Van Huijsduijnen v Woodley [2012] NZHC 2685 (16 November 2012)

Last Updated: 27 November 2012

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV 2012-485-000638 [2012] NZHC 2685

BETWEEN RONALD ALOYSIUS WILHELMUS HOOFT VAN HUIJSDUIJNEN AND MARTINA HELENA HOOFT VAN HUIJSDUIJNEN

Appellants

AND EDWARD MERVYN JOHN WOODLEY AND LYNETTE ANNE CATHERINE WOODLEY

First Respondents

AND PORIRUA CITY COUNCIL Second Respondent

AND DONALD JOHN HAWINKELS Third Respondent

Hearing: 1, 2 October 2012

Supplementary Submissions: 23 October 2012

5 November 2012

Counsel: M C Josephson and S J Baldwin for Appellants

No appearance for First Respondents

P A Robertson for Second Respondent

No appearance for Third Respondent

Judgment: 16 November 2012

_{JUDGMENT OF RONALD YOUNG J}

RONALD ALOYSIUS WILHELMUS HOOFT VAN HUIJSDUIJNEN AND MARTINA HELENA HOOFT VAN HUIJSDUIJNEN V EDWARD MERVYN JOHN WOODLEY AND LYNETTE ANNE CATHERINE WOODLEY HC WN CIV 2012-485-000638 [16 November 2012]

_{Table of Contents}

Paragraph No.

Introduction [1] Appeal rights [7] The claim before the Tribunal [9] Summary of appeal grounds [14] Summary of Tribunal’s approach [20] Breach of warranty by the first respondents [22] The Council [44]

Conflict of evidence [49] Estoppel/abuse of process [52] The same party or their privy or a decision in rem [64]

Abuse of process [70] Systems of inspection and inferences [86] Negligent Council inspections and the related builder’s obligations [95] The deck [96]

Kick out flashing [105] Water ingress through foundation wall [115] Cladding concerns and ground clearances [127] The rebate/painting and metalex [140] Window jambs [153]

The builder [163] Water proof membrane [170] Summary [172] Costs [178]

Introduction

[1] The appellants purchased a house in Papakowhai, Porirua from Mr and Mrs Woodley, the first respondents, in 2002. Shortly afterwards they discovered dampness in the area backed by a retaining wall at the rear of their house. They investigated the problem.

[2] In 2004 the appellants contacted the Weathertight Homes Tribunal (the Tribunal) and obtained an assessor’s report. That report identified that remedial work was required to make the home weathertight. Further reports were obtained over subsequent years.

[3] In June 2010 the appellants filed a claim with the Tribunal. The extent and value of the claim was subsequently amended until the amount sought for remedial work was $494,824.76. A long list of defects was alleged by the appellants. This required, amongst other things, the complete recladding of the house.

[4] The appellants bought their claim in the Tribunal against the Woodleys (who had hired the builder to build the house), the Porirua City Council (second respondent), the builder Mr Hawinkels (third respondent), the architect who designed the house, and an engineer who provided engineering advice with respect to the house. The Tribunal removed the architect and engineer as parties to the claim before the hearing by the Tribunal.

[5] The Tribunal concluded that the leaks which had damaged the house were not caused by any negligence of the builder, nor were the Council’s inspections negligent and that the Woodleys had not breached the warranties given by them in the agreement for sale and purchase of the house to the appellants. The Tribunal concluded that the removal of the architect from the proceedings meant an estoppel was created which prevented the appellants challenging the Council’s approval of the architect’s plans. When it granted the building consent, this in turn, meant where the builder and the Council relied upon the architect’s plans they could not be negligent. All claims by the appellants were, therefore, dismissed.

[6] The appellants in their amended notice of appeal allege the Tribunal made numerous factual and legal errors in relation to its findings covering each of the respondents. They say the Tribunal should have found the Council and the builder negligent and that the Woodleys had breached their contract with the appellants and, therefore, were liable for the damage and thus for the repairs. Regretfully the Woodleys and the builder, Mr Hawinkels, who were self represented before the Tribunal, elected not to participate in this appeal. The Porirua City Council opposed the appeal as it related to their liability.

Appeal rights

[7] Section 93 of the Weathertight Homes Resolution Service Act 2006 provides that a party to a claim may appeal to the High Court on a question of law or a question of fact arising from the decision of the Tribunal.

[8] It is accepted that this is an appeal covered by the Supreme Court’s decision

in Austin, Nichols & Co v Stichting Lodestar.1

Those exercising general rights of appeal are entitled to judgment in accordance with the opinion of the appellate court, even where that opinion is an assessment of fact and degree and entails a value judgment. If the appellate court’s opinion is different from the conclusion of the tribunal appealed from, then the decision under appeal is wrong in the only sense that matters, even if it was a conclusion on which minds might reasonably differ. In such circumstances it is an error for the High Court to defer to the lower Court’s assessment of the acceptability and weight to be accorded to the evidence, rather than forming its own opinion.

The claim before the Tribunal

[9] This house was architecturally designed. It was built on three levels with concrete floors on the two lower levels. There were retaining walls of polystyrene blocks filled with concrete to several sides of the building. The roof was

_{predominantly concrete tiles with a flat section over a bathroom on the south eastern}

1 Austin, Nichols & Co v Stichting Lodestar [2008] 2 NZLR 141 at [16].

side of the house. The house had a number of decks. The exterior cladding was plywood panels with battens. There was aluminium joinery.

[10] By the time the hearing began the total claim for remedial work was

$511,632.93. This involved a combination of repair costs (constituting the vast bulk)

of almost $450,000 plus about $77,000 for interest and general damages.

[11] Broadly the appellants’ case before the Tribunal was that as a result of a multitude of defects with the construction, water had entered the house and caused substantial damage. This required, amongst other repairs, full recladding of the house. The Tribunal accepted that the appellants’ house was a “leaky” home. In its decision, the Tribunal considered each of the alleged defects and determined if they were defects. If a defect, the Tribunal then considered whether “there is any evidence they were causative of loss”. If loss was established then the Tribunal considered whether any part of the responsibility arose from the negligent action of a particular party and whether such negligence or breach of a contractual term caused the damage.

[12] The Tribunal identified the following “defects” as causing the moisture

problem in the home:

(a) inadequate apron flashings near the front door;

(b) inadequate clearance between the ground and the bottom of the cladding;

(c) moisture from the family room door bypassing the moisture membrane;

(d) water entry at flashings and the failures of sealants or mitres of jambs and the lack of flashings at the sills of windows;

(e) incorrect installation of moisture membrane with respect to the deck battens causing water damage to the deck and deck columns;

(f) water entering the house through the retaining/garage wall; and

(g) dampness between the ply and the battens near the family room.

[13] The significant contributors to water entry in the house were (b) and (f) and the deck (e).

Summary of appeal grounds

[14] With respect to the builder, Mr Hawinkels, the appellants submit that there were a significant number of defects in the construction of the house which arose from the builder’s negligence. The appellants submit that the Tribunal made factual errors which led to its erroneous conclusion that the builder was not negligent and that it wrongly concluded the appellants were estopped from alleging the builder’s negligence arose from (in part) the negligently drawn plans and specifications by the architect.

[15] As to the Woodleys the appellants say the Tribunal misinterpreted the meaning of the warranty given by the Woodleys on the sale of their house to the appellants. Correctly interpreted, the warranty meant the Woodleys were liable for the cost of bringing the building up to the standard required by the Building Act 1991 (the Act). The Woodleys were also sued as developers in negligence. The Tribunal ruled the Woodleys were not developers. No challenge is made to that conclusion.

[16] The Porirua City Council was said to be liable in negligence on the basis that the Council failed to exercise the required skill and care:

(a) to ensure the building plans and specifications complied with the

Building Code when it gave the building consent;

(b) when it carried out inspections and issued the code compliance certificate; and

(c) when it failed to “establish and enforce a system that would give effect to the Building Code”.

