Johnson v Watson [2002] NZCA 313; [2003] 1 NZLR 626 (5 December 2002)

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Johnson v Watson [2002] NZCA 313 (5 December 2002); [2003] 1 NZLR 626

Last Updated: 14 December 2011

IN THE COURT OF APPEAL OF NEW ZEALAND

CA294/01

	BETWEEN	BRYAN JOHNSON and ANNE JOHNSON
		Appellants

	AND	COLIN WATSON
		Respondent

Hearing:	26 August 2002
Coram:	Gault P Keith J Tipping J
Appearances:	G J Kohler for Appellants R M Bell for Respondent
Judgment:	5 December 2002

JUDGMENT OF THE COURT DELIVERED BY TIPPING J

[1] The appellants (the Johnsons) engaged the respondent (Mr Watson) to build them a house. The contract was primarily oral. The work commenced in March 1990 and was substantially complete by December 1990. The Johnsons took possession on or about 16 December 1990. They contend that the building work was defective principally because of leaks from the roof and elsewhere. They further contend that in the period from 1991 to 1998, Mr Watson did remedial work on a number of occasions on each of which he claimed to have fixed the problems.
[2] The Johnsons’ most recent statement of claim sets out in some detail the faults which they allege and the work which Mr Watson did in attempting to cure them. In October 1999 the Johnsons obtained independent expert advice on the problems which they were continuing to experience. That advice supported the view that Mr Watson’s original workmanship was not up to standard and the remedial work too had been unsatisfactory. The necessary repairs are estimated to cost close to $250,000.
[3] In March 2001 the Johnsons commenced proceedings claiming damages from Mr Watson on several causes of action. They also sued their architect, and the local Council, in respect of various alleged failures on their part. They subsequently discontinued their proceedings against the architect and the Council, accepting that the claims against them were time barred. That left Mr Watson as the only defendant. He applied in the High Court for summary judgment and to strike out the Johnsons’ proceeding, on the same basis, ie. that the claims against him were also time barred. Master Gambrill accepted that contention, entered summary judgment for Mr Watson and for good measure also struck out the claims against him. The Johnsons have appealed.
[4] In their most recent pleading, which is a third amended statement of claim, the Johnsons do not state a date upon which they say the building contract was completed. They say that, although the house was “substantially complete” when possession was given and taken on about 16 December 1990, “building work continued into 1991”. In his affidavit Mr Johnson says that items were finished by Mr Watson “during early 1991”, after they had moved in. No details are given. There is, however, no suggestion that any of this post 16 December 1990 work was causative of the problems to which this proceeding relates.
[5] The Johnsons’ claims against Mr Watson can, for ease of analysis, be examined under three heads. First there is their claim that the original construction work was defective. Second is their claim that the remedial work was defective. Third they contend that Mr Watson, both by his conduct and by statements he made, represented to them that his remedial work would fix and had fixed the problems. They say that as a result of relying upon these representations, which were negligently or misleadingly made, they ran out of time to sue both Mr Watson himself (if that be the case), and the architect and the Council for their various acts and omissions in relation to the original faulty work. In respect of this third category of claim, the Johnsons sue Mr Watson on the basis of negligent mis-statements and breaches of s9 of the Fair Trading Act 1986. It is convenient to look at the case under each of these heads. We do not find it necessary to discuss the way in which the Master dealt with the issues.

The original work

[6] For the reasons already given, we proceed on the basis that the work which originally caused the problems was performed by 16 December 1990 at the latest. It is not possible, nor indeed is it necessary in the present case, to be any more precise than that. Mr Bell argued on Mr Watson’s behalf that in these circumstances the Johnsons’ case on this head was barred by s91(2) of the Building Act 1991. The relevant provisions of s91 are in the following terms:

91 Limitation defences

(1) Except to the extent provided in subsection (2) of this section, the provisions of the Limitation Act 1950 apply to civil proceedings against any person where those proceedings arise from—

(a) Any building work associated with the design, construction, alteration, demolition, or removal of any building; or

(b) The exercise of any function under this Act or any previous enactment relating to the construction, alteration, demolition, or removal of that building.

(2) Civil proceedings relating to any building work may not be brought against any person 10 years or more after the date of the act or omission on which the proceedings are based.

