Weaver v HML Nominees Ltd
[2014] NZHC 2073
•29 August 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2013-404-003130 [2014] NZHC 2073
BETWEEN ANN-LOUISE EVELYN CHANTEL
WEAVER and GRAHAM WILLIAM ANDERSON
Plaintiffs
AND
HML NOMINEES LIMITED First Defendant
AND
HELEN MARTHA MOORE Second Defendant
AND
AUCKLAND COUNCIL Third Defendant
AND
STONESCAPES LIMITED First Third Party
AND
FLEXCO (NZ) LIMITED Second Third Party
AND
ASHTON MITCHELL ARCHITECTS Third Third Party
AND
BUILDING CODE CONSULTANTS LIMITED
Fourth Third Party
AND
KELVIN LEONARD WALLS Fifth Third Party
AND
COOPER ROOFING COMPANY LIMITED
Sixth Third Party
AND
FLEXCO (NZ) LIMITED Seventh Third Party
AND
MOHAN ROOFING SERVICES LIMITED
Eighth Third Party
AND
POINT CONSTRUCTION LIMITED Ninth Third Party
ANN-LOUISE EVELYN CHANTEL WEAVER and GRAHAM WILLIAM ANDERSON v HML NOMINEES LIMITED [2014] NZHC 2073 [29 August 2014]
AND STONESCAPES LIMITED
Tenth Third Party
AND
JACKSON CLAPPERTON & PARTNERS LIMITED Eleventh Third Party
Hearing: 2 May 2014 Appearances:
E Telle and S N Parkins for the Fourth and Fifth Third Party
Applicants
D J Barr and S S R Mears for the Third Defendant/RespondentJudgment:
29 August 2014
JUDGMENT OF ASSOCIATE JUDGE SMITH
Introduction ................................................................................................................................... [1] The Evidence ............................................................................................................................... [15]
Legal principles applicable to strike-out applications and applications by defendants for
summary judgment ...................................................................................................................... [42] Strike-out applications ............................................................................................................. [42] Summary judgment applications ............................................................................................. [45]
The issues in this case ................................................................................................................. [47] Claims against BCCL .............................................................................................................. [47] Claims against Dr Walls .......................................................................................................... [47]
Discussion – applications by BCCL ............................................................................................ [48] Issue 1 No Reliance – application by BCCL for summary judgment on the Council’s negligent mis-statement cause of action .................................................................................................. [49] Issue 2 No loss - application by BCCL for summary judgment on the Council’s negligent mis- statement cause of action ......................................................................................................... [58] Issue 3 No duty of care owed by BCCL to the plaintiffs ......................................................... [60]
Issues 4, 5 and 6: Claims against Dr Walls................................................................................. [85] Issue 5: No duty of care to the plaintiffs .................................................................................... [86] Issue 4 No duty of care to the Council ....................................................................................... [90] Conclusion ................................................................................................................................. [106]
Introduction
[1] On 29 November 2005 the third defendant (the Council) issued a building consent authorising certain remedial works to be carried out on a property in Seymour Street, St. Mary’s Bay, Auckland (the property) then owned by the first defendant (HML). The dwelling on the property had been found to be a leaky home, and the remedial work included complete recladding.
[2] Having carried out a number of inspections as the remedial work progressed, the council issued a Code Compliance certificate (the CCC) for the remedial work on
16 October 2006.
[3] The plaintiffs purchased the property from HML on 16 June 2007, and took possession of the property on 7 September 2007.
[4] Unhappily, the recladding work also turned out to be defective. In or about
2009 the plaintiffs discovered that some of the stone cladding had delaminated from a wall of the dwelling and fallen to the ground. Further sections of the stone cladding detached and fell in 2010 and 2011.
[5] An application to the Ministry of Business Innovation and Employment (MBIE) on or about 5 March 2013, resulted in a determination that the Council did not have reasonable grounds to be satisfied that the stone cladding system used in the remedial work complied with the Building Code; that there was insufficient evidence that the waterproof membrane to the fibre-cement backing sheets was the product specified in the consent documentation; that the stone veneer was defectively installed, and that there had been changes to products that had been approved of in other respects.
[6] The plaintiffs commenced this proceeding in 2013. In their claims against the Council, the plaintiffs say the Council breached various duties of care in performing its statutory building control functions. In total, the plaintiffs ask for judgment for $190,494.62 plus general damages against the defendants.
[7] The second defendant, Ms Moore, was the project manager for the remedial work, and the third third party (Ashton Mitchell) provided architectural services in respect of the remedial work. The eleventh third party (Jackson Clapperton) provided Ms Moore with certain advice relating to stone work forming part of the proposed recladding system.
[8] In its statement of defence the Council admits having issued a building consent for the remedial work, having carried out inspections, and having issued the CCC. Regarding its approval of the stone veneer cladding, the Council says it wrote to Ashton Mitchell on 13 October 2005 stating that the proposed stone veneer cladding was not a construction method detailed in the compliance documents. It requested information sufficient to satisfy it on reasonable grounds that the construction method would comply with the Building Code. It subsequently received correspondence from the fourth third party (BCCL) and from Jackson Clapperton, and by 29 November 2005 it considered that it had reasonable grounds to believe the proposed work would comply with the Building Code if undertaken in accordance with the plans and specifications. It then issued the building consent.
[9] On January 2006 the Council amended the building consent to reflect certain changes from what had been described in the original application.
[10] Following the issue of proceedings against it, the Council issued a number of third party claims. The present application is concerned with the Council’s third party claims against BCCL and the fifth third party, Dr K L Walls (Dr Walls). Specifically, it is claimed that the BCCL and its director/building surveyor Dr Walls provided an opinion to the Council by letter dated 17 October 2005 (the Opinion) stating that the proposed stone cladding system forming part of the remedial work would meet the performance requirements of the Building Code. The Opinion was provided to the Council in response to the Council’s 13 October 2005 letter to Ashton Mitchell, and was written in support of HML’s application for a building consent for the remedial work.
[11] The Counci’s claims against BCCL and Dr Walls are put on two bases. First,
the Council says that BCCL and Dr Walls owed it a duty of care, in the tort of
negligent mis-statement, to exercise appropriate care and skill in writing the Opinion. The Council says that it relied on the Opinion in making its decision to issue the building consent, and that if and to the extent that reliance has caused it loss in the form of liability to the plaintiffs in this proceeding, it is entitled to recover that loss from BCCL and Dr Walls.