[17] The appellants’ case was, therefore, that there were inadequacies in the plans and specifications provided by the architect. The Council was negligent in its failure to pick up these errors in its consent process. It was also negligent when its inspectors failed to adequately inspect the house under construction and identify errors in both the application of the plans and specifications and in the construction. The Tribunal concluded that because the architect had been removed from the proceedings on the basis that his plans and specifications were not negligent, then the appellants were prevented (by estoppel) from challenging that finding by alleging the Council was negligent in failing to identify inadequacies in the architect’s plans and specifications.

[18] The appellants’ challenge in this appeal is, therefore, to almost all of the Tribunal’s factual findings as to the alleged defects. The appellants say the Tribunal fundamentally misunderstood the standard of care required of a Council as part of its inspection process. The appellants submit that a proper analysis of the Council’s responsibilities would show that its assessment, at the time the plans were presented and/or its inspection of the building site, required it to be satisfied that the products or methods to be used in the house would work. This they had not done.

[19] Secondly, the Council could not hide behind the architect’s plans. It was not sufficient that the Council was satisfied the house had been built in accordance with the plans. It had to ensure that the plans and ultimately the building of the house complied with the Building Act. These obligations were set out in ss 34(3) and 43(3) of the Act.

Summary of Tribunal’s approach

[20] The Tribunal’s approach in its judgment to most of the alleged defects was to identify the complaint and the failure, if any, arising from the complaint. It would then identify what was competent industry knowledge and workmanship (or Council

inspection standard) with regard to the alleged defect failure and compare that against the work undertaken.

[21] In some cases the Tribunal concluded there was no defect. In others, no damage. And in others still, no negligence because the appropriate standard at the time of the construction (1997) had been met. I, therefore, consider firstly the challenge to the Tribunal’s conclusions with respect to the alleged breach of warranty, then the claims relating to the Council and finally the builder. There is some overlap between the issues affecting the Council and the builder.

Breach of warranty by the first respondents

[22] Clause 6.2(5) of the agreement for sale and purchase between the appellants and the Woodleys, provides:

6.2 The vendor warrants and undertakes that at the giving and taking of possession:

...

(5) Where the vendor has done or caused or permitted to be done on the property any works for which a permit or building 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 were

fully complied with.

[23] As to this the Tribunal said:2

In the present case claimants knew that a code compliance certificate had been issued as Mr Hooft had been to the council offices to view it. To take the agreement in context clause 7.2(5) means no more than, to paraphrase McKenzie J in Ford above, that the parties agreed that the vendors warranted that the house had been constructed in a way that would not have prevented the issuing of a code compliance certificate and that a certificate had been issued.

2 Wilhelmus and Hooft van Huijsduijnen [2012] NZWHT Auckland 11 at [199] to [201].

In view of the variations in factual backgrounds and the availability of a High Court decision, I prefer to follow McKenzies’ J judgment in Ford which is consistent with the most recent decisions. In each of the other cited cases the parties had failed the Ford test as the liable parties had either failed to obtain a code compliance certificate as a result of their own actions or had done something which would have prevented the issue of such a certificate.

Accordingly, I find that the Woodleys, having fully contracted the whole of the work to a competent builder to construct the building in accordance with consented plans prepared by an architect, having obtained a code compliance certificate and having done nothing to fail to comply with any part of the Building Code which would prevent the issue of such a certificate, did not breach paragraph (d). They are not liable under the warranty. The claimants have not persuaded me that the clause is an absolute guarantee of quality for the life of the building (save for the limitation provisions) such that any leak from whatever cause renders them liable for the complete cost of repairs.

[24] The meaning of cl 6.2(5)(d) is not at all clear. In particular, the extent of its reach. The appellants’ case is that the clause is to be read and interpreted literally. The overriding obligation under the Act is set out in s 7 as follows:

7 All building work to comply with building code

(1) All building work shall 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.

(2) Except as specifically provided to the contrary in any Act, no person, in undertaking any building work, shall be required to achieve performance criteria additional to or more restrictive in relation to that building work than the performance criteria specified in the building code.

[25] The owners obligations in ss 32, 33, 34 and 43 of the Act effectively match the warranties in cl 6.2(5)(a), (b) and (c). There are other obligations under the Act but they have no relevance to the current situation.

[26] The appellants’ case is that the obligation to comply with the Code (in s 7 of the Act) had particular relevance in this case with respect to cls B2 and E2 of the

_{Building Code. E2 provides as follows:}3

3 Building Regulations 1992, sch 1.

Clause E2 – EXTERNAL MOISTURE

Provisions

OBJECTIVE

E2.1 The objective of this provision is to safeguard people from illness or

injury what could result from external moisture entering the building.

FUNCTIONAL REQUIREMENT

E2.2 Buildings must be constructed to provide adequate resistance to penetration by, and the accumulation of, moisture from the outside.

PERFORMANCE

E2.3.1 Roofs must shed precipitated moisture. In locations subject to

snowfalls, roofs must also shed melted snow.

E2.3.2 Roofs and exterior walls must prevent the penetration of water that could cause undue dampness, damage to building elements, or both.

E2.3.3 Walls, floors, and structural elements in contact with, or in close

proximity to, the ground must not absorb or transmit moisture in quantities that could cause undue dampness, damage to building elements, or both. E2.3.4 Building elements susceptible to damage must be protected from the adverse effects of moisture entering the space below suspended floors.

E2.3.5 Concealed spaces and cavities in buildings must be constructed in a way that prevents external moisture being accumulated or transferred and

causing condensation, fungal growth, or the degradation of building

elements.

E2.3.6 Excess moisture present at the completion of construction must be capable of being dissipated without permanent damage to building elements. E2.3.7 Building elements must be constructed in a way that makes due allowance for the following:

(a) the consequences of failure:

(b) the effects of uncertainties resulting from construction or from the sequence in which different aspects of construction occur:

(c) variation in the properties of materials and in the characteristics of the site.

Limits on application

Requirement E2.2 does not apply to buildings (for example, certain bus

shelters, and certain buildings used for horticulture or for equipment for washing motor vehicles automatically) if moisture from the outside penetrating them, or accumulating within them, or both, is unlikely to impair significantly all or any of their amenity, durability, and stability.

[27] And B2 provides as follows:

Clause B2 – DURABILITY Provisions

OBJECTIVE

B2.1 The objective of this provision is to ensure that a building will

throughout its life continue to satisfy the other objectives of this code.

FUNCTIONAL REQUIREMENT

B2.2 Building materials, components and construction methods shall be

sufficiently durable to ensure that the building, without reconstruction or major renovation, satisfies the other functional requirements of this code throughout the life of the building.

PERFORMANCE

B2.3.1 Building elements must, with only normal maintenance, continue to satisfy the performance requirements of this code for the lesser of the

specified intended life of the building, if stated, or:

(a) The life of the building, being not less than 50 years, if:

(i) Those building elements (including floors, walls, and fixings) provide structural stability to the building or

(ii) Those building elements are difficult to access or replace or

(iii) Failure of those building elements to comply with the

building code would go undetected during both normal use and maintenance of the building

(b) 15 years if:

(i) Those building elements (including the building envelope, exposed plumbing in the subfloor space, and in-built chimneys and flues) and moderately difficult to access or replace, or

(ii) Failure of those building elements to comply with the

building code who go undetected during normal use of the building, but would be easily detected during normal maintenance.

(c) 5 years if:

(i) the building elements (including services, linings, renewable protective coatings, and fixtures) are easily to access and

replace, and

(ii) Failure to those building elements to comply with the building code would be easily detected during normal use of the building.

B2.3.2 Individual building elements which are components of a building

system and are difficult to access or replace must either: (a) All have the same durability, or

(b) Be installed in a manner that permits the replacement of building

elements of lesser durability without removing building elements that have greater durability and are not specifically designed for removal and

replacement.

Limits on application

Performance B2.3.1 applies from the time of issue of the applicable code compliance certificate. Building elements are not required to satisfy a durability performance which exceeds the specified intended life of the

building.

