) LIMITED
Second Third Party
ASHTON MITCHELL ARCHITECTS LIMITED (DISCONTINUED)
Third Third Party
BUILDING CODE CONSULTANTS LIMITED (DISCONTINUED)
Fourth Third Party
KELVIN LEONARD WALLS (DISCONTINUED)
Fifth Third Party
COOPER ROOFING COMPANY (DISCONTINUED)
Sixth Third Party
FLEXCO (NZ) LIMITED
Seventh Third Party
MOHAN ROOFING SERVICES LIMITED
Eighth Third Party
POINT CONSTRUCTION LIMITED (DISCONTINUED)
Ninth Third Party
STONESCAPES LIMITED (IN LIQUIDATION)
Tenth Third Party
JACKSON CLAPPERTON AND PARTNERS LIMITED (DISCONTINUED)
Eleventh Third Party
Table of Contents
Introduction ..........................................................................................................[1]
What are the defects?...........................................................................................[7] Stone cladding [7] Garage cladding [23] Garage roof ]29] The chimney flashing [35] Main entrance to the house [36] Flu vent [47] Summary/conclusion on defects [49]
Is HML Nominees’ liable for the defects? ........................................................[54] The scope of the vendor warranties [55] Were the vendor warranties breached in relation to the stone cladding
defects? [68] Were the vendor warranties breached in relation to the chimney flashing
and flu defects? [70] Did HML Nominees make misrepresentations regarding the property? [71]
Is Ms Moore liable for any of the defects? .......................................................[80]
Is the Council liable in respect of its issue of building consents?...................[86]
Is the Council liable in respect of its inspections/issue of code
compliance certificates? .....................................................................................[89]
Relevant legal principles [89] The stone cladding defects [92] Chimney flashing and flu defects [96]
Estoppel issues ....................................................................................................[97] Relevant legal principles [98] Was the Chief Executive’s decision a judicial decision? [101] Are the parties the same? [111] Did the Chief Executive determine an identical issue to one that is
raised in this case? [113] Should issue estoppel apply in this case? [119]
The Council’s third party claim against Stonescapes ...................................[131] The Council’s third party claim against Flexco ............................................[136] HML Nominees’ third party claim against Flexco ........................................[139]
Overview of the claim [139]
The February and April 2007 meetings [143] Was Flexco negligent? [163]
HML Nominees’ cross claim against the Council ..........................................[166] General damages ..............................................................................................[174] Quantum ...........................................................................................................[182] Summary and conclusion ................................................................................[185] Result .................................................................................................................[197]
Introduction
[1] The plaintiffs, Ann-Louise Weaver and Graham Anderson, own a property in Seymour St, St Mary’s Bay, Auckland. They seek to recover losses they have allegedly suffered as a result of the failure of remedial work that was undertaken by the previous owner of the property, HML Nominees Limited, in 2005 and 2006. HML Nominees is the corporate trustee of Helen Moore’s family trust. The house was originally built as a family home for Ms Moore in 1997.
[2] In 2004 Ms Moore discovered that the house was leaky. She arranged for extensive remedial work to be undertaken. Significant re-cladding was required. The chosen design involved attaching Niwala stone slips to the exterior cladding. Two building consents were obtained from the Council for the remedial works. HML Nominees hired Point Construction Limited as builder and project manager. Ted Jordan, the principal of Point Construction, did not undertake stonework, so Ms Moore engaged Stonescapes Limited, on the stone supplier’s recommendation.
[3] Final code compliance certificates were issued by the Council on 16 October
2006. Not long afterward, in early 2007, some of the stone slips delaminated and fell off the house. Further remedial works were then undertaken to the areas that had delaminated. At about this time Ms Moore’s personal circumstances changed and she decided to sell the property. It was purchased by the plaintiffs in June 2007, with settlement taking place in September 2007.
[4] About 18 months after settlement further stone slips started falling off the house. The plaintiffs undertook various investigations of the problem, including obtaining a report from a building surveyor, Neil Alvey. Mr Alvey identified various defects in the stone cladding as well as a number of other (more minor) defects in the property. It is not in dispute that a full re-clad of the stone cladding was required. This was undertaken in 2012. The plaintiffs now seek to recover $181,831.07 in respect of the costs incurred (or yet to be incurred) in remedying the various defects identified by Mr Alvey, of which about half relates to the stone cladding. They also seek general damages for the stress they have suffered.
[5] The plaintiffs have elected not to sue any of the tradespeople involved in the actual construction work. Rather, their claims are against HML Nominees (as vendor), Ms Moore (as alleged project manager of aspects of the works) and the Council (as the regulatory authority who issued the building consents and code compliance certificates). The defendants, in turn, joined nine third parties. Only
three of the third parties remained “live” by the conclusion of the trial, namely:1
(a) Stonescapes, who undertook the stone works;
(b)Flexco Limited, who distributed the Flexi-Seal waterproofing membrane that was intended to be used in the stone works (but was not) and also the adhesive that was used;
(c) Mohan Roofing Limited, the roofing contractor.
[6] I will first consider each of the alleged defects, before turning to consider the liability of the defendants for any defects I find to be established. I will then consider whether any aspects of the Council’s defence are precluded by issue estoppel, based on a previous determination made by the Chief Executive of the Ministry of Business Innovation and Employment (“MBIE”) under the Building Act
2004 (“Building Act”). Finally, I will consider the third party claims, HML
Nominees’ cross claim against the Council, general damages and quantum.
What are the defects?
Stone cladding
[7] It was not in dispute that a full re-clad of the stone works was necessary. This work was undertaken by the plaintiffs in 2012 at a cost of $89,892.96, plus
professional fees and interest.
1 The claim against Point Construction settled immediately prior to the delivery of closing addresses.
[8] In order to determine whether HML Nominees, Ms Moore or the Council are liable to the plaintiffs in relation to the defective stone cladding it is necessary to first determine the causes of its failure. Expert evidence on this issue was given by:
(a) Neil Alvey, a registered building surveyor, who gave evidence for the plaintiffs.
(b)John Harvie of RLA Polymers (the manufacturer of Flexi-Seal products). Mr Harvie is a specialist in waterproofing membranes and adhesives. He gave both factual and expert evidence for Flexco.
(c) Stuart Wilson, a registered building surveyor, who gave evidence for the Council.
[9] The three experts agreed on some issues and disagreed on others.2 Further, as is often the case, their views shifted over time both during the pre-trial period and, to some extent, during the course of the trial itself. By the conclusion of trial, however, the experts were broadly in agreement on many of the key issues.
[10] Mr Alvey and Mr Wilson, in addition to their own briefs of evidence, provided a joint “experts’ conference list of issues” (“experts’ conference report”), which comprised a table listing the various alleged defects, their causes, whether they comprised a departure from the building consents, the consequence of the defect and the work required to remedy it. Mr Harvie was not a party to the experts’ conference report as he was overseas at the time of the relevant meeting. He disagreed with some of the views expressed in that document.