[12] Secondly, the Council says that BCCL and Dr Walls owed a duty to the plaintiffs as future owners of the property, to exercise appropriate care and skill in writing the Opinion. It says that if it is found to have breached a duty of care owed by it to the plaintiffs, then BCCL and Dr Walls have also breached their (separate) duties owed to the plaintiffs, and the Council is entitled to contribution or indemnity from BCCL and Dr Walls as joint or concurrent tortfeasors.1 This second cause of action against BCCL and Dr Walls is not based in negligent mis-statement – it is not suggested that the plaintiffs ever saw the Opinion, let alone relied upon it. The claim
is based in negligence simpliciter: the Council says that by providing the Opinion to the Council in support of the application for a building consent, BCCL and Dr Walls sufficiently participated in the remedial work that they assumed duties of care to future owners, similar to the duties which the courts have held are owed to future
property owners by builders and architects.2
[13] BCCL and Mr Walls have applied to strike out the Council’s claims against
them. In the alternative, they seek summary judgment against the Council. They say:
1Section 17(1)(C) Law Reform Act 1936. Proceedings against, and contribution between, joint and several tortfeasors
(1) Where damage is suffered by any person as a result of a tort (whether a crime or
not)—
…
(c) any tortfeasor liable in respect of that damage may recover contribution from any other tortfeasor who is, or would if sued in time have been, liable in respect of the same damage, whether as a joint tortfeasor or otherwise, so, however, that no person shall be entitled to recover contribution under this section from any person entitled to be indemnified by him in respect of the liability in respect of which the contribution is sought.
2 See for example Bowen v Paramount Builders (Hamilton) Ltd [1977] 1 NZLR 894 (CA).
(1) Dr Walls did not assume any personal obligations for the actions of
BCCL, and cannot be liable on either cause of action;
(2)they accept that BCCL owed the Council a duty of care in negligent mis-statement, but say BCCL owed no duties to the plaintiffs;
(3)the Opinion could not have been relied upon by the Council (or if it was, it should not have been relied upon).
(4) The Council has not suffered any loss by relying on the Opinion.
[14] The Council says that a special relationship existed between BCCL and Dr Walls on the one hand, and the Council on the other, such that BCCL and Dr Walls both owed duties of care to the Council in writing the Opinion. The Council further contends that it relied upon the Opinion in satisfying itself on reasonable grounds that the proposed building work would comply with the Building Code.
The Evidence
[15] Dr Walls provided two affidavits in support of the application. Among other things, he said:
(1)That when Ms Moore, the project manager, wanted to use a stone cladding system rather than a solid plaster cladding system, BCCL prepared the Opinion, in which the proposed stone-clad system was “discussed”.
(2) In response to the Opinion, the Council “made it quite clear that it was
not willing to further consider the proposal…”
(3)That following the sending of the Opinion, BCCL was not given instructions to take any further steps, and did not take any further steps. BCCL and Mr Walls had no further involvement in the remedial work. BCCL issued an invoice for $405 to Ms Moore on
31 January 2006, for a “preliminary report on cladding to Auckland
City Council and liaising with architect.”
[16] Mr Woodger, an employee of the Council, swore two affidavits. He was the leader of the Council’s ‘Specialist Re-clads’ team. In his first affidavit he explained that when a building consent application was received an assessment was required to determine whether it complied with the performance requirements of the Building Code. Sometimes further information was requested of the applicant to determine whether any proposed work was an “acceptable solution”, or an “alternative solution”. In the latter case, as occurred here, the Council was required to satisfy itself on reasonable grounds that the proposed building work complied with the Building Code before issuing a building consent.
[17] Mr Woodger’s evidence was that a number of documents are typically relied upon by councils considering “alternative solutions”. They include:
(1) the plans and specifications;
(2) any comparable acceptable solutions; (3) relevant manufacturers’ specifications;
(4)any Building Research Association of New Zealand (BRANZ) or equivalent appraisal; and
(5) any Opinion put forward by a suitably qualified building expert.
[18] Mr Woodger said that the Council does not have the necessary in-house expert resources to assess every type of alternative solution that may be proposed. He said:
I am aware that one of the purposes of the Act is to allow for “continuing innovation in methods of building design and construction” (s 4(2)(g) of the Act), therefore it is important that the council does not simply reject alternative solutions because the council does not have the relevant expertise to satisfy itself that the solution complies with the Building Code. Accordingly, the council often has to rely on experts, such as Dr Walls, when
determining whether proposed building work complies with the Building
Code.
[19] Mr Woodger’s evidence was that the proposed re-clad involved an uncommon system, in that it consisted of a fibre cement sheet substrate (4.5mm Hardibacker fibre cement sheet) over which a waterproofing membrane would be applied, with the stone cladding applied over the waterproofing membrane using an adhesive.
[20] This was not an “Acceptable Solution”, and therefore had to be considered under the Building Code as an alternative solution.
[21] The initial building consent application was put on hold on several occasions as the Council sought further information. Following one such request (the Council’s letter dated 13 October 2005), the Council received the Opinion.
[22] The Opinion was prominently headed “Building Code Consultants Ltd”, and in addition to BCCL’s address and contact details the letterhead contained the words “Principal Kelvin Walls”. A list of Dr Walls’ academic qualifications appeared beneath his name. The Opinion was written in the first person plural, and it was signed by Dr Walls above the words “Principal, Building Code Consultants Ltd”.
[23] The Opinion included the following:
…Ashton Mitchell Architects have asked me to respond on their behalf.
It is proposed to provide further information relating to the proposed cladding using the Acceptable Solution (E2 AS1) as a basis. The cladding is not defined here…as it has been defined on the plans and understood by you as read in your letter of 13 October.
…
The description of the proposed cladding is compared with a 20mm solid plaster cladding as defined in E2/AS1 and as specified in the plans as cladding for other external walls on this house. The first three elements are:
Absorbent building wrap to timber frames
H3 treated timber battens and fixings
4.5mm Hardibacker and fixings
The next elements vary from the solid plaster proposal
6000 Acrylic primer to seal the Hardibacker
Flexi-seal waterproofing applied to the primer (as per the brochure submitted)
Installation of 20mm thick selected stone pieces
Flexi Wall n’ Floor 2-pot adhesive to adhere the stone pieces
(as per the brochure submitted)
Master seal 360 TE sealer to the stone face (as per the brochure)
Why the latter five elements would be acceptable
The four products (excluding the stone) are manufactured by
reputable manufacturers…
The total weight of the cladding would be similar to that of the
20mm solid plaster system.
The system proposed will act as a cladding with all properties at least equivalent to a 20mm solid plaster system as specified on the plans and as per building code E2/AS1.
No specialist expertise is required beyond standard building, waterproofing and brick/block laying expertise.
…it is our view that [the proposed stone cladding system] meets the requirements of the building code and in particular the most relevant requirement: that is Performance E2.3.6- “Excess moisture present at the completion of construction, shall be capable of being dissipated without permanent damage to building elements.”(emphasis added).