[28] The appellants’ case is that this house, some years after its construction, leaked. The fact it leaked was a breach of cl E2 of the Code because the house within at least 50 years of construction (as provided for in cl B2) had not (in the

words of E2) provided adequate resistance to the penetration by moisture from the outside.

[29] The appellants’ case is that cl 5(d) effectively warrants that the house should not allow moisture entry for at least 50 years by its requirement that the obligations under the Act and, therefore, the Code, be met. If it allows moisture entry, then there is a breach of the Code and therefore of the Act. In this case, the warranty is triggered and breached.

[30] Perhaps understandably, the warranty in cl 5(d) has been removed from subsequent versions of the Auckland District Law Society agreement for sale and purchase form. This is said to be because of the uncertainty of the breadth of the warranty in cl 5(d).4

[31] The potential extent of the warranty in cl 5(d) can be seen in the question – does the vendor warrant that for 50 years or more5 after the construction of the house it will provide adequate resistance to penetration by moisture? Does the warranty provide such an open ended obligation?

[32] I am satisfied that there is no reason to read down cl 5(d) by restricting its breadth only to Building Act requirements that relate to the code compliance certificate or the permit. To read down cl 5(d) in this way is, in my view, to reduce the clause to a superfluous provision except where the consent or code compliance certificate was wrongly granted.

[33] However, in that situation, in terms of cl 6.2, the vendor will still be liable because of the warranty the vendor has given pursuant to cl 5(d). Irrespective of the warranties in cls 5(a), (b) and (c), the vendor warrants compliance with the Act and,

_{therefore, the Code.}

4. See for example, paper presented at Auckland District Law Society Seminar on 8th Edition of Agreement for Sale and Purchase cited in Keven Investments Ltd v Montgomery [2012] NZHC 1596 at [35]; D McMorland “The 8th Edition of the Agreement for Sale and Purchase” (2007) 12 BCB 193.

5 Clause B2 at [26].

[34] Thus, in most cases the warranty in cl 5(d) will add nothing to the warranties given in cl 5(a), (b) and (c). But the cl 5(d) warranty will be operative where the local authority’s process has failed and the permit or code compliance certificate wrongly granted. But I do not consider cl 5(d)’s meaning is restricted in the way identified by MacKenzie J in Ford v Ryan.6

[35] I see no reason to read down the warranty in cl 5(d) as relating only to the permit or the code compliance certificate. The words of cl 6.2(5) do not limit the effect of cl 5(d) in this way. There is, however, understandable concern that vendors could be liable for a leaky home which first shows its defects many years from construction distant from any vendor knowledge regarding the construction of the house. I am satisfied that there is an inherent restriction in cl 5(d) which avoids this dilemma.

[36] The wording of cl 5(d) is concerned to ensure that at the giving and taking of possession of the house, the obligations under the Act were complied with. Inherent within the timing of the warranty is that the warranty in cl 5(d) can do no more than warrant that given the then level of knowledge of house construction that the work done on the house was to that appropriate standard of knowledge and, therefore, at the time, complied with the Act.

[37] I consider that the warranty in cl 5(d) cannot impose an obligation on the vendor to warrant a standard of construction that did not exist at the time of the warranty. An example from the facts of this case, illustrates the point of interpretation.7

[38] The retaining wall at the house was sealed with a particular product designed to ensure no water entry into the house through the retaining wall. The sealant was recognised and sold at that time as an appropriate sealant to use. There was no reason to suppose that the sealant would not do its job. It was accepted by the

_{Tribunal that the sealant was appropriately applied by the builder.}

6 Ford v Ryan [2007] NZHC 1454; (2007) 8 NZCPR 945.

7 At [116]–[122].

[39] However, more than a decade later when the fill behind the wall was excavated and the sealant inspected, it seems that this product may have failed allowing water entry. This failure could not have been known or predicted at the time of construction and its application. Given that conclusion no breach of the cl 5(d) warranty has occurred based on those facts. The house has allowed water entry. The warranty of compliance with the Code has not, however, been breached. The warranty in cl 5(d) must be subject to the caveat that the work done at the time of construction (the essence of the warranty) meets the standard of knowledge of construction at the time and, therefore, meets the requirements at the time of the Building Code and the Act. To require the vendor by cl 5(d) to meet the standard unknown at the time of construction and sale of the house, would be absurd.

[40] In this case there were three main areas of water entry8 into the house. I have already dealt with entry through the retaining wall. The appellants’ case was that water entered the house and rotted part of the exterior cladding through an inadequate gap between the bottom of the cladding and the ground. The manufacturer of the cladding specified a particular gap to prevent such water entry.

[41] The Tribunal found that the builder had constructed the house with the appropriate gap but it was likely that it had been narrowed sometime after construction. At the time the works were completed, therefore, there was no breach of the Code and, therefore, no breach of the warranty in cl 5(d).

[42] The same analysis applies to the other areas where it is said there is water entry, through the retaining wall (already dealt with) and as a result of the roof flashing. Both the wall and the roof flashings were accepted as being constructed (and the walls sealed) in accordance with the then known proper building standard. And so the vendors on the facts of this case did not breach the cl 5(d) warranty.

[43] At the time the house was built (given the state of knowledge of house construction) it was built in accordance with the Act and Code. The fact that as it

_{subsequently turned out, the house may not have been weathertight because of}

8 At [12].

unpredictable product failure, the use of building techniques subsequently found to be inadequate and subsequent events outside of the vendors control does not constitute a breach of the warranty. For rather different reasons than the Tribunal, I am satisfied the first respondents did not breach cl 6.2(5)(d) of their agreement for sale and purchase. I, therefore, reject this ground of appeal.

The Council

[44] The claim against the Council before the Tribunal had three parts. Firstly, the appellants alleged that parts of the plans and specifications prepared by the architect were inadequate and in breach of the Building Code. The appellants said, therefore, the Council was negligent in failing to pick up these inadequacies at the consent stage. These failures caused specific problems with water entry into the house.

[45] Secondly, the appellants claimed that the Council did not have a system which ensured proper inspection of the actual construction of the house. Finally, the actual inspections of the house were carried out negligently in that defects which should have been picked up by Council inspectors were not.

[46] The evidence from the appellants was from Mr Ron Thurlow, a building surveyor, who had been involved with the remediation of the house, and Mr Edward Saul, a building consultant, with building inspection experience. The appellants also relied upon the weathertight home assessors reports.

[47] The Council called Dr Garrett Butt, a building surveyor, who had inspected the house and Mr George Skimming, a building inspector.

[48] These expert witnesses met before the hearing and were able to agree on significant issues and to identify those on which they disagreed. The relevant experts gave evidence concurrently so that each of the experts’ response to a particular point could be given at the same time. This further narrowed the issues for resolution. A schedule of defects in the house was prepared but conclusions reached in that schedule before the hearing were modified, by some of the experts, at the hearing.

Conflict of evidence

[49] The first preliminary appeal ground challenges the Tribunal’s conclusion that, where the evidence of Mr Skimming and Mr Saul differed, the Tribunal preferred the evidence of Mr Skimming. Mr Saul and Mr Skimming’s evidence covered the issue of what a competent Council building inspection officer would have done and seen with respect to the appellants’ house. The Tribunal noted that Mr Saul had no experience of building inspections prior to 2000. The Tribunal said “he gave evidence of what he would have done as a builder”. However, as the Tribunal pointed out the test was what a “reasonably competent Council officer” would have done. In contrast, Mr Skimming had particular experience of Council inspecting at the time when the appellants’ house was built. The Tribunal, therefore, relied upon Mr Skimming’s expert evidence as to Council inspection practice during the time of the construction of the house.

[50] There was a clear conflict at the Tribunal hearing between the evidence of these two men relating to the Council’s inspection obligations in 1997/1998 when the house was built. The Tribunal had to resolve this conflict, indeed it went to the heart of many of the challenged decisions of the Tribunal. I am satisfied the Tribunal resolved that conflict on a rational basis that cannot be challenged.