[11] The stone cladding design that was proposed by Ms Moore was an “alternative solution” under the building code. As a result it could not be automatically treated by the Council as compliant with the requirements of the code. The alternative solution ultimately approved by the Council, as set out in the building consent documentation, required the use of Eterpan fibre cement board as a
substrate. The Eterpan was to be waterproofed using the Flexi-seal licensed
2 Mr Harvie’s evidence was limited to the stone cladding defects, whereas Mr Alvey and
Mr Wilson’s evidence addressed all of the pleaded defects.
waterproofing system (“Flexi-Seal System”). Niwala medium weight slip stone veneers were then to be affixed to the Eterpan with “Flexi Wall ‘n Floor Adhesive”. The exterior of the stone slips was then to be sealed using Aqua Mix Penetrating Sealer.3
[12] There was no dispute between the parties that Eterpan fibre cement board and Niwala stone veneers were used, as required by the building consents. The Flexi-Seal System was not, however, used. Rather, Miracryl 2-Part waterproofing membrane (“Miracryl”) was applied to the Eterpan substrate as the waterproofing membrane.
[13] The adhesive specified in the building consent was “Flexi Wall ‘n Floor Adhesive”. Two adhesives fell within that general description - a general purpose adhesive and a high performance adhesive. The general purpose adhesive was used to affix the stone slips to the Eterpan. The exterior of the stone slips was sealed, as required, using Aqua Mix Penetrating Sealer.
[14] The primary deviation from the building consents was therefore that Miracryl was substituted for the Flexi-Seal System. None of Stonescapes’ employees were licensed Flexi-Seal applicators. Allan Towers, who was a Flexi-Seal licensed applicator, was therefore engaged to undertake the waterproofing work. He arranged for Steve Swart, who was also a licensed Flexi-Seal applicator, to assist him.
Mr Towers substituted Miracryl for Flexi-Seal.4 He believed that Miracryl was
simply the generic (and therefore cheaper) version of Flexi-Seal. Mr Harvie’s evidence, however, was that Miracryl and Flexi-Seal are different products. Although Miracryl was the precursor product, Flexi-Seal was a higher quality product developed specifically to meet New Zealand conditions. The products have different ingredients and perform differently. For example, Flexi-Seal has a greater tensile strength than Miracryl and a greater cohesive strength. Mr Harvie’s evidence
was that “while Miracryl is fine to use as a general-purpose waterproofing product,
3 I do not accept, for the reasons set out at [57] to [63] below, the plaintiffs submission that the building consents also included technical literature provided to the Council in support of the building consent application.
4 For the reasons set out at [85] below I have concluded that Ms Moore was not involved in that decision.
Flexi-Seal would be a much better product to use as a substrate for the vertical fixing of tiles, brick veneers, or natural stone in New Zealand”.
[15] Mr Harvie also said, however, that while Flexi-Seal was a “better product”, both Flexi-Seal and Miracryl, if applied correctly, would have exceeded the performance requirements of the job. That is because there is a significant margin of safety built into the specifications. The system, even substituting Miracryl for Flexi-Seal, “should not have failed”, however, “there were so many factors that were impacting upon the performance of the membrane that it was almost bound to fail”. Miracryl would likely have performed adequately if there had been no other problems with the stone works. However, because it was an inferior product to Flexi-Seal, with a lower safety margin, it was more likely to fail when it came under pressure (as it did in this case).
[16] Of particular significance in this case, the Miracryl was incorrectly installed. An “ash test” conducted on a sample of the waterproofing membrane by RLA Polymers in 2013 identified that either the product was either not Miracryl or, if it was Miracryl, that the product was mixed and applied at such a variance to the specified mix ratio that the performance would undoubtedly have been compromised. (By the time of trial there was no dispute that the product that had been used was Miracryl, not Flexi-Seal). The experts were agreed that the incorrect mixing and installation of the Miracryl membrane was a key contributing factor to the failure of the stone cladding.
[17] One consequence of substituting Miracryl for Flexi-Seal was that the Flexi-Seal System was not followed. Mr Riedstra (the managing director of Flexco) gave evidence that the Flexi-Seal System required applicators to be trained and certified in the use of Flexi-Seal products. When installing a Flexi-Seal membrane the licensed applicator was required to follow three stages. First the substrate had to be prepared so that it was ready for the installation of the waterproofing membrane. Second, the licensed applicator has to clean the substrate, fill any holes and cracks, apply a sealer/primer, allow that application to cure, and apply two coats of waterproofing membrane (allowing both coats to dry). Third, the applicator checks and confirms the membrane is ready for covering. Each stage must be signed off by
the licensed applicator, using a particular form. Satisfactory completion of stages one to three is also confirmed by a secondary signature from the builder or project manager. The licensed applicator then applies a “guarantee” stencil to the membrane and a copy of the paperwork is provided to Flexco, which guarantees the finished product. (The Flexco guarantee does not, however, cover defective workmanship).
[18] Mr Towers’ evidence was that he believed “absolutely” that he had installed the waterproofing membrane correctly (although I note that the evidence was that most of the work was actually undertaken by Mr Swart). It is certainly possible that if Mr Towers and Mr Swart had used Flexi-Seal, as required, they would have had no difficulty in signing the relevant Flexi-Seal paperwork. Nevertheless, a consequence of the change of product was that a carefully developed quality assurance process was not followed. The requirements of the Flexi-Seal system, including that Mr Towers sign off on the three stages of the process and get the builder or project manager to do the same, were not followed. If the Flexi-Seal System had been followed it is possible that Mr Towers and/or Mr Swart may have undertaken the installation of the membrane with a higher degree of care.
[19] The other major contributor to the failure of the stone cladding was that the stone slips were affixed to the Eterpan with spots or blobs of adhesive, rather than the adhesive being applied over most or the entire surface of the stone slips with a notched trowel (complete combed coverage). When considered in isolation, the experts’ conference report described this as a minor issue. Mr Harvie disagreed strongly. His evidence was that poor application of the adhesive was a very significant issue. The partial (rather than full) adhesive coverage very significantly increased the “effective weight” of the stone on the adhesive. Mr Harvie provided compelling evidence illustrating the impact of spot adhesion on the effective weight of the stone cladding. In light of that evidence I accept that the method of application of the adhesive was a significant contributing factor to the failure of the stone cladding.
[20] In addition, it seems likely that the adhesive was incorrectly mixed. I find that this was also a likely contributing factor to the failure of the stone cladding. In particular, I note Albert Clarke’s (the adhesive supplier’s) evidence that:
Although I cannot know for sure what mix ratios were used at the property at
7a Seymour Street, as I do not know how Mark mixed it, the quantities
Stonescapes purchased would indicate to me that an approximate ratio of four bags of General Purpose Adhesive powder to (just over) one pot of adhesive liquid was used on this project. This ratio would likely have produced a relatively rigid, non-flexible adhesive that would not expand or contract as much as a ‘2:1’ kit.