[24] Mr Woodger stated that Dr Walls is a well regarded and suitably qualified building expert, whose Opinion was that the proposed cladding system would be acceptable, and that there would be no specific requirements for inspections or documentation. However Mr Woodger formed the view that the Opinion was not sufficiently detailed for him to be satisfied on reasonable grounds that the proposed re-cladding system would comply with the Building Code. He replied to BCCL (to Dr Walls in particular) on 20 October 2005, noting that the individual components of the proposed stone veneer system were not in issue – it was the performance of the system as a whole which had to comply with the Building Code. He referred in that context to a number of sections of the Code, including B1 (structure) and B2 (durability), before noting:
No reference within your submission has been made regarding these clauses.
[25] Mr Woodger went on the make a number of observations on the system described in the Opinion. Important among his observations were the following:
(1)While solid plaster is self supporting (i.e. not reliant on the Hardibacker substrate to provide it with stability), the proposed system was 100 per cent reliant on the Hardibacker to provide support. In this regard, he said: “Therefore, Council disagrees with your comments that the two systems are compatible”.
(2)The entire weight of the stone was also reliant on an adhesive. The Council asked what is the durability of the proposed adhesive, and whether it would be compatible with the product used to seal the Hardibacker.
(3)While the manufacturer of Hardibacker states that the product is suitable for a number of purposes, including use as a rigid backing for plaster exterior wall covering, it makes no mention of the product’s suitability for the purpose of the stone veneer cladding which had been proposed.
[26] The Council advised BCCL that it was “unable to accept [the Opinion] as confirming compliance with the Building Code.”
[27] Following the Council’s letter to BCCL dated 20 October 2005, communications with the Council were carried on by Ashton Mitchell on behalf of HML. Jackson Clapperton provided certain further advice to Ms Moore, and that advice was passed on to the Council.
[28] An engineering appraisal of Stutex stone veneer, which Jackson Clapperton had prepared on 15 March 2004, was forwarded to the Council. This appraisal contained a section dealing with suitable substrates, and it appears to have been the source for the introduction of Eterpan fibre cement sheets as a substitute for Hardibacker in the proposed system. The Council wrote to Ashton Mitchell on
1 November 2005 with a number of questions arising out of the comments in the March 2004 Jackson Clapperton appraisal. Jackson Clapperton responded by way of report to Ms Moore dated 10 November 2005. They noted in that report that the proposed weights of the two alternative stone veneers which were under consideration were both within acceptable limits, and would both be acceptable alternative products. Jackson Clapperton noted that James Hardie did not warrant its Hardibacker product if used as an underlay for another product. They recommended Eterpan as an alternative. They concluded by advising Ms Moore that she would need to decide on a suitable substrate, then gather the specifications for the waterproofing of that substrate, the mortar adhesive, and the stone sealer. Council would then need to be convinced the three products were compatible. They noted that a letter would probably be required from the manufacturers attesting to the compatibility.
[29] There was a further letter from Jackson Clapperton dated 16 November 2005. A copy appears to have been received by the Council on or about that date. The
16 November letter referred to a meeting between Ms Moore and Mr Woodger, and a revised cladding system for the dwelling which had apparently been discussed at that meeting. Jackson Clapperton set out their understanding of the individual products which would now be used, including Eterpan fibre cement board (5mm) applied on a cavity system (the Ventclad system).
[30] Jackson Clapperton concluded their 16 November 2005 letter by stating:
Provided the above system is adhered to with all products being applied in accordance with the manufacturers specifications, then it is our Opinion that this exterior cladding system to the building will meet the requirements of the New Zealand Building Code under cl E2 external moisture, as an alternative solution.
[31] The next step appears to have been a letter dated 25 November 2005 from the Council setting out further matters which needed to be addressed before the building consent could be issued. The requirements included amendment of the notations on the plans to identify the “selected stone cladding”, and a requirement that the Eterpan fibre cement sheets would have to be 9mm thick to meet the manufacturer’s specification for the use of Eterpan when supporting other materials.
[32] The building consent was then issued on 29 November 2005.
[33] Mr Woodger stated that he could not recall whether he revisited the Opinion prior to the issue of the building consent. However the Opinion provided the basis upon which he had determined what further information would be required prior to issuing the building consent. Had he rejected the views expressed in the Opinion outright, his evidence was that he would not have requested further information regarding the proposed cladding system. He would instead have asked for an alternative cladding system to be proposed.
[34] Mr Woodger concluded that the views expressed in the Opinion, together with further information supplied by other parties, the original plans and specifications, and the various other materials obtained (such as manufacturer specifications), were all collectively matters which ultimately led to the issue of the building consent.
[35] In Mr Woodger’s view, the change in the December 2005 amended application for the reclad consent (replacing the Hardibacker fibre cement sheet with Eterpan fibre cement sheet) was not significant enough to render irrelevant the opinions about the recladding system for the dwelling which had been expressed in the Opinion.
[36] Evidence was given for BCCL and Dr Walls by Mr Roger Cartwright, an independent building consultant. Mr Cartwright had spent some time working in senior roles in the Council’s building inspection department in the past, and his company had subsequently been retained by the Council to assist with various aspects of its regulatory services associated with processing building consents.
[37] Mr Cartwright referred to variances between the original Ashton Mitchell design which was the subject of the Opinion, and what he referred to as the “new design” for which the Council later issued the building consent.
[38] Mr Cartwright concluded from his comparison of the two cladding systems that the system eventually approved by the Council was completely different in
design and proposed construction from the cladding system which was reviewed in the Opinion. The most significant difference was the use of the Eterpan product as the substrate rather than Hardibacker: Eterpan was a proprietary cladding system with its own cavity system and particular requirements to provide a waterproof finish to the building.
[39] In Mr Cartwright’s view Mr Woodger would have had no need to revisit the Opinion before issuing the building consent. Mr Cartwright reasoned that if the changes were as insignificant as Mr Woodger contended, the Council would not have needed to formally address them by way of amendment to the building consent issued on 29 November 2005 (as it did).
[40] In his second affidavit, Mr Woodger stuck to his guns on the issue of whether the Council had placed any reliance on the Opinion when it issued the building consent. He also referred to an expert report which the Chief Executive of MBIE had commissioned in the course of the 2013 proceeding under the Building Act relating to the remedial work and the building consent issued for it. The expert report, dated 23 April 2013, concluded amongst other things that the building consent should not have been issued because of omissions including (but not restricted to) lack of evidence that the specified waterproof membrane to be applied to the stone slip backer board had sufficient cohesive strength and adhesion to hold the stone up without additional mechanical support. The expert considered that the cause of the failure of the stone cladding was separation taking place at the waterproof membrane inter-coat boundary, or within the waterproof membrane itself. These were design aspects which were not changed between the initial design as reviewed and approved in the Opinion, and the final design.