[51] The Tribunal was entitled to find that Mr Skimming’s evidence was more likely to be accurate about Council obligations in the 1990’s than Mr Saul’s. The appellants could not identify any error in the Tribunal’s reasoning. Mr Saul did not have experience of, nor had he made a particular study of Council inspection processes and decisions at the relevant time. Mr Skimming had actual knowledge of inspection practices and standards of the relevant time. The Tribunal, therefore, was entitled to rely upon Mr Skimming’s evidence and reject Mr Saul’s evidence as to proper Council practice at the time of the construction of the house. There was no error by the Tribunal with respect to this aspect of the case.

Estoppel/abuse of process

[52] The appellants’ claimed that the Council were negligent in approving the inadequate and negligent plans of the architect by granting the building consent.

[53] The Tribunal concluded that “the claimants are estopped from raising the quality of the plans for consent purposes”. The effect of this finding had particular relevance to the Council and the builder.

[54] As to the Council, the Tribunal concluded that where the appellants’ allegation was that the Council was negligent in failing to identify the negligence of the architect’s plans then the appellants could not succeed. The appellants were estopped from asserting the architect’s negligence. The Tribunal had already concluded the architect was not negligent when it removed the architect from the proceedings.

[55] The Tribunal in reaching such a conclusion relied upon the authority Body

Corporate 344862 (Wellington) v E-Gas Cycle Ltd.9 The Tribunal said:10

The test in E-Gas was:

a) Was the issue raised by the defendants’ current pleading distinctly

put in issue in the (interlocutory) application which was determined?

b) If so, was the issue fundamental to the decision? and

c) Did the judgment finally determine the issue raised in the

defendants’ pleading?

[56] The Tribunal then concluded that there was a final determination made when the architect was removed as to whether the plans and specifications were sufficient

_{to allow consent and to allow the building to be built in accordance with the Code.}

9 Body Corporate 344862 (Wellington) v E-Gas Cycle Ltd HC Wellington CIV 2007-485-2168,

_{8 July 2010.}

10 At [208].

[57] The Tribunal considered that if the appellants wanted to challenge that decision, they should have appealed the removal of the architect rather than attempt to relitigate the matter in the absence of the architect. The Tribunal noted that the removal of the architect had prevented the other parties from making a claim of contribution from the architect if the plans had turned out to be deficient.

[58] However, the Tribunal failed to refer to a crucial part of the test for estoppel identified in E-Gas at [20] as follows:

The authorities also require that the same parties must be before the court and they must be litigating in the same capacity as they are in the second decision.

[59] I am satisfied that no estoppel arises in this case. The same parties were not involved, nor were their privies, nor was the decision a judgment in rem. I now set out why I reject the estoppel claim.

[60] Res judicata estoppel may arise from an earlier judgment of the Court in either two ways; a cause of action estoppel; or issue estoppel. The latter requires a particular matter of fact or law in issue in the second proceeding which is held to have been decided by the prior judgment but may or may not have been determinative of the second proceeding.11

[61] The requirements for issue estoppel are:12

(a) the decision was judicial in the relevant sense; (b) it was in fact pronounced;

(c) the tribunal had jurisdiction over the parties and the subject matter;

_{(d) the decision was –}

11 _{Shiels v Blakeley [1986] 2 NZLR 262 (CA).}

12 Chean v De Alwis [2010] NZCA 30.

(i) final; and

(ii) on the merits;

(e) it determined the same question as that raised in the later litigation;

and

(f) the parties to the later litigation were either parties to the earlier litigation or their privies, or the earlier decision was in rem.

[62] There are two main policy grounds underpinning issue estoppel. The first is public policy – it is in the interests of the state that there is finality in litigation. The other is a private interest – there should not be hardship on the individual, he/she should not be vexed twice for the same cause.13

[63] Items (a)–(e) in [61] are all present in this case. The Tribunal gave its decision on a subject matter within its jurisdiction. The decision was final, on the merits and determined the same issue, the negligence of the architect.

The same party or their privy or a decision in rem

[64] A judgment in personam raises an estoppel only against the parties to the proceedings in which the judgment is given, and against those parties’ privies in blood, title or interest. Where the parties are not the same and the parties are also not privies, issue estoppel will fail.14

[65] As to a party’s privy, the Court of Appeal in Shiels v Blakeley said:15

Privity in this sense denotes a derivative interest founded on, or flowing from, blood, estate, or contract, or some other sufficient connection, bond or mutuality of interest. No case has yet sought to define exhaustively the degree or nature of the link necessary to render a person privy in interest. That this is so is not surprising for the necessary connection may arise in a

13 _{Shiels v Blakeley citing Lord Blackburn in Lockyer v Ferryman (1877) 2 App Cas 519.}

14 McCarthy v McCarthy [2001] NZFLR 1073. See also Link Technology 2000 Ltd v Memelink

[2006] 1 NZLR 1 (CA).

15 At 268.

variety of ways and its existence falls to be tested in light of the object of the rules about estoppel by res judicata and their effect in preventing the party in the subsequent proceeding from putting his case in suit. But while there is no ready definition the cases give some indication of what is necessary.

...

We conclude that there must be shown a union or nexus, such a community or mutuality of interests, such an identity between a party to the first proceeding and the person claimed to be estopped in the subsequent proceeding, that to estop the latter will produce a fair and just result having regard to the purpose of the doctrine of estoppel and its effect on the party estopped.

[66] Examples of privies include: any person who succeeds to the rights or liabilities of a party on death; insolvency; trustee and beneficiary; director of a company16 or a company which is effectively controlled by a person.17 No such issue arises in this case.

[67] The parties in the initial proceedings were (as relevant) the home owners, the architect, the Council and the builder. The parties in the later proceedings before the Tribunal were the home owners, the Council and the builder. The architect had been removed by the time of the adjudication on the merits and so the parties were not the same.

[68] The decision by the Tribunal was also not one in rem. A decision in rem conclusively determines the status of a person or a thing sometimes said to be binding on the world unlike decisions in personam. A judgment in rem is defined as:18

The judgment of a Court of competent jurisdiction determining the status of a person or thing, or the disposition of a thing, as distinct from the particular interest in it of a party to the litigation.

[69] These principles establish, therefore, that the Tribunal was wrong to conclude that an estoppel arose in this case. There was no commonality of parties, there were

16 _{Chean v Alwis [2010] NZCA 30.}

17 Ready Mark v Grant HC Auckland CIV-2010-404-8264 18 November 2011; Laughland v

_{Stevenson [1995] 2 NZLR 262}

18 Link Technology 2000 Ltd v Attorney-General [2006] 1 NZLR 1 (CA) at [56].

no privies and the earlier decision is not in rem. And so no issue estoppel arises here. I am satisfied the Tribunal was wrong to conclude it did.

Abuse of process

[70] After this appeal concluded I invited submissions from counsel as to whether an abuse of process arose in this case. Such a possibility was not argued before me at the hearing of the appeal. However, such a principle seemed to have relevance especially following my conclusion that issue estoppel did not arise in this case. The possible abuse of process arose from the same facts as the claimed issue estoppel; is it an abuse of process to permit the appellants to base their claim (in part) against the Council and the builder on the negligence of the architect when the Tribunal has ruled the architect was not negligent?

[71] There are two overriding questions in any abuse of process claim:19

(a) whether manifest unfairness or unjustice would result to a party; and

(b) whether the administration of justice will be brought into disrepute. [72] These factors will be relevant:

(a) a consideration of the identity of the issues; (b) the context of the two sets of proceedings; (c) whether there is a right of appeal;

(d) whether the proceedings were initiated by a party seeking a ruling inconsistent with an earlier judgment or whether the issue is raised in

_defence.

19 Arthur J J Hall v Simons [2000] 2 All ER 673 (HOL); Walker v Wilson HC Auckland CP 198/00,

16 April 2000.

[73] The facts in each individual case will determine the outcome.20 Applying those principles to the current case. The issues are clearly the same. The pivotal question in both the removal decision and these proceedings is the adequacy of the plans drawn by the architect. The Tribunal concluded that the architect was not negligent in the preparation of the plans and specifications when it removed him as a party to the claim. The relevant part of the appellants’ claim is that the Council was negligent because it failed in turn to identify the negligence of the architect. The builder was negligent because although he built the house to the architect’s plans and specifications, those plans and specifications were negligent. The same defects are alleged against the architect and the Council.