[21] The use of Flexi-Seal general purpose adhesive, rather than high performance adhesive, likely also contributed to the stone cladding failure. Mr Harvie’s evidence, based on his knowledge of the products, was that the general purpose adhesive’s lower level of flexibility would make it less suitable than high performance adhesive for use for the vertical fixing of tiles, brick veneers, or natural stone onto a substrate coated with a waterproofing membrane, because higher levels of stresses would be transferred onto the adhesive/membrane interface.
[22] Several other issues with the stone cladding were identified by the experts, including a lack of control joints, a lack of grouting, and a lack of ventilation/weep holes between the stone slips. The experts’ evidence was that, on their own, these were relatively minor issues that would have not triggered the need to undertake a full reclad. Given the significant number of other issues with the stone cladding, however, these workmanship defects added extra pressure to a stone cladding system already under significant strain due to other factors, contributing to the ultimate failure that occurred.
Garage cladding
[23] When the house was constructed in 1998 the garage plaster cladding was face fixed to timber framing. The building consent obtained for the remedial works that took place in 2005 and 2006 appeared to envisage that the east and west walls of the garage would be reclad with solid plaster over a drained and ventilated cavity, although unfortunately this is not entirely clear from the plans (and was a matter of some debate at trial).
[24] The garage walls were not reclad during the remedial works. Mr Jordan’s evidence (which I accept) was that a Council officer told him the garage did not need to be reclad in order to comply with the building code. The plaintiffs say that the
garage should have been reclad and they accordingly seek the costs of now recladding it. This claim accordingly differs from the plaintiffs’ other claims in that it is not a claim in relation to defective workmanship. Rather, it is a claim in relation to work that was not done at all, but which the plaintiffs say should have been done.
[25] The experts’ conference report noted that the plaster cladding to the garage was finished in contact with the adjacent ground, “however this work was original construction from 1998 and not part of the 2006 works”. The consequence of the “defect” was said to be intermittent wetting of the bottom plate timber. The experts concluded, however, that the 1998 cladding “appears to have satisfied its minimum durability requirement as set out by the building code”. Mr Wilson expanded on his views at trial, as follows:
Where the stucco cladding is taken below the adjacent horizontal surfaces it provides the potential for moisture ingress. However, there has been no evidence of damage presented that I have been able to observe.
Accordingly the cladding has performed for longer than its required 15 year durability period under the Building Code. Given there is no evidence of damage, I consider that no repair is required.
[26] Mr Alvey stressed in his evidence at trial that it was only the minimum requirements of the building code that had been met. I note, however, that s 18 of the Building Act explicitly prevents any standard higher than that minimum being enforced.
[27] There is accordingly no evidence that the garage cladding breaches the building code, or that the failure to reclad the garage as part of the remedial works has resulted in any loss or damage to the plaintiffs. The mere fact that a building consent is obtained for certain work does not impose an obligation on the consent holder to actually do that work, if they subsequently change their mind or it proves to be unnecessary (albeit it may be necessary to obtain an amended consent in such circumstances).
[28] It is therefore not necessary to consider the garage cladding issue further. There is no proven “defect” in relation to the failure to reclad the garage in 2006. Similarly, the joinery on the west wall of the garage was not installed as required by
the building consent. The experts also agreed that there were no negative consequences as a result of the failure to undertake this work, and it is also, therefore, not necessary to consider this issue further.
Garage roof
[29] The plaintiffs plead the following defects to the garage roof: (a) lack of cross-fall;
(b)insufficient drainage to the roof space due to enclosing of the guttering during the remedial works;
(c) ineffective application of waterproofing membrane resulting in cracking to the membrane and moisture ingress.
[30] The experts’ conference report identified the main defect to the garage roof as being the cracking in the roof membrane. The report further noted that “other minor defects exist, such as a lack of fall and internal gutter where the new copper roof was extended over”. These, however, were said to be unlikely to be an issue requiring any remedial work, when considered in isolation. No specific damage was identified as attributable to these minor defects.
[31] The key issue therefore is the cracking in the roof membrane. Mr Alvey’s evidence was that this appears to have resulted in moisture penetration through the surface of the membrane flat roof over the garage and into the underlying timber roof structure to the garage. Mr Wilson, on the other hand, noted that any moisture staining could have been historic, as there was no evidence that it was wet at the time of inspection. Further, there was no evidence of any deterioration to the timber. He concluded that it was therefore equally likely that any leak was historic and attributable to the original works rather than the remedial works. This conclusion ultimately prevailed in the experts’ conference report, which stated:
The cause of the cracking in the membrane is unable to be confirmed;
however the majority of cracks exist at the upstand junctions.
Unable to confirm whether damage observed is a result of water ingress prior to or subsequent to the overlay in 2006.
[32] Mr Wilson also noted that as the only suggestion of moisture ingress was localised to one part of the roof, the appropriate repair would be a localised repair to any cracks in the membrane. In his view the limited damage (if proven) would not justify the laying of a completely new membrane. The costs of a localised repair have not been quantified or claimed.
[33] Ultimately the plaintiffs have failed to prove, on the balance of probabilities, what the cause of the cracking in the membrane was, or that it has resulted in any damage/loss. Nor have they proved that any of the “minor” garage roof defects identified in the experts’ conference report have caused any identifiable damage or loss. Any claims in relation to this alleged defect must accordingly fail.
[34] I note, for completeness that the plaintiffs advised, at the outset of the trial, that they were not pursuing their claim against the Council in relation to this alleged defect (although they maintained their claims against HML Nominees and Ms Moore in relation to it). The reason for the concession in relation to the Council was that the plaintiffs accepted (based on expert advice) that pursuant to best practice health and safety guidelines the Council cannot inspect a roof without significant steps being taken to ensure the safety of the roof area. It was common ground that, on the facts of this case, a roof inspection would not have been a “reasonable step” to undertake during an inspection.
The chimney flashing
[35] This is a relatively minor issue. The chimney flashing was re-used during the
2005/2006 remedial works, whereas both experts agreed that it ought to have been replaced. The failure to replace the flashing has compromised the weathertightness of the chimney, allowing water to enter at the corners of the flashing.
Main entrance to the house
[36] The plaintiffs plead the following defect in relation to the main entrance on the ground north floor, north elevation:
Internal floor 70mm below external floor levels, causing water to be trapped at the junction.
[37] It appears that when the house was first built in 1997 the external tiling around the main entrance to the property was installed level with the timber threshold to the door opening. The internal concrete floor slab, however, sat 70mm below the surface of the internal timber flooring. As a result the internal floor levels were slightly lower than the external levels, which could potentially lead to problems with water ingress.
