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Lockwood and Wadham Goodman Trustees Limited as Trustees of the Island Trust [2010] NZCA 436 (24 September 2010)

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Lockwood and Wadham Goodman Trustees Limited as Trustees of the Island Trust [2010] NZCA 436 (24 September 2010)

Last Updated: 5 October 2010


IN THE COURT OF APPEAL OF NEW ZEALAND

CA381/2009 [2010] NZCA 436

BETWEEN STEPHEN GRAHAM LOCKWOOD AND WADHAM GOODMAN TRUSTEES LIMITED AS TRUSTEES OF THE ISLAND TRUST
Appellant


AND BOSTIK NEW ZEALAND LIMITED
Respondent


Hearing: 19 May 2010


Court: O'Regan, Priestley and Ronald Young JJ


Counsel: L McEntegart and I T F Hikaka for Appellant
A C Challis and R J Scott for Respondent


Judgment: 24 September 2010 at 10am


JUDGMENT OF THE COURT
  1. The appeal is allowed.
  2. The proceeding is remitted to the High Court for reconsideration in light of this decision.
  1. Costs are reserved. Leave is reserved to either party to seek costs.

_______________________________________________________________


REASONS OF THE COURT

(Given by O’Regan J)


Table of Contents

Para No
Introduction [1]
Facts [4]
Pleading [18]
The High Court decision [24]
Adequacy of reasons [36]
Approach to appeal [39]
Was the representation false? [45]
Reactivation representation [76]
Outcome [79]
Costs [80]


Introduction

[1] This is an appeal against a decision of Andrews J in which she dismissed the claim by the appellants (the Lockwood Trustees) against Bostik New Zealand Ltd (Bostik) for negligent misstatement.[1] The Judge found that the Lockwood Trustees had failed to prove that the pleaded misrepresentation was false. That finding made it unnecessary for her to determine issues such as the existence of a duty of care, causation, loss and the like or to address the defences put forward by Bostik.
[2] The Lockwood Trustees say that the Judge’s finding was wrong in fact and, in any event, she did not give adequate reasons for her decision in that she did not refer to some of the evidence said to substantiate the falseness of the representation. The Lockwood Trustees also argued that the Judge did not deal with their second pleaded misrepresentation at all.
[3] We intend to approach the appeal as follows:

(a) we will first set out a brief summary of the facts;

(b) we will then analyse the pleading of negligent misstatement in the statement of claim;

(c) we will then evaluate the High Court Judge’s consideration of the issues;

(d) we will then discuss the approach to be taken to deal with the issues on appeal;

(e) we will then deal with the principal issue on the appeal, namely whether the representation made by Bostik’s employees was false;

(f) we will then deal with the disposition of the appeal.

Facts

[4] The facts are set out in some detail in the judgment of Andrews J. For the purposes of this appeal, the relevant facts can be stated briefly. The summary which follows largely adopts the factual summary presented by Mr McEntegart for the Lockwood Trustees, as that summary was accepted (apart from a couple of minor matters) by counsel for the respondent, Ms Challis.
[5] The case concerns the product used to waterproof the large timber deck of a residence on an island in the Bay of Islands. The deck extends over the bottom level of the house, used as a caretaker’s flat, made up of two bunkrooms, a bathroom and a rumpus room. The product in question was Bostik’s Ultraseal product, which is a urethane-based waterproofing membrane. At the relevant time there were two Ultraseal products – Ultraseal and UltrasealR (Rollable). UltrasealR was a less viscous variant of Ultraseal, allowing it to be applied by roller rather than by trowel or brush. Later another variant was introduced – Ultraseal LV (Low Viscosity). This variant was not available for purchase in New Zealand. In this judgment, we will refer to the original Ultraseal as basic Ultraseal and the rollable variety as UltrasealR. We will use “Ultraseal” as an umbrella term to encompass both. It is often not clear in the evidence which is being referred to.
[6] The construction of the house commenced in early to mid-2001. The then owners of the property engaged Mr Jeff Iversen to undertake some stone cladding on the walls and internal and external tiling associated with the house. This included the tiling of the large external deck above the caretaker flat.
[7] In mid-2001 Mr Iversen met with representatives of Bostik. There was some disagreement about what occurred, but the Judge found that there was a meeting between Mr Iversen and Messrs Reid and Marusich of Bostik, in May-July 2001. At that meeting, Mr Iversen showed the Bostik representatives the plans for the house on the island and described the approach he intended to take to waterproofing the deck prior to affixing the tiles.[2] Mr Reid recommended Bostik’s product, Ultraseal, as the most suitable product for waterproofing the external decks of the house. It seems likely that this was intended to be a reference to UltrasealR.
[8] In August 2001, Mr Iversen applied Ultraseal to the deck, applying two coats over two days (in two directions). It is not entirely clear whether the product applied was basic Ultraseal or UltrasealR.[3]
[9] In November 2001, Mr Lockwood purchased the island and the partially constructed house. He nominated SG Lockwood Developments Ltd as the purchaser.
[10] Soon after the purchase, Mr Lockwood spoke with Mr Iversen regarding the use of Ultraseal as the waterproofing product for the deck. He told Mr Iversen that the quality of the waterproofing was of critical concern to him and, although one layer of Ultraseal was already in place, he wanted to revisit the issue and would be prepared to have the deck removed and replaced with a product that was better suited to the job. He told Mr Iversen that he required an assurance from Bostik that Ultraseal was the best available product and the most suitable for the job.
[11] The Judge accepted that the representation was made by Mr Reid. She said:[4]