[74] The context of the two proceedings. These are also indistinguishable. The proceedings all arise from allegations that the appellants’ house was a leaky home and that various people including the builder, the architect and the Council were negligent and caused the loss.

[75] As to the right of appeal, there was a right of appeal from the decision by the Tribunal to remove the architect as a party to the proceedings.21 Section 93 of the Act gives a right of appeal to any party to a claim that has been “determined” by the Tribunal. There was a determination in the removal of the architect as a party to the proceedings. The parties then had 20 working days within which to appeal. The appellants did not appeal. Indeed the appellants did not oppose the architect’s

removal.

[76] The appellants’ case was that the architect’s removal was based on the argument that his role was limited to the design and specification of the house. The architect was not hired to supervise the work on site. Thus, the release of the

_{architect did not affect the Council’s inspection obligations.}

20 Programmed Maintenance Services NZ Ltd v Witters HC Auckland CIV 2008-416-90,

_{8 April 2009.}

21. See Auckland City Council v Unit Owners in Stonemason Apartment 27 Falcon Street, Parnell & Others HC Auckland CIV 2009-404-3118, 11 December 2009; Fenton v Building Code Consultants HC Auckland CIV 2009-404-6348 15 March 2010.

[77] As to the later point, the respondents do not claim that estoppel/abuse of process applies to the Council’s inspection obligations, only the plan approval process as it relates to the Council. The appellants do not claim that the builder constructed the house outside the architect’s plans. And so the negligence alleged against the builder arises only from the alleged negligence of the architect. I deal separately with the inspection obligations in this judgment.

[78] The point of significance is that these proceedings were initiated by the same party, the appellants. Thus, their allegation that the Council was negligent because it failed to identify the architect’s negligence can be seen as a collateral attack on the earlier decision of the Tribunal which they neither opposed nor appealed.

[79] As to injustice or unfairness, the Council say that it is now no longer possible for them to obtain any contribution from the architect should it be found that they were negligent as a result of the architect’s negligence.22 The builder will be in the same situation.

[80] Finally, will the administration of justice be brought into disrepute? Here, the question of finality is of importance. Once an issue is litigated and resolved, it should only generally be through the appeal process that it can and should be able to be challenged. I agree with the respondents that this was a considered decision by the Tribunal similar to a summary judgment. The Tribunal’s decision on this aspect of the alleged negligence by the Council and the builder is entirely dependent on a finding the architect was negligent. Thus, the Tribunal’s finding with respect to the architect goes to the core of the Council’s and the builder’s liability in this aspect of the claim. This favours a conclusion there is an abuse of process here.

[81] There is though one matter which could point away from an abuse of process in this case. It is the question of whether the appellants have obtained new evidence about architectural failures after the architect had been discharged from the proceedings. If evidence of the current allegations and architectural negligence

_{could not have been produced at the time of the removal of the architect, then it}

22 See Blair v Queenstown Lakes District Council [2010] NZSC 44.

could be said to be unjust and unfair to the appellants to limit their suit against the

Council and the builder.

[82] The appellants in their statement of claim filed with the Tribunal made specific allegations of negligence against the architect. Based on these allegations the architect obtained evidence from other professional architects to say that he was not negligent. The appellants did not oppose the architect’s removal. Presumably they had no evidence to challenge the architect’s claims.

[83] However, by the time the matter came before the Tribunal, the appellants had significantly widened the allegations of negligence against the architect. And, based on these new allegations of negligence by the architect, the appellants wished to say in turn the second respondent was negligent in failing to identify the architectural errors. There is no evidence to suggest that with diligence the “new” allegations of negligence against the architect could not have been identified before the architect’s removal.

[84] The appellants are, therefore, responsible for the current state of affairs. It has, as I have identified, created a potential injustice to both the Council and the builder. Any unfairness to the appellants is of their own making. I am, therefore, satisfied that as it would be an abuse of process to now allow the appellants to base their claim (directly or indirectly) against the Council relating to the approval of the plans and the granting of the permit or the builder on the architect’s negligence. I consider the builder’s liability later in this judgment. For different reasons than the Tribunal, I reject the appellants’ claim against the Council for alleged negligence in approving the architect’s plans and in granting the building permit.

[85] I do not consider the abuse of process findings permit the Council to avoid liability for its inspections of the actual construction. The Council must carry out its obligation of inspection of the house (to ensure it is being built accordingly to the approved permit) in a proper competent manner. In undertaking the inspection, the inspection officer would be entitled to take into account the fact the house had been designed by an experienced architect. But such a proposition could not wholly absolve the Council from having to make inspections nor absolve the inspector from

responsibility for failing to observe inadequacies about the house construction what were there to be seen. I return to the allegations of negligence against the Council arising from the inspection at [95].

Systems of inspection and inferences

[86] The second ground of appeal relates to the adequacy of the Council’s system

of inspections.

[87] The appellants argued that because the Council did not have a record of its inspections of the house during construction and nor did they call evidence before the Tribunal from inspectors who had inspected the house (in 1997/1998) then adverse inferences should have been drawn by the Tribunal that the inspections were negligently undertaken. And further, the Tribunal should have inferred that the code compliance certificates should not have been issued.

[88] It seems that sometime between 2002 and the hearing before the Tribunal, Council records of its inspection of the appellants’ house disappeared from its files. It is not known exactly when, how or why this occurred. Other essential documents such as the code compliance certificate and the plans and specifications were available to the Tribunal.

[89] The two inspectors who inspected the house were not called to give evidence. I was told from the bar that one had died and the other was mentally ill. In any event it is unlikely they would have been helpful to the Tribunal. It seems improbable that they would have been able to recall the inspection of a particular house 14 or

15 years after the event.

[90] The Council, therefore, advised the Tribunal that if it found a particular alleged defect in the house should have been seen by a Council inspector, then it would accept that the failure was negligent. The only issue would then be whether that defect had caused damage.

[91] The appellants submitted, however, that in the absence of any evidence of a system of inspection, or of the detail of the inspections carried out, the Tribunal should have concluded, given the defects identified, that the Council had been negligent in its inspection of the construction of the house.

[92] The Tribunal’s approach to this question was to consider each individual alleged defect and assess whether that defect, if established, would have been identified at inspection by a competent Council inspector (considered objectively) (no challenge was made to the Tribunal’s identification of the appropriate test in law to be applied to the inspections).

[93] I am satisfied the Tribunal’s approach was correct. Whether the Council did or did not have an appropriate inspection system had nothing to do with the damage alleged in this case. The damage alleged by the appellants arose, they claimed, from specific failures in the construction of the house. The Council’s case was that the defects which ultimately resulted in water ingress were not defects that a competent inspector would have identified. Thus, whether the Council had or did not have an appropriate inspection process was irrelevant. The existence or otherwise of such a process would not help in assessing on a defect by defect basis whether a competent inspector would have identified the defect.

[94] There is, therefore, no evidence that the Council failed to have an adequate system to ensure proper inspection of the construction of the house.23

23 At [456].

Negligent Council inspections and the related builder’s obligations

[95] The third ground of appeal relates to the adequacy of the Council inspections. I turn now to each of the alleged defects in the construction which the appellants say should have been seen by a competent Council inspector. They submit no code compliance certificate should have been issued until these defects were remedied. The Council’s failure was negligent and directly caused water entry and damage to

the house.24

The deck

[96] The Tribunal noted that the appellants complained that the deck structure had been damaged through water ingress and as a result defects in the design and construction of the deck were revealed. In particular, the drip edge around the deck and a waterproof membrane over the edge of the deck.

[97] The appellants’ case was that the lack of a drip edge resulted in water entering the deck structure. However, the evidence established there was a drip edge installed but none to the batten.