[41] Mr Woodger included in his second affidavit a section headed “Council’s reliance on Dr Walls personally”. In it, Mr Woodger stated that the Council relies on the opinions of individual experts whose reports it may be considering, not on the companies for whom those individuals might work. He illustrated the point by saying that, if the view set out in the Opinion had been provided by someone within BCCL other than Dr Walls, it would likely not have been accepted (until the qualifications of the individual author had been established).
Legal principles applicable to strike-out applications and applications by defendants for summary judgment
Strike-out applications
[42] The following principles applicable to strike-out applications are taken from the decision of the Court of Appeal in Attorney-General v Prince,3 and were endorsed by the Supreme Court in Couch v Attorney-General:4
(1) Pleaded facts, whether or not admitted, are assumed to be true.
(2)The cause of action must be clearly untenable: the Court must be certain that it cannot succeed.
(3) The jurisdiction is to be exercised sparingly, and only in clear cases.
(4)The jurisdiction is not excluded by the need to decide difficult questions of law, requiring extensive argument.
(5)The Court should be particularly slow to strike out a claim in a developing area of the law.
[43] In an appropriate case, the Court may receive affidavit evidence on a strike- out application, but it will not attempt to resolve genuinely disputed issues of fact. Generally, affidavit evidence admitted on a strike-out application will be limited to matter which is undisputed.5
[44] Each cause of action is to be considered separately, and if the Court concludes that it clearly cannot succeed, it may be struck out.
Summary judgment applications
[45] Under r 12.2(2) of the High Court Rules, the Court may give judgment against a plaintiff if the defendant satisfies the Court that none of the causes of action
3 Attorney-General v Prince [1998] 1 NZLR 262 (CA).
4 Couch v Attorney-General [2008] NZSC 45; [2008] 3 NZLR 725.
5 Attorney-General v McVeagh [1995] 1 NZLR 558 at 566 (CA).
in the plaintiff’s statement of claim (in this case, the Council’s third party claims)
can succeed.
[46] Both counsel cited the decision of the Court of Appeal in Westpac Banking Corporation v M M Kembla New Zealand Limited.6 That case is authority for the following propositions:
(1)A defendant applying for summary judgment has the onus of proving the plaintiff cannot succeed. Usually, summary judgment for a defendant will arise where the defendant can offer evidence which is a complete defence to the plaintiff’s claim.
(2)The Court must be satisfied that none of the claims can succeed: it is not enough that they are shown to have weaknesses.
(3)Summary judgment will only be suitable where all the material facts are not in dispute and can be put before the Court efficiently in affidavit form.
(4)The procedure may be inappropriate if the case is likely to turn on a judgment which can only be reached properly after hearing all the evidence at trial.
(5)Developing points of law may require the added context and perspective provided by a full trial.
The issues in this case
[47] At the hearing, Mr Telle conceded that it is reasonably arguable for the
Council that BCCL owed it a duty of care in negligent mis-statement when it issued the Opinion. Following that concession, the remaining issues for determination are:
6 Westpac Banking Corporation v M M Kemba New Zealand Limited; (CA) [2001] 2 NZLR 298
631.
Claims against BCCL
(1)No Reliance – has BCCL shown that it has a complete answer to the Council’s claim against it in negligent mis-statement, on the ground that the Council did not rely on the Opinion?
(2)No loss – has BCCL shown that it has a complete answer to the Council’s claim against it in negligent mis-statement, on the ground that any reliance placed by the Council on the Opinion did not cause the Council any loss?
(3)No duty of care to the plaintiffs – has BCCL shown that it has a complete answer to the Council’s contribution claim against it based in negligence simpliciter, or that that claim should be struck out as clearly untenable, on the grounds that BCCL did not owe the plaintiffs a duty of care?
Claims against Dr Walls
(4)No duty of care to the Council – has Dr Walls shown that he has a complete answer to the Council’s claim against him in negligent mis- statement, or that that claim should be struck out as clearly untenable, on the grounds that he did not owe the Council any duty of care?
(5)No duty of care to the plaintiffs – has Dr Walls shown that he has a complete answer to the Council’s contribution claim, or that that claim should be struck out as clearly untenable, on the grounds that he did not owe the plaintiffs a duty of care?
(6)Reliance and no loss – has Dr Walls shown that he has a complete answer to the Council’s causes of action against him based on:
(i) No reliance by the Council on the Opinion; or
(ii) No loss.
Discussion – applications by BCCL
[48] I will consider first the applications by BCCL. Because of the concession that the negligent mis-statement duty of care to the Council is arguable, and the effect of r 12.2 of the High Court Rules, it will be convenient to address BCCL’s summary judgment application first.
Issue 1 No Reliance – application by BCCL for summary judgment on the Council’s
negligent mis-statement cause of action
[49] As noted above, it is conceded that the alleged duty of care to the Council is arguable.
[50] Mr Telle sensibly accepted in his written submissions that, given the differing views expressed by Mr Cartwright and Mr Woodger, the question of whether the Hardibacker and Eterpan systems were so different that the Council could not possibly have relied on the Opinion (which did not include a review of the Eterpan system) is not suitable for determination on a summary judgment or strike-out application. However he submitted that it is not necessary to resolve that particular conflict in order for the Court to uphold his clients’ contention that the Council did not place any reliance on the Opinion.
[51] Mr Telle’s principal submission on reliance was that the wording of the Council’s letter to BCCL dated 20 October 2005 was a complete rejection of the Opinion. He submitted that that response from the Council is enough on its own to show that there was no reliance.
[52] Mr Telle submitted that the Opinion did not move matters along in any way. The Council sought the same information in its letter dated 20 October 2005 as it had sought in its 13 October 2005 letter. In his submission, it was the new information provided later by the architect or engineer, after 20 October, that led to the Council’s decision to issue the building consent.
[53] In the alternative, Mr Telle submitted that it was not reasonable for the
Council to have relied upon the Opinion. Nor was it reasonably foreseeable by
BCCL that the Council would rely on the Opinion, particularly given the wording of the Council’s 20 October 2005 letter, in which the Council emphasised that it was not so much concerned with the quality of the individual components in the cladding system as with the question of whether the system as a whole satisfied the performance requirements of the Building Code.