[7] Mr Kohler, for the Johnsons, accepted that unless s28 of the Limitation Act 1950 (which deals, amongst other things, with concealment of a cause of action by fraud) prevails over s91(2), his clients’ claim based on the original work was barred by s91(2). The acts or omissions claimed to amount to defects in the original work all took place prior to 16 December 1990. The proceedings were commenced more than ten years later in March 2001. Hence, unless s28 applies, s91(2) clearly bars this head of the Johnsons’ claim, whether that claim be framed in contract or in tort.
[8] We cannot, however, accept Mr Kohler’s submission that if there was concealment by fraud, as is alleged, s28 operates so as to extend the ten year period prescribed by s91(2). Section 28 is concerned with when a cause of action accrues. If concealed by fraud, its accrual is postponed. Section 91(2) is by contrast concerned with the act or omission on which the proceedings are based. An act or omission occurs on a particular day. No question of extension of time can logically arise when the starting point is measured from the day of the occurrence of an act or omission. Furthermore, it is clear from the introductory words of s91(2) that the provisions of the Limitation Act do not apply to the subsection (2) time limit of ten years. Subsection (2) is in this respect a statutory bar which is self-contained, both as to the commencement of the period allowed and its duration. In short, s91(2) means exactly what it says. A plaintiff cannot in any circumstances sue more than ten years after the act or omission on which the proceedings are based, if the case involves, as this one clearly does, building work associated with the construction of a building.

The prevention/remedial work

[9] The Johnsons’ second head of claim rests on the allegation that Mr Watson purported on several occasions between 1991 and 1998 to fix the leaks but failed to do so. They claim that on each of these occasions his failure was negligent and caused them further loss, ie. the additional damage to the house which occurred after the date of each attempt to solve the problems. After the conclusion of argument, the Court called for further written submissions on this aspect of the case and a further draft pleading. These have now been received and considered.
[10] In short, the Johnsons’ case is that Mr Watson owed them a duty of care, if not in contract then at least in tort, on each occasion he returned and purported to fix the leaks. They say his failure to do so was negligent and thus a breach of his duty to them and caused additional damage, ie. damage beyond that which they would have suffered if Mr Watson had taken appropriate care and thereby fixed the leaks on the occasion in issue. Whether a duty of care was owed by Mr Watson to the Johnsons on each occasion of attempted repair is a question of law. Whether Mr Watson was negligent and thereby breached such duty of care as he owed is a question of fact. Whether any such negligence caused additional and separately identifiable damage is a mixed question of fact and law. Of course the Johnsons cannot sue for breach of a duty to conduct remedial work with appropriate care unless the act or omission involved occurred within ten years of the date the relevant cause of action was first raised.
[11] Mr Watson’s case is that as a matter of causation there is no liability in tort for damage arising from ineffective work designed to prevent additional damage occurring as a result of an earlier breach of duty. It will be convenient henceforth to call work of this kind prevention work as opposed to remedial work which is designed to put right damage which already exists. So far as contract is concerned, Mr Watson says that from the point of view of the original construction work his duties did not extend beyond the completion of the house and that there was no contract in respect of the prevention work for want of consideration. It is convenient to look at the position in tort first. In the light of our conclusion in that respect we do not find it necessary to consider the contractual issues.