[98] The Tribunal held that there was a drip edge in place but it was not in the correct place. It said the evidence did not establish that any damage had been caused by the lack of a drip edge in the correct position. The appellants could not identify any evidence which established damage to the deck from the incorrect positioning of the drip edge. The issue of adequacy of inspection by Council officers did not, therefore, arise.

[99] The second submission by the appellants relating to the damage to the deck relates to the way in which the waterproof membrane was fixed on the deck. The Tribunal concluded that the deck and the deck columns were damaged because of the way the waterproof membrane which had been turned down over the edge of the

_{deck and had a batten nailed over the top. This enabled the water from the deck to}

24 At [45].

pool at the batten. The correct procedure was to have the membrane go over the top of the batten. This would have diverted water away from the batten. The architect in his plans had specified the method of construction used by the builder (with the membrane underneath the batten).

[100] The Tribunal concluded that the alleged architect’s negligence had been dealt with and so neither the builder nor the Council could be negligent when this deck detail was constructed according to the plans (the estoppel point).25

[101] Mr Skimming’s evidence was that a competent Council inspector was entitled to believe there would be no problem with this design of the waterproof membrane. He said the design was not contrary to any building code. The Tribunal accepted this evidence.

[102] Given the Tribunal’s reliance upon Mr Skimming’s evidence as to the proper inspection practice at the time, the appellants’ claim was bound to fail irrespective of the estoppel point.

[103] The Council’s responsibility was to take reasonable steps to ensure compliance with the Act and Code. As has been often repeated they are not a Clerk of Works responsible for checking every detail of a construction. Here, the inspector was faced with the plans and specifications of an experienced architect who had provided a detail of the deck construction. The builder had followed this detail in the actual construction. The fact an architect designs and provides specifications does not, by itself, excuse the Council’s obligations to ensure compliance with the Act. But the Council’s obligation is only to take reasonable steps to ensure compliance.

[104] The Council is entitled to take into account in deciding whether there has been compliance, that an experienced professional has specified a particular detail and the builder has built the detail according to the plans. In the absence of any

_{reason to doubt the efficacy of the plan and the specified detail, it could not be said}

25 At [53]–[85].

the failure to identify either “defect” by the inspector was negligent. I, therefore, agree with the Tribunal’s assessment and reject this ground of appeal.

Kick out flashing

[105] A “kick out” is a flashing which is designed to take water away from the junction of the roof and the body of the house. The house as designed and built had no such flashing.

[106] The appellants had argued before the Tribunal that this was an example of a defect which was easily observable by a competent building inspector. The failure by the inspector to notice the house had no kick out flashing was a negligent failure. The appellants claimed that the lack of such a flashing allowed water entry into the house causing damage.

[107] However, the Tribunal concluded, arising from the experts’ conference report, that kick outs were not required at the time of construction (1997/8) but that good building practice did require water to be diverted away from the area.

[108] The Tribunal said:26

I accept that kick outs were not required at the time and the claimants’ allegation is as a result of hindsight and subsequent industry knowledge. Failing to supply an item that is not required is not a defect so neither the builder nor the Council was negligent in this regard. Neither is liable for any damage from this detail.

[109] On appeal this issue changed somewhat. The complaint at this appeal was that the system installed to divert water away had been negligently installed and that this faulty installation was something the building inspector should have observed. It was agreed that at the time of the construction of the house lead flashing would have been installed to take water away from the house and ultimately into the spouting. This required the lead to be bent appropriately to channel the water into

_{the spouting. When the cladding of the house was removed many years later, photos}

26 At [30].

were taken which showed the lead was not appropriately folded and water could have entered the house in this way.

[110] There was some cross-examination and evidence at the Tribunal hearing about the installation of the lead. However, a claim that the lead had been negligently installed was never an alleged defect by the appellants. No doubt that is why the Tribunal did not deal with that point.27 The Tribunal dealt with the allegation that the construction required kick outs but none were installed.

[111] It would not be fair to the respondents to now allow the appellants’ case to be expanded to include this point of complaint. There was ample opportunity for the appellants to identify this alleged defect and give the Tribunal and the respondents’ adequate notice. I, therefore, refuse to allow this appeal ground to be amended as (at least inferentially) sought by the appellants.

[112] In any event two points can be made with regard to the lead flashing. Firstly, there is no evidence that in fact the lead flashing was incorrectly installed or was the cause of the leaks in that area. The only evidence as to the position of the lead flashing came after the removal of the exterior cladding in the area, more than ten years after its installation. The removal of the cladding could easily have disturbed the position of the lead flashing. No legitimate inference could be taken as to the installation of lead flashing from this evidence.

[113] Secondly, the evidence from Mr Skimming was that it was not be part of a building inspector’s job (in 1997/8) to climb up a ladder to inspect a particular detail of a particular flashing. And so on the evidence accepted by the Tribunal, the Council would not have been negligent in failing to inspect this detail of the construction.

_{[114] For those reasons, therefore, I reject this ground of appeal.}

27 At [108].

Water ingress through foundation wall

[115] There was evidence that water had come through a foundation wall at the rear of the property into the house. There were two concerns here. Firstly, the application of and use of a waterproof product called Mulseal to waterproof the block work and secondly, the use of nails to fix foam sheets over the Mulseal.

[116] The appellants’ case was that Mulseal was not a proven alternative for use to prevent water ingress. The builder should not have used it and the Council was negligent in approving its use in the building consent.

[117] There was no evidence that Mulseal was, at the time of the construction of the house, viewed by any of the experts as an inappropriate product to use in such circumstances. Some experts said that on the evidence of the condition of the wall when viewed more than ten years after construction, Mulseal had appeared to have been inadequately applied when the house was built in 1997.

[118] Mr Hawinkels gave evidence as to his application of the Mulseal. He said that he had reinforced the cracks in the concrete with foam before he had applied the Mulseal and that he had applied at least four coats of Mulseal when only two had been required by the manufacturer’s instructions. And so the manufacturer’s recommendations had, if anything, been exceeded.

[119] The Tribunal accepted that Mulseal was a product that could be used to seal such a wall based on 1997/8 evidence. The Tribunal accepted Mr Hawinkels’ evidence that he had appropriately applied the product. The Tribunal concluded that the product had failed but that that failure could not have been predicted at the time of its application.

[120] The Tribunal was entitled to accept the evidence of Mr Hawinkels that he applied the membrane in accordance with the manufacturer’s specifications and indeed exceeded those specifications. The Tribunal was also entitled on the evidence to reach a conclusion that Mulseal was seen as an appropriate and available product at construction. While Mr Saul was critical of the use of Mulseal and said it should

not have been approved, the Tribunal was entitled to view this as a conclusion based on hindsight. Further, as the respondents pointed out, Mr Hawinkels evidence was that it was only in recent years he has become aware that Mulseal may deteriorate.

[121] What must also be kept in mind is that there is no evidence that the inspector should have observed that the Mulseal was somehow inappropriately or inadequately applied to the block walls or that it was bound to fail. There was, therefore, no evidence to support the claim that the Council was negligent.

[122] Further, the only evidence of the condition of the wall was many years later when it seemed probable that the Mulseal had deteriorated. There is, therefore, nothing to suggest that the Council were negligent, either in approving Mulseal or in their inspection of the wall.

[123] The appellants’ case was that the experts agreed that fixing nails through the retaining wall was very poor practice. The appellants say the Tribunal wrongly rejected the claim that the Council inspector should have seen this “poor practice” and required its remedy.

[124] Mr Skimming in his evidence said he considered the use of nails in such a situation particularly bad practice. However, he doubted an inspector would have seen the nails.

[125] The Tribunal’s decision relating to the nails had two aspects. Firstly, the Tribunal referred to the BRANZ guide which they described as an exemplar of good building practice. That guide approved the use of nails in this way. Secondly, the evidence from the expert witnesses was the use of nails in this way was a trivial matter which would not have allowed moisture entry of any importance.