[54] Mr Woodger’s evidence was that the Council did not reject outright the system described in the Opinion. He said that the fact that he had asked a number of questions in the Council’s 20 October letter was an indicator that the letter was not an outright rejection of the proposed system. He stated that the views expressed in the Opinion, together with further information supplied by other parties, were all matters which ultimately led to the issue of the building consent (although he could not recall revisiting the letter before the building consent was issued on
29 November 2005).
[55] In those circumstances, it is difficult to say with any degree of confidence whether the Opinion played any continuing role in the Council’s considerations before it issued the building consent, or whether it was simply discarded, as BCCL and Dr Walls contend. The Council noted in its 20 October letter that BCCL had not referred in the letter to the structure and durability requirements of the Building Code, but the Opinion did express the view that the system described would meet the requirements of the Building Code. While specific aspects of the Building Code relating to structure and durability were not addressed, I think Mr Woodger and the Council were entitled to take from the Opinion that BCCL had concluded that the proposed system would meet the requirements of the Building Code in all respects.
[56] The expert report commissioned by the Chief Executive of MBIE concluded that a cause of the failure of the stone cladding was separation taking place at the waterproof membrane intercoat boundary, or within the waterproof membrane itself. That aspect of the proposed system was present from the beginning, and formed part of the system described by BCCL in the Opinion. (In respect of the waterproofing membrane, BCCL had simply noted in the Opinion that the “Flexi-seal waterproofing was manufactured by a reputable manufacturer whose test data and conditions of use were “commensurate with the level of detail required”. BCCL
advised in the Opinion that the total weight of the cladding would be similar to that of the 20mm solid plaster system, and that “the system proposed would act as a cladding with all properties at least equivalent to a 20mm solid plaster system as specified on the plans and as per building code E2/AS1”). I think in the context the Council was entitled to read “all properties” in the quoted passage as including properties relevant to the structure and durability of the system as a whole.
[57] In the end, I do not believe that BCCL reaches the threshold of showing that it has a complete answer to the Council’s case on the reliance issue. It cannot be said with sufficient certainty (to justify the entry of summary judgment) that BCCL’s apparent view that the proposed system would meet the structural and durability requirements of the Building Code played no ongoing role in the Council’s thinking when it concluded (as it presumably did) that there would be no structural or durability problems with that part of the system comprising the waterproof membrane and the inter-coat boundary within the system. In my view the reliance issue is not suitable for determination in the context of this summary judgment application.
Issue 2 No loss - application by BCCL for summary judgment on the Council’s
negligent mis-statement cause of action
[58] If the duty of care is conceded (as it is), and the Council’s claim that it relied on the Opinion is unsuitable for determination on a summary judgment application, I do not see any basis on which BCCL can contend that the Council has no reasonable prospect of establishing at trial that reliance on the Opinion caused it some loss. If it is held at trial that there were defects in the cladding system such that no building consent should have been issued, and that reliance on part of the Opinion was an element in the Council’s decision to issue the building consent, BCCL clearly cannot say that it has a complete answer to the claim on the basis of no loss. The issues of causation and the extent of any loss suffered by the Council are issues for trial. BCCL’s application for summary judgment based on the “no loss” argument therefore fails.
[59] BCCL’s application based on its “no reliance” and “no loss” arguments both having failed, there is no remaining basis for the entry of summary judgment in its favour on the Council’s negligent mis-statement cause of action.
Issue 3 No duty of care owed by BCCL to the plaintiffs
[60] It is not necessary to consider BCCL’s application for summary judgment on
this cause of action.
[61] The effect of r 12.2 of the High Court Rules is that if a defendant’s application in respect of one cause of action pleaded by the plaintiff is considered unsuitable for summary judgment, the application as a whole must be dismissed. That is the position here, where BCCL’s application for summary judgment on the Council’s negligent mis-statement cause of action has been unsuccessful.
[62] However, r 12.2 has no application to strike-out applications – a court may strike out one of a plaintiff’s causes of action while allowing others to stand. It is therefore necessary to consider whether BCCL’s application to strike out the third party contribution claim made against it by the Council should be struck out on the grounds that BCCL did not owe the plaintiffs any duty of care.
[63] In accordance with the principles set out at paragraphs [42] – [44] above, I assume that relevant facts pleaded by the plaintiffs and by the Council are true. It is for BCCL to show that, on those facts, the cause of action is clearly untenable. I must be certain that the Council’s third party contribution claim based in negligence simpliciter cannot succeed, because BCCL owed no duty to the plaintiffs.
[64] The general rule is that those involved in building work in New Zealand, such as builders, architects, roofing contractors and so on, do owe duties of care to future owners of the property on or in relation to which they carry out their work.7
Territorial authorities also owe duties to future owners.8
7 Bowen v Paramount Builders (Hamilton) Ltd, above n2.
8 Body Corporate No 207624 v North Shore City Council (Spencer on Byron) [2012] NZSC 83; [2013] 2 NZLR 297.
[65] Construction of buildings in New Zealand is governed by the Building Act
2004 (the 2004 Act). Section 17 of the 2004 Act provides:
All building work must comply with building code
All building work must comply with the building code to the extent required by this Act, whether or not a building consent is required in respect of that building work.
[66] In her judgment in Spencer on Byron, the Chief Justice referred to the forerunner of s 17 of the 2004 Act (s 7 of the Building Act 1991, which is materially the same as s 17 of the 2004 Act), noting that “building work” which is not code- compliant is contrary to the Act. Her Honour went on to say: 9
The Act sets up an interlocking system of assurance under which all undertaking building work or certifying compliance with the code are obliged to observe the standards set in it.
[67] Was BCCL carrying out “building work” when it sent the Opinion to the
Council? I think it is arguable that it was.
[68] The expression “building work” is defined in s 7 of the 2004 Act as work:
for or in connection with … the alteration … of a building … on an allotment that is likely to affect the extent to which an existing building on that allotment complies with the Building Code.
[69] Design work comes within that broad definition. 10
[70] As in the Southland Indoor Leisure Centre Charitable Trust case, there is no issue in this case over whether the relevant work was undertaken in respect of a particular building: the Opinion was created in connection with the alteration of a particular building on the property, and the Opinion was written with the express purpose of persuading the Council to issue a building consent. This is not a case like
Deeming v EIG-ANSVAR Ltd, where geotechnical reports on earthworks for a
9 At [16].
10 See Southland Indoor Leisure Centre Charitable Trust v Invercargill City Council [2014] NZHC 1439 at [30]: “It is clear that design work on buildings is incorporated in the definition of building work by its inclusion in the element of construction. The two specific types of design work identified in s 7(c) and (d) are in addition to the general design work carried out in connection with buildings.”