I accept the evidence of Mr Lockwood and Mr Iversen, that Mr Iversen telephoned Mr Reid in November 2001, at Mr Lockwood’s request, for the express purpose of obtaining an assurance that Ultraseal was the best and most appropriate product to waterproof the deck. Further, I accept Mr Iversen’s evidence that Mr Reid gave that assurance. Accordingly, I find that Mr Reid made the alleged representation.

[12] The Judge also found that Mr Iversen passed on that assurance to Mr Lockwood, and that Mr Lockwood then approved the use of Ultraseal. She found that Mr Lockwood had relied on the assurance in deciding to approve the use of Ultraseal to waterproof the deck.[5]
[13] Mr Iversen applied a second layer of Ultraseal between February and March 2002, again applying two coats over two days in two different directions. Prior to doing so he cleaned off and prepared the decks, but did not “reactivate” the surface (that is, he did not apply a solvent to the surface of the earlier layer so as to provide a proper base to which the new layer could adhere).
[14] Around August 2002, after a substantial rainfall, water leaked through part of the external deck. This area was subsequently repaired following a meeting at the island in November 2002 and attended by Messrs Lockwood, Iversen, Reid and Marusich.
[15] Throughout 2003 and 2004, there were further leaks, culminating in the collapse of the ceiling of a bedroom in the caretaker’s flat under the deck in 2004.
[16] As a result of these leaks, SG Lockwood Developments Ltd was required to undertake a programme of replacement of all of the tiles on the deck and this work also involved replacing the Ultraseal with a new waterproofing product.
[17] SG Lockwood Developments Ltd transferred the island to the appellant by a Deed of Sale dated 25 June 2004. On 10 November 2006 it also assigned its rights against Bostik to the appellant and gave notice of that assignment to Bostik. Shortly thereafter the appellant issued these proceedings.

Pleading

[18] One of the issues raised on appeal is the alleged failure by the Judge to deal with one of the misrepresentations pleaded by the appellant. In order to provide the context for that submission, it is necessary to consider the manner in which the case was pleaded in the amended statement of claim. The key paragraph of this document for present purposes is [15], which provides:

In late 2001 Mr Iversen, further to the discussion with Mr Lockwood referred to in paragraph 14 above, consulted with Mr Reid of Bostik. He advised Mr Reid that the property had been sold and the new owner wanted assurance from Bostik that Bostik Ultraseal was the best product for the job. In response Mr Reid represented to Mr Iversen that he remained of the view that Bostik Ultraseal was the best product and was suitable and appropriate for the job (Representation).

[19] The pleading then refers to Mr Iversen’s repetition of the representation to Mr Lockwood on behalf of SG Lockwood Developments Ltd and the decision by SG Lockwood Developments Ltd to continue to use Bostik Ultraseal in reliance on the representation. It recounts the application of Ultraseal to the deck of the house in February 2002, the subsequent tiling of the deck and the water damage which later ensued.
[20] There is then a pleading to the effect that Bostik held itself out as a competent and experienced supplier of polyurethane water proofing membranes, and that the circumstances and the relationship between Bostik, Mr Iversen and SG Lockwood Developments Ltd meant that Bostik owed a duty of care to SG Lockwood Developments Ltd. There is then a pleading of breach of that duty which is in the following form:

In making the Representation the defendant was negligent and acted in breach of the duty of care owed by it to SG Lockwood Developments Limited.