[126] Thus, the Tribunal was satisfied there were no negligence in the use of nails in those circumstances and, therefore, no negligent failure by the Council in its inspection. And further, there was no damage caused by the use of the nails. This was a conclusion based on the evidence before the Tribunal. The Tribunal’s conclusions were, therefore, clearly correct. I reject this ground of appeal.

Cladding concerns and ground clearances

[127] The manufacturer recommended a clearance of at least 25 millimetres between the bottom of the plywood cladding on the house and the ground when constructed and to be maintained throughout the life of the house. By the mid

2000’s there was damage to the bottom of the cladding. The appellants’ case before the Tribunal was that the builder had not allowed adequate clearance (negligently) and the Council (also negligently) had failed to identify this failure. Inadequate clearance can result in moisture from rain entering inside the cladding and in the long term causing the cladding to rot. The appellants’ case was that the lack of clearance was the reason for or at least a contributing factor to the damage to the bottom of the cladding in some parts of the house. The area affected was on the front of the garage and along the southwest elevation of the house. The solution had been to cut away the bottom of the affected sheets and replace those sheets.

[128] The architect had specified clearances less than the manufacturer’s recommendations to some parts of the house where it was suggested it was difficult to achieve the 25 millimetre clearance. The builder’s evidence was that he had followed the design of the architect. However, he said that the necessary ground clearances had been achieved when the house was constructed. By the time the house was inspected (in 2005 and later) there were areas, especially where the cladding had deteriorated, where the clearances were less than specified.

[129] The issue, therefore, before the Tribunal became whether the ground levels had changed in the interim period from construction of the house over the subsequent ten years to the first inspection and 14 years when the case was heard.

[130] The Tribunal concluded that it could not be satisfied that the ground levels had not changed since construction. Therefore, it could not say that the builder had been negligent or that the Council had been negligent in failing to notice any inadequate clearances during inspection.

[131] The appellants’ case is that the evidence should have satisfied the Tribunal that neither the Woodleys nor the appellants had changed the ground levels since construction and that the only logical inference was that there had been inadequate ground clearances at construction. The appellants say that Mr Woodley said he had not altered the ground levels when he had owned the property and the appellants had said that while they had laid pavers in and around the patio they had not changed the ground levels beyond that.

[132] Other than the evidence of Mr Hawinkels, who said that he had provided for the necessary ground clearances when the house was constructed, there was no direct evidence of the original ground clearances. Mr Hawinkels’ evidence was that he had achieved the necessary ground clearances but then he left the landscaping of the house to the initial owners, the Woodleys.

[133] Mr Woodley in his evidence agreed that he had landscaped the property. This involved the use of a Bobcat to move soil around to form garden areas and the lawn. That action would have changed soil levels around the property. But Mr Woodley maintained in his evidence that he had not changed the level of the ground at the house.

[134] Mr Hooft’s evidence was that he had paved an area to the rear of the house and accepted that that had narrowed the clearance although there was significant clearance in that area in any event.

[135] Finally, the expert witness’ assessment was that:

(a) there was no area where cladding had touched the ground;

(b) there were areas where there was an inadequate clearance with the ground which had caused a localised problem particularly in the paved area in front of the garage and along the southwest elevation of the garage.

[136] The established fact was that in a number of places around the house there was inadequate clearance. There was, therefore, a conflict between the owners who maintained they had not altered the ground level and the builder who maintained that he had allowed for the correct gap between the cladding and the ground.

[137] The other point made by Mr Skimming was that there were commonly situations where the manufacturer’s recommended clearance could not be achieved because of the design of the house and the land. In those circumstances he said there were other ways within to mitigate potential damage.

[138] The Tribunal was faced with a clear conflict in the evidence. In the circumstances it was reasonably open to the Tribunal and not an error to accept Mr Hawinkels’ evidence that at the time he constructed the house the clearances were appropriate. It is clear that the original owners of the house did undertake considerable landscaping. In doing so, there was no evidence to suggest that they were aware of the importance of keeping the “as built” gap between the soil and the exterior cladding. The Tribunal had the advantage of seeing these witnesses. There was significant cross-examination of the witnesses. In the end it was open for the Tribunal. To conclude that it could not be satisfied that Mr Hawinkels was either misdescribing or misremembering the work that he had done. The Tribunal was entitled to say that it could not be sure in the intervening 14 years that the gap had not changed as a result of the actions of the owners of the house. In those circumstances, given the advantage here enjoyed by the Tribunal in seeing the witnesses, and given the Tribunal’s approach is rational and logical, I do not consider the appellants have established that the Tribunal was wrong. The Tribunal was better placed than this Court to make that assessment in this aspect of the case.

[139] I, therefore, reject this ground of appeal.

The rebate/painting and metalex

[140] To aid water drainage the specifications required that there be a gap called a capillary gap between the concrete footings and the overhang of the cladding. This was achieved by the builder cutting a rebate into the plywood. In addition, the

builder applied a product called Metalex Clear to waterproof the bottom of the plywood cladding sheets.

[141] There was evidence of deterioration of the bottom of the cladding in particular points around the house. This, the appellants claimed, was in part, because of the way the builder had constructed the rebate and the inadequate sealing of the bottom of the cladding. The appellants’ case was that the builder was negligent in constructing such a rebate and the Council negligent in failing to identify the inadequacy of the rebate during its inspection. The appellants claimed the particular type of rebate used allowed water into the house.

[142] The Tribunal concluded that the rebating had achieved the relevant capillary gap and that the rebate as constructed was appropriate. They considered that the use of Metalex Clear to waterproof the bottom of the sheets was also appropriate.

[143] The appellants’ case was that cutting a rebate into the plywood was not an accepted solution to achieve such a gap. It was not a recommended solution in the manufacturer’s specifications. They pointed to the fact that Mr Thurlow said that this was not acceptable practice and would compromise the strength and durability of the cladding.

[144] As to the use of the Metalex, the original plans for the house, as agreed, specified an acrylic paint on the plywood cladding and battens. However, the Woodleys decided not to paint the exterior cladding and as a result a preservative known as Metalex was used. The appellants say that the manufacturer’s specifications for the cladding did not permit the use of Metalex alone on the bottom edge.

[145] Further, in their written submissions, the appellants said that the manufacturer’s recommendations required the use of a primer and paint to the bottom edge of the cladding. In oral submissions they accepted that the manufacturer’s specification did not require such an application.

[146] Finally, it was the appellants’ case that the Council inspector should have noticed and refused to approve the rebate and secondly, should have noticed the lack of paint and required a remedy.

[147] The Tribunal concluded as far as Metalex was concerned, that it had been applied to the rebate edge of the cladding, that it was capable of sealing the plywood and that there was no evidence which could establish in any event, that the decay to the plywood sheets was caused by the use of Metalex or the absence of paint.

[148] The first point to be noted is that there was no disagreement with the proposition that the rebate did act as an effective capillary break. Further, there was no evidence that in fact the rebate as constructed caused any deterioration in the cladding.

[149] There was disagreement between Mr Skimming and Mr Saul as to what a properly informed inspector appropriately carrying out his work would have seen of the rebate. Mr Skimming’s evidence was that the inspector would not have seen the gap. It could not be expected an inspector would inspect such a detail. In any event, if the inspector had put his hand behind the cladding to check that there was a capillary gap, then such a check would have concluded there was a gap.

[150] I agree with the Tribunal that there was no evidence to establish that the inspector was negligent. Mr Skimming’s evidence which was accepted was that an inspector could not be expected to check such a detail given it was not visible but that if he had he would have confirmed there was an appropriate capillary gap. In any event, there was no clear evidence that the rebating gave rise to any damage given the use of Metalex.

[151] As to the use of Metalex, as I have noted, counsel for the appellants accepted that on a proper reading of the manufacturer’s instructions there was no requirement to paint the exterior cladding.

[152] Further, all the experts agreed that one interpretation of the manufacturer’s

directions was that Metalex was adequate to waterproof the bottom of the cladding.