planned subdivision were held not to be “building work” under the Building Act, as the work was not work for or in connection with the construction, alteration, demolition, or removal of a particular building.11
[71] It might perhaps be argued that BCCL did not actually carry out any design work itself, but merely reviewed a cladding system which had been designed by others. But it seems to me that there is little practical difference between an expert review of a building design, and the expert carrying out the design work. And even if the work carried out by BCCL in this case was not strictly design work, it still, arguably falls within the broad definition of work “for, or in connection with, the … alteration … of a building”. As Collins J noted in the recent case of GPE Holdings Ltd v Tile ‘N’ Style, the words “in connection with” have a wide meaning, requiring merely a link or relationship between one thing (A) and another (B). It is not necessary for there to be a causal relationship in order for (A) to be connected with
(B).12
[72] GPE Holdings Ltd was a case where a representative of a distributor of building products made certain representations about its product to a property developer. There was an issue as to whether the representations fell within the definition of “building work” in s 7 of the 2004 Act. Collins J concluded that they did. The context of the particular representations was that the distributor was seeking to convince the developer to use the product on the decks and roofs of the development. In that context, the Judge concluded that the representations were
“work in connection with the construction of a building”.13
[73] I accept that BCCL says that the cladding system which it described in the Opinion was different from the system which was eventually adopted. In those circumstances it might be argued that one should not be regarded as having carried out “building work” under the Act if the structure on which one has carried out design or other “preliminary” work is never actually built on any land. But the Council’s argument in this case is that relevant parts of the cladding system on which
BCCL advised were carried forward into the stone cladding system which was
11 Deeming v EIG-ANSVAR Ltd [2013] NZHC 955.
12 GPE Holdings Ltd v Tile ‘N’ Style Ltd [2014] NZHC 802 at [34].
13 At [48].
eventually adopted and installed, and I do not think it is either possible or appropriate to dismiss that contention in the context of an application to strike out the Council’s claim.
[74] I conclude that it is reasonably arguable for the Council that the preparation of the Opinion and the provision of the Opinion to the Council, constituted the carrying out of “building work” under the 2004 Act.
[75] Given the requirement in s 17 of the 2004 Act that all building work must comply with the Building Code to the extent required by the Act, and the duties of care to future owners which have been recognised by the courts in respect of others involved in carrying out building work under the 2004 Act, I do not see this as an appropriate case for striking out. I acknowledge that there might be an argument that not every breach of the 2004 Act should result in a liability to a future owner, but if there is any such argument to be made it should be made at trial, where the Court will be able to address the argument in the context of all relevant facts. For the moment, I note simply that BCCL gave its Opinion for the express purpose of persuading the Council to issue a building consent for the re-cladding of a particular building on a particular site. On the face of it, there is sufficient proximity for the alleged duty of care to have arisen, and no policy reason has been identified which in my view would justify a conclusion that no duty of care was owed.
[76] Indeed, the policy factors if anything seem to me to point the other way, and favour the recognition of a duty. If an expert opinion writer in BCCL’s position owes no duty in negligence simpliciter to current land owners there may be no one the land owner can sue where a building consent has been issued which should not have been issued. The Council itself may have no liability to the land owner, as it may have been quite reasonable for it to rely on the expert’s opinion. And the property owner would likely have no claim direct against the opinion writer in the
law of negligent mis-statement, because of the absence of any reliance.14
[77] BCCL’s position seems to me to be not sufficiently different from that of an
architect or other person providing design advice for the construction of a dwelling,
14 Spencer on Byron, above n8, at [219] – [223].
where duties of care are recognised, for the claim against it to be struck out on a pre- trial application.
[78] For BCCL, Mr Telle contrasted the difference between an action in negligence simpliciter and an action based in negligent mis-statement, and submitted that the only tenable cause of action in this case is that of negligent mis-statement. He referred to the decision of the Court of Appeal in Body Corporate 202254 v Taylor, and the following statement in the judgment of Chambers J:15
I should also mention Williams v Natural Life Health Foods Ltd [1998] 1
WLR 830; [1998] 2 All ER 577 (HL), a decision to which the President refers at length. It, like Trevor Ivory, was a negligent misstatement case, not a case in pure negligence such as is pleaded here. Negligent misstatement cases have always been subject to special rules. The reasons for this are set out by Todd S, at para 5.8.02. In order to contain liability for negligent misstatements, the Courts have used various devices not necessary in conventional negligence cases. Sometimes the Courts have referred to the need for the plaintiff to show the defendant assumed responsibility for what he or she said. At other times, the Courts have referred to the need for there to exist a “special relationship” between the parties: see Todd S, at paras
5.8.04-5.8.05. In Williams, the House of Lords took the view that directors, employees and agents acting on behalf of a company were under no duty to take care in making statements to company clients unless they had assumed responsibility for their words. That is not relevant, however, to the present case, as a builder's liability in negligence does not turn on assumption of responsibility. Rather, the builder is liable, as Todd S states, “on ordinary principles of negligence for physical damage to property caused by faulty work of construction”: at para 6.4. This appears to be a difference between the majority and me.
[79] It is true that the Council relies on precisely the same act (furnishing the Opinion to the Council) as constituting both the tort of negligent mis-statement (vis- à-vis the Council) and negligence simpliciter (vis-à-vis the plaintiffs). On the face of it, it may seem strange that the same act could form the basis of both torts, especially in circumstances where there is no reliance by, or special relationship with, the plaintiffs. But as Chambers J noted in the passage quoted from Taylor, a builder’s liability in negligence does not turn on assumption of responsibility, but on ordinary principles of negligence for physical damage to property caused by faulty work or construction. It seems to me to be at least arguable that if an opinion which contains negligent advice causing a property owner damage also happens to qualify as
“building work” under the 2004 Act, there should be a cause of action in negligence
15 Body Corporate 202254 v Taylor [2008] NZCA 317; [2009] 2 NZLR 17 at [144].
simpliciter (i.e. negligently performing “building work”), in addition to the cause of action in negligent mis-statement which may be available to anyone who read the Opinion and relied on it.
[80] Mr Telle also referred to the judgment of Associate Judge Faire in Lockie v North Shore City Council & Ors.16 That was a case in which the North Shore City Council had joined Dr Walls in a proceeding. He applied to strike out the claims against him, or alternatively for summary judgment on them. At the time of the relevant events, Dr Walls was employed as a consulting engineer by a company which had been retained to provide a pre-purchase report for the plaintiffs, who were the trustees of the Lockie family trust. Dr Walls signed the report for his employer. The employer was later struck off the register of companies. The plaintiffs sued
Dr Walls, alleging that he owed a duty of care in both pure negligence and negligent mis-statement for failing to bring to their attention alleged defects in the property. The Associate Judge found that the plaintiffs’ cause of action could only be in negligent mis-statement, and not in negligence simpliciter. In making his decision, the Associate Judge pointed out that “Dr Walls had no involvement with the process associated with the building work such as inspection for purposes of plans approval,
building consent…”.17
[81] In my view the present case is distinguishable from Lockie, as it is at least arguable here that BCCL did carry out “building work” which is alleged to be defective, and that it did have involvement with the process associated with the building consent. I do not read Lockie as supporting the proposition that the same act can never constitute both negligent mis-statement (vis-à-vis one party) and negligence simpliciter (vis-à-vis another).