[38] Mr Jordan’s evidence (which I accept) is that this issue was identified by a Council inspector during an inspection while the remedial works were underway. Although there was no requirement in the building consent to install a channel drain outside the main entrance, the Council inspector required this to be done as a means to address the differential between the exterior paving level and interior floor level. Point Construction undertook the requested work, which Mr Jordan said was subsequently approved by the Council inspector. The existing joinery in the front door area was retained.
[39] The purposes of floor to ground clearances are to prevent water from running from the outside of the building into the inside, over the door threshold. The relevant acceptable solution provided that this objective could be met in at least two ways, other than by lowering the external ground levels. One method was to install a concrete nib (small wall or barrier) at the threshold. Another method was to lower the ground level for a small portion just outside the door and install a channel drain, so that water driving towards the door goes into the drain and flows away. Mr Alvey accepted in cross-examination that both of these were acceptable alternative ways of ensuring compliance with clause E2 of the building code, which relates to weathertightness. Compliance with an acceptable solution must be accepted by a building consent authority (such as the Council) as establishing compliance with the building code.
[40] When the plaintiffs replaced the stone cladding in 2012 they also undertook some extensions to their property, some of which were adjacent to the front entrance. During the course of this remedial and extension work in 2012 the plaintiffs’ builder, Gary Purdey, noticed that the outside pavement in the main entrance area was higher than the concrete floor inside. He was very concerned about this, as his
understanding was that the building code required the external ground levels to be lower than the internal floor level. Mr Purdey advised Mr Anderson that there was a “serious problem” and that he would not be prepared to reclad the area until the floor to ground levels were corrected. This required, in Mr Purdey’s view, all of the external paved area at the front of the house to be dug up, the ground level lowered, the paving relaid and a new channel drain installed. This was a major undertaking, costing $32,697.60.
[41] Mr Purdey acknowledged, in cross-examination, that this was the first leaky building remediation he had been involved in. He was clearly incorrect in his view that there was an absolute requirement in the building code that the external ground level be lower than the internal floor levels. The channel drain solution adopted during the course of the remedial works in 2005 and 2006 was an acceptable way to address the issue, provided of course that it was installed correctly. I therefore turn to consider whether the plaintiffs have proved, on the balance of probabilities, that the channel drain was installed incorrectly.
[42] Both Mr Purdey and Mr Anderson saw signs of decay in timber in the main entrance area, which could possibly indicate that the channel drain had not been installed correctly. Although Mr Alvey did not see this in his inspection, I accept the evidence of Messrs Purdey and Anderson that such decay was present. There is no evidence, however, that any decay was the result of defective installation of the channel drain in 2006. In particular there are at least two other possible explanations for any decay in that area.
[43] First, the decay may have pre-dated the 2005/2006 remedial works, having been caused by water ingress during the period 1997 to 2006.5 Further, Ms Weaver gave evidence of another source of water ingress in the main entrance area that could have also caused or contributed to the decay that was identified in 2012. Her evidence was that:
...I told Helen of a problem we were having with the rimu floor in our front entrance discolouring, especially the nails in the floor which were going
5 The claim, as pleaded, is based on the 2005/2006 remedial works, not the original construction of the house in 1997.
black (ie the putty above the nails). As result she got Ted Jordan, her builder, to come and look at it as we requested this be fixed also. We had determined the cause of the discolouration was a leak through the outer wall due to the total absence of wall board or any waterproofing between the planter box and the internal linings. The planter box had a watering system. In fact the soil had been placed in the planter against the building paper (building wrap). When the watering system in the planter box came on the water would run inside the wall of the house onto the concrete floor inside.
When Ted saw this he said that they had known of some water ingress in the front entrance area for some time but hadn’t been able to locate the cause of it, so he was pleased in a way to find out the cause.
[44] Agreement was reached between the parties regarding the costs of remediation (including replacing the rimu floorboards) and the necessary work was then undertaken.
[45] Taking these matters into account, the plaintiffs have not discharged the burden of proving that the channel drain was installed incorrectly in 2005/2006 and that this has resulted in damage. The evidence indicates that the primary reason why significant works were undertaken by the plaintiffs in the main entrance area was Mr Purdey’s belief that there was an absolute requirement in the building code that the external ground level be lower than the interior floor level. That view was incorrect.
[46] As I have noted above, the channel drain was not required as part of the building consent but rather, was an additional requirement imposed by a building inspector during the course of his inspection of the property. Strictly speaking, he ought to have required HML Nominees to apply for an amended consent to include this additional detail. His failure to do so has not resulted in any loss, however, given that it has not been proved that the channel drain was installed incorrectly resulting in damage to the property.
Flu vent
[47] A copper roof was installed as part of the building works undertaken during 2005/2006. Mr Alvey identified a flu vent through the roof surface which is of aluminium/zinc composition. The building code (E2/AS1) highlights an incompatibility between zinc/aluminium and copper metals. Due to the adverse
chemical reaction that occurs between these metals they cannot be in contact, and additionally, water runoff between the two materials is not permitted. Corrosion has resulted from the interaction between the flu and the installation of the copper roof.
[48] Mr Jordan of Point Construction, who was the project manager for the remedial works (excluding the stoneworks) had no recollection of any flu vent in the roof being installed and queried whether it might have been fitted later. I do not doubt that Mr Jordan genuinely cannot recollect this work. That is perhaps not surprising, given the lapse of time and the fact that much of the work would presumably have been undertaken by the contractors who installed the copper roof, rather than directly by Mr Jordan. Nevertheless, given the short period of time between the copper roof being installed and the house being put on the market, the necessary inference is that this work would have been done when the new roof was installed. I accordingly accept that this defect exists (which was not disputed) and that it occurred during the course of the remedial works that were undertaken in
2005 and 2006.
Summary/conclusion on defects
[49] In summary, I have concluded that there was no single cause of the failure of the stone cladding. Rather a number of factors combined to cause the system to fail, namely:
(a) The substitution of Miracryl for Flexi-Seal, because Miracryl was an inferior product that was more likely to fail when it came under pressure, as it did in this case.
(b) The incorrect mixing and installation of the Miracryl membrane. (c) The failure to follow the Flexi-Seal System.
(d)The use of the spot adhesion method of affixing the stone slips to the Eterpan, rather than following a complete combed coverage technique.
(e) The use of Flexi-Seal general purpose adhesive rather than high performance adhesive.
(f) The incorrect mixing of the adhesive.
(g)The failure to install control joints, grouting, and ventilation/weep holes between the stone slips.
[50] Some factors clearly contributed to the failure of the system to a much greater degree than others. In particular, I find that the two major contributing factors were the incorrect mixing and installation of the Miracryl, and the use of the spot adhesion method to adhere the stone slips to the Eterpan. Most of the other factors, in isolation, would not have caused the system to fail. The combined effect of all of these factors, however, is that failure of the stone cladding system was virtually inevitable.