Mr Hawinkels’ evidence was that he had applied Metalex Clear to the exterior cladding and that Mr Skimming said that the application of that product would have been accepted by a Council at the time. In those circumstances, the Tribunal was clearly correct to conclude there was nothing in this complaint by the appellants. I reject this ground of appeal as it relates to both the Council and the builder.

Window jambs

[153] The appellants’ case was that the window jambs had been inadequately sealed. This allowed water entry into the house and damage to the house. The appellants said that the way in which the windows were sealed was not in accordance with the appropriate standard of the time. Standard E2/AS1 required an acceptable solution to the weathertightness of windows in this way:

3.0.1 Windows and doors and the joints between them and cladding materials shall be as weatherproof as the cladding itself.

3.0.2 Windows and doors shall have head flashings and scribers or proprietary seals between facings and the building cladding.

[154] Here the appellants say the sealant was applied after the windows were installed and with inadequate sealing. The Council was negligent in failing to identify the inadequacy of the window seal, and the builder negligent in its installation.

[155] The Tribunal concluded that the window jambs were constructed in accordance with the standards and practices of the time. The fact the sealant appeared to subsequently fail, did not establish the builder or the Council were negligent. Mr Hawinkels’ evidence before the Tribunal was that he had applied a bead of sealant to the relevant area. He said the window joinery is then pressed hard against the plywood cladding to seal the junction. There is no reason or indeed evidence to doubt that this is how Mr Hawkinkels carried out this work. Indeed, as Dr Butt pointed out, there was evidence from an observation of the windows when the house was later repainted showed that the sealant had been applied in this way.

[156] Mr Thurlow’s evidence, as the Tribunal noted, was that the leaks occurred because the plywood was not sealed around the window joints. He said that although sealant had not been applied completely down the window, in his view, no damage had resulted from this.

[157] Finally, all witnesses agreed that the existence or otherwise of sealant would not have been obvious to the Council inspector. Once the window joinery was pressed hard against the plywood and the seal made, it would be impossible to observe whether sealant was present.

[158] The appellants relied upon the observations of Baragwanath J in Dicks v Hobson Swan Construction Limited (in Liquidation).28 The appellants say that the Court in Dicks concluded that a sealant for exterior joinery should be a proprietary sealant “a custom built fabricated item which would fill a gap between the aluminium window and the stucco surround”. And the appellants said that Baragwanath J also recognised that the sealant needed to be placed between the

joinery and the cladding.

[159] Given the facts in this case, the appellants submitted the Tribunal should have followed the conclusions of Baragwanath J in Dicks and concluded that the sealant had been negligently applied. In turn, the Tribunal should have concluded that the Council’s failure to pick up this inadequacy was a negligent failure of inspection.

[160] In Dicks the Judge was concerned with a solid plaster house in contrast with the house with which I am concerned. In Dicks no seals were installed. It was possible by simple observation for a Council inspector to ascertain whether there had been any seals. So the presence or otherwise of a sealant would have been obvious to an inspector given the process for installing and sealing the windows in Dicks. Thus, the failure to see what was there to be seen was, the Judge concluded, a

_{negligent failure.}

28 Dicks v Hobson Swan Construction Limited [2005] NZHC 1657; (2006) 7 NZCPR 881 (HC).

[161] Here, however, the presence or absence of a sealant could not be ascertained by observation. Thus, beyond the assurance of the builder that he had constructed a window detail in accordance with the competent standard of the time (which Mr Hawinkels gave in evidence) there could be no further expectation on the Council. In those circumstances I am satisfied that the Tribunal is correct in that the appellants have not established that the Council was negligent. Nor was there any evidence to support the claim the builder had negligently installed the windows. The fact that many years later the windows leaked illustrated that the known standards at the time of construction were, with the benefit of hindsight, inadequate.

[162] At the appeal hearing the findings of the Tribunal relating to the leaking family door, the window head flashings inadequacy and the sealant to the tops of the windows were abandoned as grounds of challenge.

The builder

[163] The Tribunal concluded that the builder was not negligent in any aspect of the construction of the house. Further, it concluded that the builder was covered by its issue estoppel finding. That is, the builder’s negligence was dependent upon the architect’s negligence. The Tribunal had found the architect was not negligent and so the builder could not be negligent.

[164] I have rejected the claim of issue estoppel. I have, however, found an abuse of process. It has the same fundamental effect with respect to the appellants’ claim against the builder. It would be an abuse of process for any of the appellants’ claims against the builder to be pursued in reliance upon the assertion that the builder was negligent because he built the house according to negligent plans prepared by the architect.

[165] However, part of the appellants’ claim against the builder is that he had, in certain respects, gone outside the architect’s plans. In any event, the merits of the appellants’ claim against the builder, was considered by the Tribunal. The Tribunal rejected the appellants’ claim that the builder in fact was negligent in the work he

undertook on the house. The Tribunal found the builder’s work did not fall below the standard of a competent builder.

[166] On appeal, therefore, I reconsider this part of the Tribunal’s analysis. The appellants’ case was that the builder had not built the house in accordance with the architect’s plans, had used “materials and techniques of unknown efficacy” and had not built the house in compliance with the Building Code.

[167] The appellants did not identify in their submissions any particular failure by the builder to follow the architect’s plans and specifications. And so I set that ground of challenge aside.

[168] As to the unknown efficacy of the materials and technique and the failure to comply with the Building Code, the appellants identified nine areas of failure by the builder. They are; the front drip edge to the deck; the application of the membrane on the edge of the deck; the lack of a kick out; the foundation wall; ground clearance of the cladding; rebate into the cladding; use of Metalex to seal; an inadequate capillary gap; and window joinery/jambs.

[169] I have dealt with and considered each of these items and subject to my observations about the deck membrane, have found that the builder was not in fact negligent with respect to any of these complaints.29

Water proof membrane

[170] It was accepted by the expert witnesses that some of the damage to the deck was caused as a result of the way in which the waterproof membrane was fixed to the edge of the deck. Detail from the architect’s plan showed that the membrane should be turned down over the edge of the deck and have a batten nailed over the top of the membrane. In fact, the experts agreed that the membrane should have

_{gone over the top of the batten to avoid water pooling behind the batten. If the}

29 At [95] to [161].

waterproof membrane had been diverted away from the batten, then water would not have pooled and water would not have entered the deck causing damage to the deck.

[171] The evidence from Mr Skimming established that the design of the deck was not contrary to the Buildng Code in the sense that the specific detail did not offend against the Code. However, as it turned out, the detail allowed water entry behind the batten causing damage to the deck. The builder followed the architect’s detail. The builder, therefore, with respect to this aspect of its construction, was entitled to rely upon the architect’s plans and specifications. The builder’s failure, therefore, arises directly from the claim the architect was negligent. I have concluded it would be an abuse of process to now allow the appellant’s to pursue a claim against the builder arising from the architect’s alleged negligence. This ground of appeal must, therefore, fail.

Summary

[172] I am satisfied the Woodley’s did not breach the warranty in the sale and

purchase agreement with the appellants.

[173] I am satisfied that no issue estoppel arose in this case relating to the alleged negligence of the architect’s plans and his removal from this case before the Tribunal.

[174] I am satisfied that it would be an abuse of process to allow the appellants to sue the Council for negligently granting the building permit based on the allegation that the architect’s plans were negligently prepared.

[175] I am satisfied that it would be an abuse of process to allow the appellants to sue the builder for negligently (or in contract for failing to construct the house to a proper workmanlike standard) constructing the house by the appellants relying upon the architect’s negligent preparation of the plans and specifications.

[176] The appellants have failed to establish that the Council was negligent when it inspected the house during construction.

[177] The appellants have failed to establish that the builder was negligent.

Costs

[178] Should the second respondent seek costs they should file a memorandum within 14 days and the appellants have a further 14 days to respond.

Ronald Young J

Solicitors:

M C Josephson, Grimshaw & Co, Wellington, email: [e-mail]

S J Baldwin, Grimshaw & Co, Wellington, email: [e-mail]

P A Robertson, Associate, Heaney & Co, Auckland, email: [e-mail]