Particulars

It made the Representation without proper reference to the size and nature of the external decks on which the tiles were to be laid.

It made the Representation without giving consideration to the inherent difficulties in dealing with Bostik Ultraseal in terms of a wooden deck (which would inevitably flex) and over a very large area.

It failed to alert the plaintiffs to the fact that its literature in respect of Bostik Ultraseal was unsound in that it made no mention of the need to reactivate the surface by applying a solvent.

[21] There is then a pleading relating to the damage suffered and a claim for relief being damages of just under $380,000, plus interest and costs.
[22] Mr McEntegart referred to the reactivation issue (the third of the particulars mentioned above) as being the “second limb of the misrepresentation” and complained that the Judge had not dealt with it. As is apparent from the previous discussion, the reactivation allegation is in fact pleaded as a particular of the breach of the duty of care by Bostik in making the Representation (ie the representation as to the suitability of Ultraseal for the waterproofing of the deck).
[23] We will return to this aspect of the case later.

The High Court decision

[24] The Judge set out a full account of the factual background, and made the factual findings already referred to, namely that Mr Reid had represented to Mr Iversen that Ultraseal was the most suitable product for waterproofing the external deck on the property and Mr Iversen had reported that to Mr Lockwood who in turn had relied on it in deciding to approve the continued use of Ultraseal to waterproof the deck.
[25] She then articulated the issues which needed to be resolved to determine the negligent misstatement claim. She said that the issues were:

(a) Was there a representation?

(b) If so, was it a negligent misrepresentation?

(c) Did the Lockwood Trustees rely on the representation?

(d) And, did the product fail, causing loss to the Lockwood Trustees?

[26] She added that if those issues were determined in the appellant’s favour, then it would be necessary to consider the matters raised as defences by Bostik, namely:

(a) Was the water ingress to the caretaker’s flat caused by a failure of the waterproofing membrane, or by other means?

(b) If the membrane failed, was that because Ultraseal was unsuitable for the job or because it was poorly applied?

[27] She said that if those issues were also resolved in the Lockwood Trustees’ favour ie there was a failure of the waterproofing membrane and that was because Ultraseal was unsuitable for the job, then it would be necessary to consider affirmative defences namely:

(a) limitation;

(b) that Bostik did not assume any responsibility to SG Lockwood Developments Ltd or to the Lockwood Trustees as subsequent purchaser;

(c) contributory negligence (Mr Lockwood did not make all reasonable and prudent inquiries relating to the use of Ultraseal); and

(d) that no loss had been suffered, or that the loss was less than claimed.

[28] The Judge summarised the appellant’s position in relation to the negligent misrepresentation claim as follows:[6]

Mr McEntagart submitted that the Representation was a negligent misrepresention because:

(a) the properties of Ultraseal, in particular its thickness, made it difficult to work with and apply consistently over an area as large as the deck; and

(b) the “product literature” provided by Bostik at the time of the representation in November 2001 did not state that it was necessary to “reactivate” the waterproofing membrane with a solvent in the event that there was, as in the present case, a gap of more than seven days between the application of the first and second layers of the membrane.