[82] Mr Telle emphasised that BCCL did no more than make the statements made in the Opinion. It had no involvement with the preparation of the plans or specifications related to the building consent, and had no involvement in the preparation of the revised plans and specifications which were required by the
Council when the cladding system was changed to incorporate the Eterpan substrate.
16 Lockie v North Shore City Council HC Auckland CIV-2007-404-6546, 6 July 2011.
17 At [33].
BCCL was not involved in any of the physical construction works to install the Eterpan cladding system and was not involved in any of the subsequent inspection work.
[83] All of those might be valid points, but it seems to me that they are concerned with matters of fact which are insufficient to justify striking out the cause of action. Whether BCCL was negligent in providing the Opinion, and whether the Council relied upon the Opinion in its decision to issue the building consent, are questions of fact which do not fall for determination on the strike-out application.
[84] In the end, I am not persuaded that the Council’s contribution claim is so clearly untenable that it should be struck out. BCCL has accordingly failed to make out its case for striking out or for summary judgment, and its application is refused. It remains to consider Dr Walls’ applications for summary judgment and/or strike out.
Issues 4, 5 and 6: Claims against Dr Walls
[85] It is not necessary to consider further issue (6), which is concerned with reliance on the Opinion, and whether any reliance on the Opinion caused the Council any loss. If Dr Walls has any legal responsibility for the Opinion personally, then the results on those questions must be the same as they were for BCCL. The remaining issues, are whether Dr Walls assumed a personal duty of care, whether to the Council in negligent mis-statement or to the plaintiffs in negligence simpliciter. It will be convenient to address issue 5, which is concerned with the question of whether Dr Walls owed any personal duty to the plaintiffs, first.
Issue 5: No duty of care to the plaintiffs – has Dr Walls shown that he has a complete answer to the Council’s contribution claim, or that that claim should be struck out as clearly untenable, on the grounds that he did not owe the plaintiffs any duty of care?
[86] The Council relies on Morton v Douglas Homes Ltd, where the High Court found the directors of a building company personally liable because of their actual
involvement in the building work which gave rise to the loss.18 The Council says that the present case is directly analogous to Morton and to Dicks v Hobson Swan Construction Ltd (in liquidation), in which Baragwanath J followed Morton. 19 In Dicks, the Judge found a director personally liable because he not only directed, but actually undertook the construction work, and was therefore personally liable for the omission of the seals which gave rise to liability in the case. Here, Mr Barr submits that Dr Walls not only had control over the writing of the Opinion, but was personally involved in it. It was he who undertook the review of the proposed system and provided the Opinion, and he can be personally liable for negligence in carrying out the tasks to which he personally attended.
[87] For Dr Walls, Mr Telle repeated the submission, based primarily on Lockie, that the only possible cause of action on the Opinion would be an action in negligent mis-statement, and that (i) there existed no special relationship between Dr Walls and the plaintiffs and (ii) Dr Walls did not assume any personal responsibility to the plaintiffs.
[88] I am unable to accept Mr Telle’s submissions. I have held on the Council’s contribution claim against BCCL that it is at least arguable that if a negligent mis- statement also happens to constitute “building work” under the 2004 Act there will be a duty of care owed to the current and future property owners, whether or not there was any relationship between them and BCCL, and regardless of whether they relied on the Opinion. As Chambers J noted in the passage from Taylor quoted at [78] above, a builder’s liability in negligence does not turn on assumptions of responsibility.
[89] If that is so, I cannot see why Dr Walls’ position should be any different. It was he who carried out the work reviewing the cladding system that was initially proposed, and it was he who signed the Opinion and sent it to the Council. In those circumstances, I accept the Council’s submission based on Douglas v Morton Homes and Dicks that there is a tenable claim against Dr Walls on the basis that he
personally carried out “building work” which may have been carried out negligently.
18 Morton v Douglas Homes Ltd [1984] 2 NZLR 548 (HC).
19 Dicks v Hobson Swan Construction Ltd (in liquidation) (2006) 7 NZCA 881 (HC).
The applications to strike out the Council’s contribution claim against Dr Walls, and for summary judgment on that claim, are accordingly refused.
Issue 4 No duty of care to the Council – has Dr Walls shown that he has a complete answer to the Council’s claim against him in negligent mis-statement, or that that claim should be struck out as clearly untenable, on the grounds that he did not owe the Council any duty of care?
[90] In Trevor Ivory v Anderson the Court of Appeal noted, in the context of what was a negligent mis-statement case, that the test as to whether an officer or servant of a company is liable for acts carried out by him or her in the name of the company, is whether the officer or servant has assumed a duty of care to the recipient of the advice, whether actual or imputed. 20 Liability was said to depend on the facts, on the degree of implicit assumption of personal responsibility, and on a balancing of policy considerations. Cooke P noted that, in relation to an obligation to give careful and skilful advice, the owner of a one-person company might assume personal
responsibility. However something special was required to justify putting a case in that class.21
[91] In Trevor Ivory, Hardie Boys J agreed that, for an officer or servant of a company to be liable for negligent mis-statement by the company, there must be an assumption of responsibility by the officer or employee, actual or imputed. Whether the officer or servant has assumed such personal responsibility will be dependent on the facts of the case. The Judge was not prepared to accept that a director of a one- man company is to be regarded as automatically accepting tort responsibility for advice given on behalf of the company by himself. The Judge observed: “there may be situations where such liability tends to arise, particularly perhaps where the director as a person is highly prominent and his company is barely visible, resulting in a focus predominantly on the man himself”. All will depend upon the facts of individual cases, and the degree of implicit assumption of personal responsibility, with no doubt some personal policy elements also applying…. There was no singular feature which would justify belief that Mr Ivory was accepting a personal
commitment as opposed to the known company obligation.22
20 Trevor Ivory v Anderson [1991] 2 NZLR 517 (CA).
21 At 524.
22 At 532.
[92] In Williams v Natural Life Healthfoods Ltd, Steyn LJ accepted that a managing director of a small, one-man company will almost inevitably be the one possessed of qualities essential to the functioning of the company. 23 But that factor in itself does not convey that the managing director is willing to be personably answerable to the customers of the company.