[12] We have no doubt that Mr Watson did owe the Johnsons a duty of care in tort when he returned on each occasion for the purpose of fixing the leaks. Appropriately Mr Bell did not argue to the contrary. The parties were in a relationship of close proximity. The Johnsons were clearly relying on Mr Watson to exercise appropriate skill and care. He assumed responsibility to them by returning for the purpose of fixing the problems. It is in all the circumstances fair, just and reasonable to impose a duty of care upon him in respect of work designed to cure the leaks and thereby prevent further damage. It must be assumed for strike out and summary judgment purposes that the Johnsons will be able to establish that Mr Watson carried out the prevention work negligently. The primary issue, as counsel acknowledged, is causation. Did Mr Watson’s assumed negligence cause loss or damage to the Johnsons of a kind which can be recovered in law? The first thing which should be said is that such loss or damage as had already occurred at the date of the relevant prevention work, cannot be recovered. It was not caused by any act or omission involved in that work. It is only such further or additional loss or damage which resulted from a negligent prevention act or omission which can be the subject of a claim on the present basis.
[13] Mr Bell argued that the law does not allow damages to be claimed for such further or additional loss because it is regarded as being caused by the original defective workmanship rather than by the failure of the builder to effect the prevention work properly. In support he cited the decision of the House of Lords in East Suffolk Rivers Catchment Board v Kent [1940] UKHL 3; [1941] AC 74; [1940] 4 All ER 527. That case involved the extent of the duties of a public authority when exercising its statutory powers. It is a case which is significantly different from the present. The respondents owned land which was protected by a wall from inundation by a tidal river. An exceptionally high spring tide was increased by a strong gale. The wall partially collapsed and the respondents’ land was inundated. The appellant Catchment Board attempted to repair the breach but was negligent in its attempt. The respondents thereby suffered additional damage by dint of their land remaining flooded for longer than if the repair work had been initially effective. The respondents sued the Board for the additional damage. The Board’s negligence did not itself actively inflict further damage on the respondents’ land, for example by increasing the area of flooding. It simply extended the period during which the original flooding lasted.
[14] The Court of Appeal had divided 2 to 1 in favour of the respondents. The House of Lords ruled in favour of the Board by a majority of 4 to 1. The majority speeches were influenced by concepts of misfeasance and nonfeasance: see for example Viscount Simon LC at 85;531. However, Lord Atkin, who was in the minority, considered that the Board was liable for the additional damage caused by the longer duration of the flooding: see 93;537. Lord Thankerton at 96;539 took the view that the whole of the damage was caused by the original inundation and the Board was not liable for a negligent failure to curtail its duration. At 102;543 Lord Romer seems to have been of the view that the Board’s honesty of purpose meant that although the inundation was prolonged by its negligence it was not liable for such prolongation. He followed a similar view expressed by du Parcq LJ, who was in the minority in the Court of Appeal. Lord Romer also seems to have been influenced by misfeasance/nonfeasance considerations in relation to the powers, duties and activities of public bodies. Lord Porter agreed with Lord Romer and was particularly influenced by the difference between causing additional damage and failing to curtail existing damage: see 105;545.
[15] It is worth adding that at least some of their Lordships who comprised the majority in East Suffolk appear to have been influenced in their approach by the continuous nature of the damage. In the case before us there are likely to have been breaks between the incidents of damage said to have been caused by the ineffective prevention work. That circumstance makes it easier and more appropriate to view those incidents as separate occurrences.
[16] Moreover we respectfully doubt whether the same result as that reached in East Suffolk would be reached today. In the intervening 60 years there have been major developments in the areas which appear to have influenced their Lordships in the East Suffolk case. Lord Atkin’s approach and particularly his example of a builder called in to repair premises suffering from a pre-existing defect are the more persuasive today. The fact that the present cause of action is in tort rather than in contract, which was the basis of Lord Atkin’s example, cannot make any substantive difference in principle.
[17] This is what Lord Atkin said in East Suffolk at 93-94:

May I introduce a hypothetical case of a contractual duty, assuming as I do, that the causation of damage is the same in contract and tort. Assume that a shopkeeper had his roof injured in rainy weather, so that the rain came in upon his goods : and that he contracted with a builder to repair it with an express term that work should proceed without unreasonable delay. If the builder were guilty of unreasonable delay whereby the rain beat upon the shopkeeper’s goods for say fourteen days instead of four, would not the shopkeeper be able to recover such damages as he could show resulted from the excess exposure showing possibly that his goods could stand four days’ exposure with little damage but could not stand the extra ten. I think that this would be a plain case : and it would not depend upon an obligation to complete the work. The builder might be protected from an obligation to complete by subsequent conditions, death, strikes, war and the like, but for such damage as would be shown to be due to delay in the work while it was being performed I conceive he would clearly be liable. Such damage would be caused by the delay in repair, notwithstanding that the original cause of damage, the rain, and its continuance were in no way caused by the builder. I suggest therefore that if the plaintiffs could prove the case indicated above they should succeed.

[18] We return to the question of causation in the present case. There can be no doubt that if the original workmanship was faulty it was a cause of the total damage in a “but for” sense. Had the original work not been faulty there would have been no damage capable of being increased by ineffective prevention work. The fact that the original work was on this basis causative of the total damage does not mean that there cannot in law be any additional and concurrent cause of part of the total damage. It is not unusual to find that certain consequences have more than one cause. To be recognised as a cause in law, the allegedly causative circumstance does not have to be the cause. It is enough if it is a cause which is substantial and material: see for example Price Waterhouse v Kwan [2000] 3 NZLR 39, 47 in para 28. Substantial in this sense means more than trivial or de minimis. Material means that the alleged cause must have had a real influence on the occurrence of the loss or damage in suit.
[19] Here negligence in carrying out the prevention work, be it act or omission, if established, is a concurrent cause of the damage which it failed to prevent. Its purpose was to prevent such damage and it would be unrealistic to take the view that it was not a substantial and material cause of that damage. In such circumstances as these it is not the law that because the further damage could not have occurred without (but for) the originally faulty workmanship, such workmanship must be regarded as the sole cause of that damage. A concurrent cause, such as the ineffective prevention work, is in a sense the opposite of a novus actus interveniens. It is in reality a novus actus causans, or in other words a new default which runs with the earlier default so as to cause, or at least materially contribute to, the further damage which it was its purpose to prevent.
[20] If, as in Lord Atkin’s example, the Johnsons had engaged a builder other than Mr Watson to carry out the prevention work, and that builder had been negligent, he could hardly rely on Mr Watson’s originally faulty work (assuming such to be established) as the sole cause of the damage suffered by the Johnsons as a result of his failure to perform the prevention work properly. In causation terms the position cannot logically be different when it is Mr Watson himself who is said to have been negligent in his performance of the prevention work.
[21] For these reasons we cannot accept Mr Bell’s argument that the further damage was in law caused only by the original faulty workmanship. The East Suffolk case is clearly distinguishable and in the circumstances of this case we prefer the approach of Lord Atkin. We agree with Mr Bell that Mount Albert Borough Council v Johnson [1979] 2 NZLR 234 (CA) is of no direct assistance on the present causation issue, albeit the conclusion we have reached is consistent with the general tenor of the judgments in that case. We have considered the other authorities to which the Court referred in its Minute of 18 September 2002 and those to which counsel referred in their supplementary written submissions. We find none of them of such direct help as to warrant specific reference. Equally we do not regard any of them as being inconsistent with the conclusion we have reached.
[22] It is clear therefore that the Johnsons are not absolutely barred by s91(2) of the Building Act 1991 in relation to prevention work carried out by Mr Watson after 19 November 1991, being ten years prior to the date (19 November 2001) when, in their second amended statement of claim, the Johnsons first raised the issue of defective repair/prevention work. Hence the Johnsons may continue their proceeding in respect of relevant acts or omissions occurring after 19 November 1991.
[23] A word should also be said about the primary limitation period of six years which applies in contract and tort. It is only in respect of allegedly faulty prevention work occurring after 19 November 1995 that the Johnsons have a clear untrammelled right of action. Before they can make a claim in respect of prevention work occurring between 19 November 1991 and 19 November 1995, they will have to establish their contention that their cause or causes of action in relation to such work were concealed by fraud or their discovery was delayed until at least 21 November 1995 so as to extend the accrual of their cause of action to within the necessary six year period pursuant to s28 of the Limitation Act. The Johnsons have the onus of proof in that respect: see Humphrey v Fairweather [1993] 3 NZLR 91, 94 (HC).
[24] As a cause of action for faulty prevention work is separate and distinct from a cause of action for faulty original workmanship, it must follow that, in pursuing the former, the Johnsons have the onus of establishing what loss or damage they have suffered on its account. That means the Johnsons have the onus of showing, on a reasonable basis, how much of the total loss or damage is properly to be attributed to the failure of the prevention work. The Johnsons must therefore show, on the balance of probabilities, how much of their total loss derives from actionable prevention work as opposed to non-actionable original construction work or non actionable prevention work.
[25] The present case is not one of continuing damage of a progressive kind, as it would have been if some of the damage from the original faulty construction work had occurred within time and some was statute-barred. Here all claims in relation to the original construction work are absolutely barred. It is only because the Johnsons have a further cause or causes of action in relation to such of the prevention work as can be shown to be within time, that they are able to sue at all. Hence the cases discussed by Todd on Torts (3rd ed, 2002 at para 26.5(d) page 1228) do not require express consideration.