[29] This articulation referred to the reactivation claim as a reason for the representation (that the product was suitable) being negligent, rather than being a separate representation. It also characterised the reason as the lack of any reference in the product literature to the reactivation requirement, whereas the statement of claim had characterised it as the failure by Bostik to alert the Lockwood Trustees to the fact that the literature lacked such references to reactivation.
[30] The Judge then dealt with the contents of the product literature in some detail, before turning to the key issue, namely whether the representation that Ultraseal was the best and most appropriate product to waterproof the deck was false.
[31] The Judge traversed the evidence called on behalf of the Lockwood Trustees from Mr Jones, a building surveyor, particularly his comment about the difficulty of applying the Ultraseal membrane to a large timber structured deck within the parameters set out in the product literature. In particular, Mr Jones referred to the difficulty of maintaining a level of thickness of one millimetre throughout (as suggested in the product literature), and concluded that the difficulties in applying the membrane over a large area “make the product all the more unsuitable for a large timber deck, because the stresses in deflection and movement that such deck experiences in an exposed environment would mean that even minor inconsistencies in the application (as would be inevitable here) could compromise the integrity of the waterproofing”.
[32] The Judge then traversed the submissions from Bostik’s counsel. In particular she referred to the evidence of Mr Reid, formerly an employee of Bostik, that Ultraseal was, by 2001, being used on many occasions both internally and externally under tiles, was being used on decks and balconies, and was being used over both concrete and fibre cement sheets on timber framing. She referred to Mr Reid’s evidence that he had seen Ultraseal used successfully on a large roof/deck of approximately 500 square metres.
[33] She then referred to his evidence, and that of another Bostik employee, Mr de Martin, that no difficulties had been encountered as to Ultraseal’s suitability as a waterproofing membrane. The Judge referred to the evidence given by another building inspector called by Bostik, Mr O’Sullivan. She noted that Mr O’Sullivan had expressed the view that urethane membranes, such as Ultraseal, were suitable for application on fibre cement sheets over timber framing and suitable for decks and balconies. She noted that he had said that he had been inspecting deck and tile
deck-related failures in New Zealand since 1994 and had dealt with membrane and deck issues of various kinds, and this was the first time he had encountered a failure where a urethane membrane had been used.
[34] The Judge then turned to the evaluation of the submissions in a section headed “Discussion”. Given the criticisms that are made of her reasoning, it is appropriate to set out in full what her reasoning was. She said:

[86] Before Bostik can be held liable to the Trustees, the Trustees must prove on the balance of probabilities that the representation that has been found to have been made was a misrepresentation; that is, that one or more of its elements was false. It is only if that is established that the Court will be required to consider whether it was made negligently.

[87] Both the Trustees and Bostik focused in the evidence put before the Court, and in submissions, on the element of representation as to Ultraseal being “suitable and appropriate for the job”. No evidence was put before the Court, and no submissions made, in respect of the element that Ultraseal was “the best” product.

[88] Mr Jones’ evidence was given in a careful, considered, and measured way, and was of considerable assistance to the court. However, I am not satisfied on the balance of probabilities on the basis of his evidence, and the evidence of what occurred in this case, that the representation was a misrepresentation.

[89] Mr Jones’ evidence, and the evidence of what occurred in relation to the deck, must be considered against the evidence given for Bostik, that Ultraseal had been used successfully to waterproof large decks, and that it had been used successfully on tiled decks constructed of fibre cement sheets over timber framing.

[90] To put my conclusion another way, I am not satisfied on the balance of probabilities that it was a misrepresentation to say that Ultraseal was suitable and appropriate to be applied as a waterproofing membrane on the deck.

[35] She then said that, although it was not necessary for her to consider other matters raised by the parties, she would record that she did not believe that the representation was negligently made, for similar reasons. She therefore disposed of the claim by giving judgment in favour of Bostik and seeking memoranda on costs.

Adequacy of reasons

[36] As already indicated, the Judge considered Mr Jones’ evidence and concluded that she was not satisfied that on the balance of probabilities that, on the basis of his evidence and the evidence of what occurred in the present case, the representation was a misrepresentation.
[37] Mr McEntegart said that this did not constitute adequate reasons for her conclusion. He also submitted that she did not address other critical issues of the plaintiff’s case, including the adequacy of the Bostik product literature and the suitability of Ultraseal and UltrasealR for application to a large external horizontal deck.
[38] We are satisfied that Mr McEntegart’s complaint that the Judge has not given adequate reasons and has not considered all of the available evidence is well founded. Our reasons for reaching that conclusion are set out later in this judgment.[7] That requires us to address the question as to what the appropriate appellate response to that outcome is. We will address that issue before we turn to our assessment of the main issue on the appeal, namely whether the representation made by the Bostik’s employees was false.