[51] In relation to the other pleaded defects I have found as follows:
(a) Garage cladding: There is no evidence that the current garage cladding breaches the building code, or that the failure to reclad the garage in 2005/2006 has resulted in any loss or damage to the plaintiffs. Similarly, there were no negative consequences as a result of the failure to undertake the installation of the joinery on the west wall of the garage.
(b)Garage roof: The plaintiffs have failed to prove, on the balance of probabilities, what the cause of the cracking in the garage roof membrane was, or that it has resulted in any damage/loss. Nor have they proved that any of the “minor” garage roof defects identified in the joint experts report have caused any damage or loss.
(c) Chimney flashing: The previous chimney flashing was re-used during the 2005/2006 remedial works, whereas both experts agreed that it ought to have been replaced. The failure to replace the flashing has compromised the weathertightness of the chimney, allowing water to enter at the corners of the flashing.
(d)Main entrance to the house: The installation of a channel drain as part of the 2005/2006 remedial works was an acceptable means of achieving compliance with the building code requirements where the external ground level is greater than the internal floor level. It has not been proven that it was installed incorrectly.
(e) Flu vent: The plaintiffs have established that a zinc/aluminium flu vent was installed through the new copper roof as part of the
2005/2006 remedial works, in breach of the building code. Corrosion has resulted.
[52] The relevant defects for liability purposes are, accordingly, the stone cladding defect and the chimney flashing and flu vent defects. The other pleaded defects were either not proven to be defects, were not causative of loss, were not proven to have resulted in any loss or damage, or were not proven to be the result of work undertaken as part of the 2005/2006 remedial works.
[53] I now turn to consider which, if any, of the defendants are liable for the stone cladding, chimney flashing and flu vent defects.
Is HML Nominees’ liable for the defects?
[54] There are two causes of action pleaded against HML Nominees. The first is for breach of the vendor warranties in the agreement for sale and purchase of the property. The second is for misrepresentation. I will consider each in turn.
The scope of the vendor warranties
[55] Clause 7.2(5) of the agreement for sale and purchase between the plaintiffs and HML Nominees warranted that at the date of giving and taking possession:
(5) Where the vendor has done or caused or permitted to be done on the property any works for which a permit or consent was required by law:
(a) the required permit or consent was obtained; and
(b) the works were completed in compliance with that permit or consent; and
(c) where appropriate, a code compliance certificate was issued for those works; and
(d) all obligations imposed under the Building Act 1991
(“the Act”) were fully complied with.
[56] The plaintiffs rely on warranties 7.2(5)(b) and 7.2(5)(d), which I will refer to respectively as the “Consent Warranty” and the “Building Act Warranty”. Turning first to the Consent Warranty, it is relied on as a warranty that the 2005/2006 remedial works were completed in compliance with the relevant building consents. A Consent Warranty is not a general warranty as to the performance or quality of a
building.6 Nor is it a warranty of compliance with the building code.7
[57] There was a dispute between the parties as to exactly what documents comprised the building consent. The plaintiffs submitted that because the approved stone cladding system involved a specific design, the building consent necessarily included any technical literature, guidelines or correspondence provided to the Council during the course of correspondence relating to the proposed design.
[58] In Sunset Terraces, Heath J observed that the Council, in issuing a building consent, was making a predictive assessment about whether there were reasonable grounds to conclude that the work would be carried out in compliance with the building code.8 In doing so it was entitled to assume that:
(a) the developer would engage competent builders or tradesperson and that their work would be properly co-ordinated;9 and
(b)a competent tradesperson would follow the instructions in the relevant technical manual.10
[59] This does not mean, however, that the relevant technical literature is expressly or impliedly incorporated into the consents themselves (whether such
literature is provided to the Council or not).
6 Ford v Ryan (2007) 8 NZCPR 945 (HC) at [41]; Brebner v Collie [2013] NZHC 63, (2013)
14 NZCPR 500 at [48] and [53].
7 Brebner v Collie, above n 6, at [53].
8 Body Corporate 188529 v North Shore City Council [2008] 3 NZLR 479 (HC) at [252] [Sunset Terraces].
9 At [399].
10 At [406].
[60] The difficulty with interpreting the building consents as impliedly incorporating all of the documents submitted to the Council during the course of a building consent application is that it would lead to considerable uncertainty regarding the precise scope of building consents. In many cases, including this one, there may be significant correspondence with owners, architects, third party suppliers and others on the Council file, particularly where an alternative solution is proposed. Some of the documents submitted to Council will relate to products or techniques that were ultimately not accepted, or that were superseded as the dialogue developed.
[61] Owners, builders, trades people, the Council and other interested parties require certainty as to the precise scope of a building consent. It would be undesirable to require such persons to trawl through a Council file trying to decide which particular documents or correspondence are impliedly incorporated into a building consent, even if not expressly referred to in the document itself.
[62] A building consent is defined in s 7 of the Act as meaning “a consent to carry out building work granted by a consent authority under s 49”. Section 49 provides that the building consent must be granted if the authority is satisfied on reasonable grounds that the provisions of the building code would be met if the building work was properly completed in accordance with the plans and specifications that accompanied the application. Section 51 provides that a building consent must be issued “in the prescribed form”. That form (Form 5) is set out in the Building Regulations.
[63] It follows, in my view, that the Consent Warranty only warrants compliance with the building consents themselves, the plans and specifications attached to them (which form part of the consents) and any relevant conditions and endorsements that are expressly recorded on the building consents by the Council.11 Recommendations set out in technical literature or other “best practice” guidelines are accordingly not
relevant to assessing whether HML Nominees breached the Consent Warranty.
11 See also Brebner v Collie, above n 6, at [56] and [57]; Saffioti v Ward [2013] NZHC 2831, (2013)
14 NZCPR 792 at [55].
[64] I turn now to the correct interpretation of the Building Act Warranty. This warranty has been considered in a number of cases which are conveniently summarised in Saffioti v Ward.12 There is, as noted by Asher J in Saffioti, a difference in the approach taken by the High Court in several of those cases. In particular, Asher J highlighted the difference between the approach of Ronald Young J in Van Huijsduijnen v Woodley13 and that of McKenzie J in Ford v Ryan.14
[65] In essence, that difference is over whether the warranty that “all obligations imposed under the Building Act 199115 were fully complied with” extends to the statutory obligation in the Building Act to carry out all building work to comply with the requirements of the building code.16
[66] Asher J in Saffiotti limited the effect of the Building Act Warranty to the express duties imposed on the owner of the property under the Building Act.17
His Honour found that those duties do not include the obligation to carry out all building work in accordance with the building code.18 Although counsel for the plaintiffs submitted that Asher J’s decision on this issue in Saffioti was wrong, the argument was not further developed. In their closing submissions the plaintiffs took the position that it was “a debate that Ms Weaver and Mr Anderson do not need to buy into to prevail in this case”. Rather, the plaintiffs were “happy to advance their breach of warranty claim squarely on the basis that the building work that HML Nominees caused or permitted to be done in 2005/6 was not undertaken in accordance with the building consents which Ms Moore obtained for that work”.