[93] In the Taylor case, the Court of Appeal accepted that there must be an assumption of responsibility, whether actual or imputed, for personal liability to arise in the case of a director or employee. William Young P, delivering the joint judgment of himself and Arnold J., noted that the courts have been very reluctant to confer rights to sue in negligence which are inconsistent with (perhaps just in the sense of going beyond) the rights for which plaintiffs had bargained. “As well, to be successful, a plaintiff will usually have to show an assumption of personal responsibility by the defendant to the plaintiff which is akin to acceptance of a
contractual obligation.”24
[94] The decision of MacKenzie J in North Shore City Council v Wightman was another decision relating to a pre-purchase inspection of a property. 25 Future Safe Buildings Inspections Ltd was retained by the purchasers to provide the report, which was authored by their employee Mr Beazley. The report stated that the property was in overall good condition and required no significant or urgent repairs. On moving into the house, the purchasers discovered leaks, and lodged a claim with
the Weathertight Homes Resolution Service. They claimed before the Tribunal against a number of parties, and Mr Beazley was joined as a respondent (at the request of the local authority). Mr Beazley’s former employer, Future Safe Buildings Inspections Ltd, was apparently in liquidation.
[95] The Tribunal subsequently made an order removing Mr Beazley as a respondent, and the case came before MacKenzie J in the High Court on appeal from that decision. The North Shore City Council submitted that there was an arguable
claim against Mr Beazley, both under s 9 of the Fair Trading Act 1986 and also in the
23 Williams v Natural Life Healthfoods Ltd [1998] 1 WLR 830 (HL).
24 Body Corporate 202254 v Steven Taylor, above n 15, at[16].
25 North Shore City Council v Wightman HC Auckland, CIV-2010-404-003942, 30 November
2010.
tort of negligent mis-statement. The essential issue on the latter point was whether
Mr Beazley could have personal liability, as an employee.
[96] MacKenzie J referred to the Court of Appeal decisions in Trevor Ivory and Taylor, and noted that an essential difference between Trevor Ivory and Morton v Douglas Homes Ltd, was that in Trevor Ivory the existence of a duty of care was dependent on an assumption by the employee of responsibility, whereas in Morton the duty of care was a duty owed personally by the employee which did not depend on the existence of any special relationship or assumption of responsibility. As
MacKenzie J put it: 26
An employee is not immune from liability for a negligent act or omission by the employee in the course of the employee’s employment, though the employer may also be vicariously liable.
[97] However at para [18], the Judge noted that, in the ordinary course, the employee’s negligent mis-statement will not also render the employee liable to the recipient of the statement, because the employee has not personally assumed responsibility to the recipient, so as to impose on the employee personally a duty of care.
[98] The factors the appellant relied on in support of its argument that Mr Beazley had assumed personal responsibility were that he personally undertook the inspection, that he prepared and signed the report, and that he sent it to the purchasers with a covering letter. He also offered to discuss the report with the purchasers, and gave an assurance that he had the skills necessary to provide the report. MacKenzie J took the view that those circumstances fell far short of indicating an acceptance of personal responsibility, as distinct from responsibility on behalf of this employer.
[99] There was no evidence to suggest that Mr Beazley had any role in the company other than as an employee; he was neither a director nor a shareholder in the company. The purchasers had engaged the company to provide the report, not
Mr Beazley personally.
26 At [17].
[100] MacKenzie J considered that adopting the various factors listed by the appellants in support of the “assumption of personal responsibility” argument would result in a very large number of cases where work was performed for an employer by an employee who had special skills, resulting in liability of the employee. Those factors should not be regarded as automatically justifying the imputation of an assumption of responsibility. At least in negligent mis-statement cases, it is not enough to establish only that the employee has carried out the work for which the employer has assumed responsibility. What must be shown are circumstances on which the claimants could reasonably rely as an assumption of personal responsibility by the employee who performed the services on behalf of the
employer.27
[101] Mr Telle also referred to the Lockie decision, where North Shore City Council v Wightman was followed by the Associate Judge. At para [57] in Lockie, Associate Judge Faire agreed with MacKenzie J that an assumption of responsibility by the employee will not necessarily arise from the following factual position:
(1) employee undertaking the personal inspection
(2) employee preparing the report
(3) employee signing the report
(4) employee sending the report to the claimant
(5) employee offering to discuss the report with the claimant
(6)employee giving assurances that he has the skills necessary to prepare the report.
[102] In Lockie, Dr Walls was merely an employee; he was not a director of his employer, and nor was he a shareholder. Associate Judge Faire took the view that
Dr Walls was carrying out work “for” the company, not work “of” the company.
27 At [28].
There was nothing in the evidence to justify a belief on the part of the plaintiffs that Dr Walls was undertaking a personal commitment, as opposed to the known company commitment. In those circumstances the Associate Judge noted at [62] that “to hold that Dr Walls had personally assumed responsibility for the report…would be to give the plaintiffs greater rights than those for which they have bargained.” The Associate Judge concluded that there had been no personal assumption of responsibility.
[103] The Council submits that Trevor Ivory can be distinguished, as in that case there was a contractual relationship between the company and the plaintiff. Here, the Council had no ability to decide the party with whom it would deal – it simply received the information provided in the Opinion, and relied on the expertise of the individual who had provided the Opinion, namely Dr Walls. Dr Walls held himself out as the “principal” of BCCL, and Mr Woodger explained in his reply affidavit that the Council relies on the expertise of the individual involved, not on his or her company. Mr Barr further submitted that there is a significant factual analysis which needs to take place to determine whether the circumstances are “sufficiently special” to attribute an assumption of personal responsibility to Dr Walls.
[104] I think the circumstances in this case are distinguishable from those in North
Shore City Council v Wightman and Lockie, in three important respects:
(1)Dr Walls is a director of BCCL along with his wife, and he and his wife are the sole shareholders.
(2)This is not a case where the Council chose to deal with BCCL: the Opinion came to the Council uninvited. There will therefore be no question of the Council getting “more than it bargained for” if it is permitted to pursue its claim against Dr Walls personally.
(3)There is evidence that Dr Walls was well known to Mr Woodger and the Council from Dr Walls’ earlier employment by the Council. It may be that evidence will be produced at trial showing that Dr Walls
knew and expected that the Council would be placing particular reliance on his personal skills and experience.
[105] In those circumstances I accept the Council’s submission that the issue of whether Dr Walls is to be treated as having assumed personal responsibility for the Opinion should be addressed at trial, in the context of all of the relevant facts. It is not suitable for determination on a strike-out or summary judgment application.
Conclusion
[106] The applications by BCCL and Dr Walls are refused. Costs are reserved.
Solicitors:
Neilsons Lawyers, Auckland for Fourth and Fifth Third Party
Simpson Grierson, Auckland for Third Defendant/Respondent
Associate Judge Smith
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