Approach to appeal

[39] The written submissions received prior to the hearing of the appeal appeared to be premised on the assumption that this Court would resolve all issues, notwithstanding that the approach taken by the High Court Judge had meant that she did not need to address almost all of them. We pointed out to counsel that was unrealistic, given the voluminous nature of the evidence and the fact that the matter had been the subject of a 13 day hearing in the High Court.
[40] Counsel for the appellant then sought an order remitting the matter to the High Court for reconsideration, but on further reflection realised that that would not assist in relation to the issue which the Judge had decided, on which she could hardly be expected to reverse her own finding. Counsel then asked that there be an order for a retrial.
[41] Because the request for a retrial arose only at the hearing, counsel did not have the opportunity to address us on the Court’s powers in that regard. Having now considered the matter we are of the view that this Court could order a new trial only if an application had first been made to the High Court for a new trial,[8] that application failed, and an appeal against the refusal to make the order for a new trial was then brought to this Court.[9] There is no express power for this Court to order a retrial in a civil matter. The Court does have power to remit proceedings to the High Court,[10] but we see that as being different in kind from a direction for a retrial. The matter would be different where the High Court trial was a nullity for any reason, so the matter is remitted to the High Court for a (valid) trial to occur, rather than for a retrial.
[42] It is notable that in its criminal jurisdiction this Court does have explicit powers to order a retrial.[11] The lack of any express power to order a new trial in civil matters can also be contrasted with the position in England, where the Court of Appeal of England and Wales (Civil Division) has an express power to that effect.[12]
[43] We do not consider that it is possible to direct that there be a new trial in the context of the present appeal. What we propose to do, therefore, is to make our own evaluation of the evidence relevant to the question of the suitability of the product for its present application and reach our own conclusion. In the event that we find that the evidence supports the proposition that the representation was false, we will make a tentative finding to that effect. We do not propose to make a final finding on the topic because in our view there are two issues on which factual findings will need to be made (but which we do not believe we can make, not having heard argument on them) before a definitive ruling is made.
[44] The first of these is whether the product actually applied to the deck in this case was basic Ultraseal or UltrasealR, and the second is whether the product that was applied in this case did in fact fail and, if so, why it did. That latter question arises under the heading of causation, and the Judge did not deal with that issue. However, it seems to us that any analysis of the suitability or otherwise of the product will be informed by whether it failed when it was actually used.

Was the representation false?

[45] Turning now to the evaluation of the relevant evidence, we intend to first consider the Bostik product literature over the years, which in our view is an important pointer to Bostik’s own views as to the appropriate uses of Ultraseal and UltrasealR. Although the Judge does discuss this literature in some detail she does not draw any conclusions from that analysis or apply it in determining whether the representation was false.[13]
[46] The relevant product literature comprises the following:

(a) Ultraseal literature, 1997;

(b) Ultraseal application instructions, October 1998;

(c) Ultraseal application instructions, July 1999;

(d) Ultraseal and UltrasealR data sheet, September 2000;

(e) Ultraseal literature and technical data sheet, September 2001;

(f) Ultraseal technical data sheet, October 2001;

(g) Ultraseal technical data sheet, April 2005;

(h) Ultraseal technical data sheet, March 2006.

[47] We will refer to these documents by reference to the relevant year. The September 2001 and October 2001 Ultraseal technical datasheets are not materially different and we will refer to the September document as the 2001 document. Similarly, there are no material differences between the April 2005 and March 2006 Ultraseal technical data sheets, and we will refer to the former.
[48] Each data sheet has a description of the product either by referring to the purpose for which it should be used or the recommended uses of the product. The 1997, 1998 and 1999 documents deal with basic Ultraseal and describe the purpose of its use as being “waterproofing internal wet areas”. The context makes it clear that this is the reference to its use in shower recess bases, but there are some minor differences in the wording. What is clear, however, is that there is no discussion of the use of the product in external areas. This is confirmed by the preparation instructions.
[49] The preparation instructions in the 1998 document referred only to the preparations required when using the product for a shower recess or shower floor base. The same applied to the 1999 document (there was no similar section in the 1997 document).
[50] The 2000 document is broader. It describes the recommended use as follows:
[51] The preparation instructions in the 2000 document did not confine themselves to preparation of shower recess, bathroom or shower floor bases: they were expressed in a more generic sense.
[52] For the first time the 2000 document referred to UltrasealR. It described basic Ultraseal as “trowel/brush grade” and the application instructions in relation to this product referred to showers, bathrooms and toilets. The implication is that it was not anticipated that this product would be used in other areas. UltrasealR was referred to as “rollable grade” and the application instructions provided:

For large horizontal wet areas such as upstairs bathrooms, kitchens, balconies or podiums Ultraseal(R)rollable would be most suited.