[67] I proceed accordingly. I note, however, that I accept the interpretation of the Building Act Warranty set out by Asher J in Saffioti, for the reasons outlined in
his judgment, which I find to be persuasive.
12 Saffioti v Ward, above n 11.
13 Hooft Van Huijsduijnen v Woodley [2012] NZHC 2685.
14 Ford v Ryan, above n 6.
15 Although the vendor warranties incorrectly referred to the Building Act 1991 rather than the Building Act 2004, the defendants did not take any issue with this and I have accordingly treated the warranties as if the reference were to the Building Act 2004.
16 See Building Act 2004, s 17.
17 Saffiotti v Ward above n 11, at [36], [42] and [43].
18 Saffioti v Ward, above n 11, at [36].
Were the vendor warranties breached in relation to the stone cladding defects?
[68] I have found that a number of factors contributed to the failure of the stone cladding. One of those factors was the substitution of Miracryl for the Flexi-Seal System, which was the specified product in the building consents. That substitution breached the building consents. The use of general purpose adhesive rather than high performance adhesive did not, however, breach the building consents, as the specified adhesive was simply “Flexi Floor ‘n Wall Adhesive”.
[69] I accordingly find that the stone cladding work was not completed in compliance with the building consents, because Miracryl was substituted for the specified Flexi-Seal System. The substitution of Miracryl for Flexi-Seal was one of a number of factors that ultimately caused the stone cladding to fail (albeit it was one of the lesser contributing factors). It necessarily follows that there has been a breach of the vendor warranties in relation to the stone cladding.
Were the vendor warranties breached in relation to the chimney flashing and flu defects?
[70] It was not proven that either the re-use of the chimney flashing or the use of an aluminium flu was a departure from the express terms of the building consents (including the attached plans and specifications).
Did HML Nominees make misrepresentations regarding the property?
[71] I now turn to consider the second cause of action against HML Nominees, namely misrepresentation pursuant to s 6 of the Contractual Remedies Act 1979. This claim requires the plaintiffs to prove that:
(a) a representation (a statement of past or present fact about the property) was made to them;
(b) the statement was made by or on behalf of HML Nominees
(statements made by a real estate agent about a property can qualify for such purposes);19
19 Humphries v Edinborough [2010] NZCA 416 at [30] – [31].
(c) the statement was not true; and
(d) it induced them to enter into the contract to purchase the property.
[72] Ms Weaver gave evidence of various statements allegedly made to her by the real estate agent for the sale of the property, Lindi Miller, including that:
(a) the remedial works had been completed to the highest standards, using the best of materials, and in excess of the standard requirements of a reclad;
(b)Ms Moore had not just fixed the leaky home issues but she had made considerable improvements to the home with the intent of remaining there;
(c) Ms Moore had completed the remedial works to the highest standards
and the house was “better than new”.
[73] Various other alleged representations were referred to in Ms Weaver’s evidence (albeit not specifically pleaded). The plaintiffs’ position in their closing submissions was that, to a large degree, the alleged representations were subsumed within the express vendor warranties in the agreement for sale and purchase, which I have discussed above. The plaintiffs submitted, however, that one area not covered by the vendor warranties is the representation that the repairs had been completed to the “highest standards” and that Ms Weaver could have confidence in the work done to the property which was now “better than new”. (I note that the other alleged representations generally appear to be variations on this same theme). I will accordingly focus on that representation, although it differs from the pleaded representation, which is that “the property had been remediated in accordance with the building code”.
[74] First, I accept Ms Weaver’s evidence that Lindi Miller (who did not give evidence) made statements along the general lines recalled by Ms Weaver. I also accept that the statements were made by Ms Miller in her capacity as agent for HML Nominees. Determining whether the representation was true or not is a somewhat
more difficult issue. It depends in part on what was meant by the phrase “better than new”. Ms Weaver’s evidence as to what she understood by the phrase was that:
Well when it was new obviously it was a leaky home and it didn’t have Venticlad cavity system which we all knew from publicity was extremely buyer shy for people so yeah it was better than new, it wasn’t leaky and also the improvements that she had stressed were being done which were – had been done which was the copper roofing and all the quality of the goods that had gone into it, yes it was definitely better than new.
[75] To the extent that the representation related to those particular issues identified by Mrs Weaver, it was true. When “new” the house had been a leaky building. As part of the remediation works a cavity system had indeed been installed and the original leaky issues were no longer present (the stone cladding issues do not relate to the prior leaks). Further, considerable improvements had been made to the property. HML Nominees spent $507,010.18 on the remedial works,
$158,316.23 of which related to betterment rather than repairs, including a new copper roof, Alti joinery and imported Spanish stone.
[76] In one major respect, however, the property was not “better than new”. There were deficiencies in the remedial work to the stone cladding. Although an “innocent” misrepresentation is sufficient for the purposes of the Contractual Remedies Act, for the reasons I set out at [143] to [162] below, I am satisfied that at the time of the sale Ms Moore was aware that the property was not “better than new” (although she almost certainly did not relay this to Ms Miller). In particular, she was aware at the time of sale that there were systemic issues with the stone cladding work that had already resulted in some delamination, and which could potentially give rise to further problems in the future.
[77] The final requirement is that the plaintiffs were induced to purchase the property as a result of the representations. By a narrow margin, I have not been persuaded that the requirement of inducement is satisfied. The maker of the statements was a real estate agent who had no building or other relevant expertise in inspecting or assessing the quality of building work. To take a statement by a layperson as to the quality of workmanship as, in effect, a warranty of quality would impose a more stringent standard than that required by the vendor warranties in the
agreement for sale and purchase. As the learned authors of Law of Contract in New
Zealand observe:20
Somewhat akin to the distinction between opinion and fact is the general rule that exaggeration of the virtues of a product do not create any obligation. Eulogistic commendation of the thing for sale is the age-old device of the successful salesperson.
[78] Obviously (as the authors note) there are limits on this principle. Much may depend on the person being addressed, for example, if the purchaser was totally inexperienced a finding of an ‘inducement’ may be more likely. The plaintiffs, however, were not unsophisticated buyers. Further, Mr Anderson conceded in his evidence that it was the LIM and the existence of the code compliance certificate itself (for the repair of a known “leaky home”) that assured him that the works had been carried out “to the highest possible standard”, together with the high quality finish of the property itself, including the quality of the stone, the Alti joinery and the copper roof. Ms Weaver accepted that the LIM and code compliance certificate also assured her that the works had been carried out to a high standard.