The representations

[26] It will be recalled that the Johnsons’ third head of claim relies on negligent or misleading representations said to have been made by Mr Watson, either by words or conduct, to the effect that his prevention work had fixed or would fix the problems. The Johnsons say that in reliance on those representations they allowed time to pass, with the result that their claims against the architect and the Council, and indeed against Mr Watson himself in respect of the original faulty workmanship, became statute barred. The essential question is whether the representations did cause the substantive claims to fall foul of the ten year limitation prescribed by s91(2). Mr Watson says that cannot be so because the Johnsons became aware in September 1999, within time, when they received their independent expert’s report, that the problems remained and they were much more extensive than they had been led to believe. Furthermore they immediately, on their own evidence, instructed solicitors (not those now acting for them): see para 3.9 of Mr Johnson’s affidavit.
[27] The building work commenced in March 1990. Thus a period of ten years from the earliest relevant acts or omissions on Mr Watson’s part would have expired in March 2000. Indeed, in a case like the present where the Johnsons could not be expected to point to an exact day on which the act or omission took place, there may be an argument for saying that where original building work is faulty the builder is under a continuing duty to remedy it right through until the date of completion, and there is a continuing “omission” until that date. On that basis the Johnsons would have had until December 2000 within which to sue without falling foul of s91(2).
[28] But even on the basis of the earliest possible date for the relevant acts or omissions the Johnsons had six months (from September 1999 to March 2000) within which to sue within time. They consulted their solicitors as soon as they became aware of the extent of the problems. There is no evidence explaining why proceedings were not issued until March 2001 – about one year too late. As from September 1999 Mr Watson’s representations must have ceased to have causal effect as a reason for the Johnsons not suing him and the other parties. The Johnsons needed a reasonable time to take proceedings after the representations ceased to have causative effect. Six months must prima facie be a reasonable time to sue in these circumstances. The Johnsons have certainly not laid any foundation for an argument that they reasonably needed more time. We are therefore of the view that, as regards suing Mr Watson, his representation did not cause the Johnsons’ claim to become statute barred. Hence they had no prospect of succeeding on their third head in this respect.
[29] It is necessary to look at the separate position of the claims the Johnsons wished to make against the architect and the Council. With regard to the Council the position must be the same as that pertaining to Mr Watson. The earliest relevant act or omission of the Council cannot have occurred before March 1990. Hence the Johnsons had at least the same amount of time to sue the Council as they had to sue Mr Watson. The pleading in the third amended statement of claim in this respect is very sparse; all that can be said is that the Johnsons have laid no foundation supporting a contention that the relevant acts or omissions on the Council’s part took place at a time more than ten years before it was reasonable to have expected them to commence proceedings. In the original statement of claim the allegations concerning the Council related to inadequate examination of plans, failure to ensure plans complied with relevant standards and negligent inspections. The last mentioned must have occurred after March 1990. The first two are unparticularised as to date; but the building permit was issued on 22 March 1990 so the Council’s alleged failures can reasonably be taken as having occurred at that date or shortly before. It must follow therefore that the Johnsons had enough left of the ten year period to sue the Council after they received their expert’s report and put the matter in the hands of their solicitors.
[30] That leaves the architect. Again the current pleading is sparse as to why Mr Watson’s representations caused the Johnsons to run out of time in his respect. But the original statement of claim averred that the architect was responsible for defective plans and specifications and defective supervision. The latter aspect cannot predate commencement of the actual building work. So in the architect’s case the key allegation relates to the preparation of the plans and specifications. The question is whether the Johnsons had enough time to sue the architect in that respect after they received their expert’s report in September 1999.
[31] Facing, as they were, an application to strike out and for summary judgment against them, it behoved the Johnsons to put up their best pleaded case. On the face of their third amended statement of claim there is no pleading which would allow the Court to say that the Johnsons have a reasonably arguable case that Mr Watson’s representations caused them to go out of time for suing the architect. The earlier pleadings do not provide any better foundation, largely as a result of their lack of specificity. No further amended pleading was tendered in this respect. We are of the view that on the premise that the Johnsons have put up their best case on this front, it is so speculative that it is appropriate to say that it cannot possibly succeed. We conclude that had the Johnsons’ previous solicitors brought proceedings on their behalf within a reasonable time of receiving instructions - bearing in mind the obvious relevance of s91(2) - the claim against the architect would not have fallen foul of s91(2). It was not suggested that in any respect Mr Watson’s representations caused the Johnsons to miss the primary limitation period of six years.

Conclusion

[32] For the reasons given the first and third heads of claim asserted by the Johnsons – see paragraph [5] above – could not succeed and were rightly struck out. To that extent their appeal must fail. The Johnsons may, however, continue with their proceeding in relation to such of the prevention work carried out by Mr Watson as they can show is not statute-barred in terms of the foregoing discussion. We give the Johnsons leave to file an amended statement of claim in terms of the draft lodged on 7 October 2002. That draft is to replace the earlier pleading in relation to repair/prevention work and is to be taken as the only extant pleading between the parties. All other pleadings are to remain struck out. No amendment to the pleading which we have given leave to file is to be made without the leave of the High Court. In view of the protracted history of the case, such leave should only be given in compelling circumstances.
[33] Although the Johnsons have had partial success in their appeal, by keeping part of their claim alive, that result derives substantially from an approach suggested by the Court. For that reason, and as the respondent, Mr Watson, has been successful in resisting the appeal in all other respects, we consider he should have an award of costs. Accordingly we order the Johnsons to pay Mr Watson costs in this Court of $3,000.00 plus disbursements including the reasonable travel and accommodation expenses of counsel, to be fixed if necessary by the Registrar. The order for costs in favour of Mr Watson in the High Court is to stand.

Solicitors
David Shanahan & Associates, Whangarei for Appellants
Webb Ross Johnson, Whangarei, for Respondent