[79] In addition, the plaintiffs engaged a builder whom they trusted (Mr Anderson had worked with him for many years) to inspect the property on their behalf and report back to them. His report was positive. They also took comfort from the vendor warranties I have discussed above. In my view it was these matters that, in combination, induced the plaintiffs to purchase the property rather than any comments made to them by the real estate agent. The claim for misrepresentation accordingly fails.
Is Ms Moore liable for any of the defects?
[80] The plaintiffs’ claim against Ms Moore, as pleaded, is that she breached her duty of care to the plaintiffs in her capacity as the alleged project manager of the remedial works. As Potter J observed in Aldridge v Boe the question of the responsibility assumed by a land owner in any particular case is fact specific and
turns on what the person actually did in relation to the particular property.21 The
20 John Burrows, Jeremy Finn and Stephen Todd The Law of Contract in New Zealand
(4th ed, LexisNexis, Wellington, 2012) at 378.
21 Aldridge v Boe [2012] NZHC 277.
plaintiffs acknowledged at trial that Ms Moore was not in fact the project manager of the remedial works. Rather, in closing, Mr Rainey summarised this aspect of the plaintiffs’ claim as follows:
Here, and having heard all of the evidence on the extent and nature of Ms Moore’s involvement in respect of the remedial works, Ms Weaver and Mr Anderson accept that this cause of action rises or falls on the Court’s findings as to the extent of Ms Moore’s involvement in the decision to change from the Flexi-Seal Waterproofing System that was specified in the building consent to the Miracryl product that was in fact used.
[81] Mr Towers’ evidence was that Ms Moore asked him for a “cheaper deal” in exchange for paying him in cash and that she expressly agreed to the substitution of Miracryl for Flexi-Seal to secure a cheaper cash price. Ms Moore denies instructing Mr Towers to use a different waterproofing product. She said she was told by Mr Jenkins (of Stonescapes) that the waterproofer would only do the job for cash and that she was to drop the cash off to an address in One Tree Hill.
[82] Any suggestion that Ms Moore might “cut corners” or agree to change the product specified in the building consents in order to save a relatively small amount of money rests uneasily with the evidence as a whole. In particular, Ms Moore made high quality product selections in relation to the remedial works generally, consistent with the fact that, at the time, she intended to continue living in the house. Ms Moore also needed to keep a careful paper trail of the costs incurred for her quantity surveyors, because at the time she was involved in litigation in relation to the original weathertightness issues. All other trades people involved in the works appear to have been paid on invoices.
[83] The more plausible explanation for Ms Moore paying Mr Towers in cash is simply because he insisted on it. This appears to have been in large part because he had had difficulty in getting paid for a previous job he had done for Stonescapes, although he acknowledged it may also have been partly for “tax reasons”. Mr Towers’ evidence was that generally if he did a job for cash he would use Miracryl instead of Flexi-Seal. As I have noted previously, his understanding at the time that was that Miracryl was simply the generic (and therefore cheaper) version of Flexi-Seal. Given that belief, Mr Towers is unlikely to have felt that securing Ms Moore’s express consent to the substitution was particularly important.
[84] It is also of note that when problems emerged with the stone cladding in early
2007 Ms Moore contacted Flexco, the distributor of Flexi-Seal, and requested that they come to the site on two occasions (along with others who had been involved in the stone works) to inspect the problems and advise on a solution. This is consistent with Ms Moore believing that Flexi-Seal had been used as the waterproofing membrane.
[85] Taking all of these matters into account I am not satisfied that Ms Moore played any operative role in the decision to substitute Miracryl for Flexi-Seal. Ms Moore’s evidence was more credible than that of Mr Towers’ on this issue and is consistent with other evidence before the Court. It follows that this cause of action must fail.
Is the Council liable in respect of its issue of building consents?
[86] It is well settled law that Councils owe a duty of care to existing and subsequent owners of premises when performing their building control functions under the Building Act.22 The plaintiffs claim that the Council breached that duty of care in relation to its issue of the building consents, its undertaking of inspections and the issue of the code compliance certificates. As a result of the Council’s negligence, the plaintiffs say, they have suffered loss, being the costs of remedying
the defects. The Council submitted that the claim was in effect, one of breach of statutory duty. I accept Mr Rainey’s submission, however, that the claim against the Council was pleaded (and argued) as an orthodox negligence claim, in accordance with well-established principles.
[87] I am satisfied that the Council did breach its duty of care when issuing the building consents, in that it should have made further inquiries to satisfy itself that the proposed alternative solution in relation to the stone cladding would comply with the building code. Indeed, the Council appeared to accept that it had breached its
duty in relation to this.
(footnotes omitted)
[177] Courtney J in Mikitasov v Collins gave general damages for a breach of a vendor warranty, stating that:66
Mr Mikitasov also seeks general damages. He has given evidence about the stress and upset that he and his family have suffered as a result of the defects to the house and the work required to rectify them. In recent times this Court has recognised through an award of general damages the distress and anxiety suffered by occupants of leaky homes, with awards of $20,000-25,000.
[178] It is accordingly clear that, in principle, general damages are available against both HML Nominees and the Council.
[179] Both Ms Weaver and Ms Anderson gave evidence of the stress caused to them as a result of the defective stone cladding. They have had to borrow money to fund the repairs, cannot sell their home, and have lived with high levels of anxiety that the stone falling off the house could cause an injury to them or others. Mr Anderson in particular has expended a very significant amount of time in investigating the problems, sourcing solutions and overseeing the remedial works.
He says that this has impacted on his ability to pursue other business opportunities.
64 O’Hagan v Body Corporate 189855 [2010] NZCA 65, [2010] 3 NZLR 486 at [153] [Byron Avenue].
65 John Burrows, Jeremy Finn and Stephen Todd Law of Contract in New Zealand
(4th ed, LexisNexis, Wellington, 2012) at [21.2.3(f)(iii)].
66 Mikitasov v Collins (No 4) (2011) 11 NZCPR 617 (HC) at [34]. See also Smith v Singh
HC Wellington CIV-2004-485-1169, 27 March 2007 at [8] and [12].
The building works themselves are said to have been very stressful and caused
“huge disruption” to their lives.
[180] I am satisfied that an award of general damages is appropriate in this case. It must necessarily reflect, however, that the only significant defect I have found either HML Nominees or the Council liable in respect of is the failure of the stone cladding. Accordingly any stress associated with other building works, such as the significant work undertaken to the main entrance of the property, does not sound in damages. Nor is a damages award appropriate for the stress of the litigation, which from Mr Anderson’s evidence was clearly a major factor. I also note that this is not in fact a leaky building case, although it arises out of repairs to a previously leaky building. There was no suggestion of water ingress through the stone cladding causing damp, mould or unhealthy living conditions. Any damage was external only and the re-clad did not require the plaintiffs to move out of the property.
[181] Taking all of these matters into account I am satisfied that an award of
$20,000 in respect of general damages is appropriate. In terms of relative culpability this should be borne equally between HML Nominees and the Council and I accordingly award $10,000 in general damages against each of those parties.
Quantum
[182] The plaintiffs called a quantity surveyor, James White, to give evidence on quantum. Mr White’s evidence was largely accepted, save that both HML Nominees and the Council took issue with the calculation of interest. The difficulties arose out of the fact that no evidence was provided as to when the invoices for the stone cladding work had actually been paid. Mr Bigio, for HML Nominees, submitted that the most appropriate course in such circumstances would be for interest to run from the date that proceedings were filed. I accept that submission. Interest will accordingly be payable at the Judicature Act 1908 rate from the date that proceedings were filed to the date of judgment.
[183] Based on Mr White’s evidence, the relevant quantum of the plaintiffs’ loss is
as follows:
Area of work
Description of cost
Amount
Stone cladding
Stone cladding remedial costs (incurred)
$89,892.96
Stone cladding
Professional and Council fees (on a pro rata basis) $ 6,513.26
Chimney cap flashing
and new flu vent
Remedial costs (estimated)
$ 2,118.98
TOTAL
$98,525.20
[184] HML Nominees is liable in contract in respect of the stone cladding defects only. The Council is liable, in negligence, in respect of both the stone cladding and the chimney cap flashing and new flu vent. If the parties were joint tortfeasors I would likely have apportioned liability on a 50/50 basis. They are not, however, and there is no apparent legal basis for apportionment of liability between the Council and HML Nominees. Obviously, however, the plaintiffs cannot recover more than their total loss, as set out in the above table (together with interest and costs).
Summary and conclusion
[185] In summary, there was no single cause of the failure of the stone cladding. Rather, a number of factors combined to cause the system to fail. I have summarised the relevant factors at [49] above. The two major contributing factors were the incorrect mixing and installation of the Miracryl and the use of the spot adhesion method to adhere the stone slips to the Eterpan. Most of the other factors, in isolation, would not have caused the system to fail. The combined effect of all of the factors I have identified, however, was that failure of the stone cladding system was virtually inevitable.
[186] I have summarised my findings in relation to the other pleaded defects at [51] above. I have found that the relevant defects for liability purposes are the failure of the stone cladding and the defects relating to the chimney flashing and flu vent. The other pleaded defects were either not proven to be defects, were not causative of loss, were not proven to have resulted in any loss or damage, or were not proven to be the
result of work undertaken as part of the remedial works undertaken in 2005 and 2006 (which the claims, as pleaded, relate to).
[187] HML Nominees has breached the vendor warranties in relation to the stone cladding (only) for the reasons outlined at [68] to [69] above. The claim against HML Nominees for misrepresentation fails, for the reasons outlined at [77] to [79] above.
[188] The plaintiffs claim against Ms Moore fails. It has not been established that Ms Moore played any operative role in the decision to substitute Miracryl for Flexi-Seal, as set out at [81] to [85] above.
[189] The Council breached its duty of care when issuing the building consents, as set out at [87] above. In particular, it should have made further inquiries to satisfy itself that the proposed alternative solution in relation to the stone cladding would comply with the building code. This was not causative of loss, however, for the reasons set out at [88] to [88] above. In particular, the experts agreed that, had the stone cladding system been installed in accordance with the building consent as approved, the cladding system would have worked.
[190] The Council breached its duty of care in relation to inspections and the issue of a code compliance certificates for the reasons set out at [93] to [94] above. In particular, it failed to take the necessary steps to establish whether the Flexi-Seal System had been used, by requiring a producer statement or a copy of the Flexi-Seal guarantee and associated paperwork. A reasonably prudent building inspector could also have identified the absence of control joints and the lack of grouting and weep holes. There is a causative link between these breaches and the plaintiffs’ loss, although these matters were not the major causes of the stone cladding failure.
[191] Issue estoppel does not apply in relation to the Chief Executive’s
determination under the Building Act, for the reasons set out at [119] to [130] above.
[192] The Council’s third party claim against Stonescapes succeeds for the reasons outlined at [131] to [135] above. Stonescapes is apportioned 60 per cent of the
liability in respect of the stone works and the Council 40 per cent (although it seems doubtful that the Council will be able to recover any contribution, given that Stonescapes is in liquidation).
[193] The Council’s third party claim against Flexco fails for the reasons outlined
at [136] to [138] above.
[194] HML Nominees’ third party claim against Flexco also fails, for the reasons set out at [163] to [165] above. In particular Flexco, as a distributor of products (only one of which, the adhesive, was actually used in the stone cladding work) did not owe HML Nominees the pleaded duties of care. Even if it did, however, it has not breached them on the facts as I have found them. Indeed it is difficult to see what more Flexco could have done to alert Ms Moore to the fact that there were serious systemic problems with the stone cladding work, or that the waterproofing membrane that was used may well not have been Flexi-Seal.
[195] HML Nominees’ cross claim against the Council fails for the reasons outlined at [170] to [173] above. In particular, at the time the house was sold to the plaintiffs HML Nominees had actual knowledge that the Flexi-Seal system specified in the consents may well not have been used and that there were systemic problems with the stone cladding. It could not have reasonably relied on the Council’s inspections or the code compliance certificates in giving the vendor warranties in such circumstances.
[196] In light of my findings at [30] to [33] above it was not necessary to consider the third party claim against Mohan Roofing.
Result
[197] HML Nominees is liable to the plaintiffs, for breach of the vendor warranties, in the sum of $96,406.22 (for the costs of remediating the stone cladding, including associated fees) as set out in the table at [183] above. HML Nominees is also ordered to pay the plaintiffs $10,000 by way of general damages. The total damages payable by HML Nominees to the plaintiffs are accordingly $106,406.22.
[198] The Council is liable to the plaintiffs in negligence in the sum of $96,406.22 (for the costs of remediating the stone cladding, including associated fees) plus
$2118.98 in respect of the estimated costs of remediating the chimney cap flashing and installing a new flu vent, as set out in the table at [183] above. The Council is also ordered to pay the plaintiffs $10,000 by way of general damages. The total damages payable by the Council to the plaintiffs are accordingly $108,525.20. The Council is entitled to a contribution of 60 per cent from Stonescapes in respect of that sum.
[199] At the risk of stating the obvious, although both HML Nominees and the Council are liable (in contract and tort respectively) in respect of the costs of remediating the stone cladding ($96,406.22) the plaintiffs cannot recover, in total, more than that sum in respect of the stone cladding costs.
[200] I also award interest to the plaintiffs, at the Judicature Act 1908 rate, from the date that proceedings were filed to the date of judgment.
[201] If costs cannot be agreed between the parties, then the plaintiffs are to file a
memorandum by 18 September 2015. The defendants’ memoranda are to be filed by
25 September 2015 and the third parties’ memoranda by 2 October 2015. Costs will then be determined on the papers. In the event that there is any dispute as to the quantum of interest, leave is reserved for counsel to also address that issue in their
memoranda.
Katz J
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