[53] The 2000 document was current when Mr Iversen first consulted Mr Reid around July 2001.
[54] The 2001 document expressed the recommended use of Ultraseal in essentially the same terms as in the 2000 document. The application instructions were also similar: the trowel/brush grade instructions referred to showers, bathrooms and the like, while those for the rollable grade referred to this grade being most suited for large horizontal wet areas such as upstairs bathrooms, kitchens, balconies or podiums.
[55] The 2001 document was the document that was current at the time Bostik gave the representation to Mr Iversen that Ultraseal was an appropriate product for the deck in late November 2001.
[56] The 2005 document is interesting not because it could have influenced what was and was not said by Bostik at the time the representation is made, but because it expresses what are presumably Bostik’s views about the appropriate use of Ultraseal. For the first time it deals with a new Ultraseal product, UltrasealLV (low viscosity) which is a lower viscosity version of UltrasealR. The recommended uses of basic Ultraseal are described in these terms:
[57] There is then a description of the Ultraseal membrane range. UltrasealR is described as most suited for “vertical and horizontal wet areas such as larger bathrooms, laundries and kitchens”. On the other hand, UltrasealLV is described as being “especially formulated for application by roller on large exterior level decks and podium areas where a thinner, easier to apply coating is required. UltrasealLV is not suitable for vertical applications”.
[58] Specific instructions are given for application to external decks. There is also for the first time a reference to recoating, and the need to reactivate the surface if recoating occurs more than seven days after cure of the previous coating.
[59] At the time Ultraseal was applied to the deck in this case, the Bostik product literature did not provide any basis for concluding that basic Ultraseal could be used externally. There was support in both the 2000 and 2001 documents for the use of UltrasealR for external balconies and podiums, but no mention of it being an appropriate product for a deck, let alone a very large deck. In our view this provides considerable support for Lockwood Trustees’ argument that neither basic Ultraseal nor UltrasealR was an appropriate product for the deck in this case.
[60] That is particularly so in relation to basic Ultraseal where there was no support for its external use in the product literature.
[61] There was evidence in this case that both basic Ultraseal and UltrasealR were used on the deck, but there was no finding about that from the Judge. This may have some influence on the final decision as to the appropriateness of the product. As the Judge records, the Bostik witnesses did not see any significance in the difference between basic Ultraseal and UltrasealR, and on more than one occasion the observation was made “Ultraseal is Ultraseal”. But given the differentiation between the different grades of Ultraseal in the 2000 and 2001 documents, it is hard to see how that observation can be sustained against the technical data supplied by Bostik to users of the products.
[62] The 2005 document is significant because it indicates that UltrasealLV was developed because neither basic Ultraseal nor UltrasealR was appropriate for external deck areas, particularly large ones. The 2005 document goes so far as to say that UltrasealLV had been especially formulated for application by roller to large exterior level decks and podium areas where a thinner, easier to apply coating is required. That at least creates an inference that UltrasealR would not be an appropriate product because a thinner product is “required”, and that UltrasealLV was developed for external decks because Bostik did not otherwise have an Ultraseal product that was appropriate for that use. Again, we see this as providing considerable support for the appellant’s case that basic Ultraseal and UltrasealR were not appropriate products for the very large deck in this case.
[63] Ms Challis argued that it wrong to draw any significance from the 2005 documents. She said that the cross-examination of Mr O’Sullivan and the Bostik employees about the changes in the Bostik product literature in 2005 did not lead to a concession on their part that UltrasealR was not suitable and appropriate for a large timber framed or fibre cement deck. She said that the change in the documentation could not in itself amount to evidence that UltrasealR was not an appropriate and suitable waterproofing product for the deck. She said that this was particularly so when UltrasealLV was never in fact imported into New Zealand.
[64] We disagree that the failure of the Bostik witnesses to capitulate on this point meant that there was no significance in the 2005 documents. On the contrary, these documents were, in the absence of anything from Bostik discrediting its own literature, the publicly expressed views by Bostik about its own products.
[65] The introduction of a lower viscosity product in 2005 is particularly significant in the present case because there was evidence before the Court that the problem identified with basic Ultraseal, and to a lesser extent, UltrasealR in relation to very large areas was the difficulty in getting an even application so that the membrane was uniformly at least one millimetre thick. The explicit acknowledgement in the 2005 document that this difficulty arose with both basic Ultraseal and UltrasealR is in our view highly significant both generally and in relation to the present case where the difficulty of application may have been a significant factor in the failure of the waterproofing system on the deck. In fact, Bostik’s own evaluation indicated that the problem may well have been failure to apply the product to achieve the necessary even membrane. That was seen by Bostik as absolving it from liability (and placing the blame on the Mr Iversen), but it can equally be seen as supporting the view that the product was not satisfactory in the first place because of this difficulty in applying it.
[66] It is also significant that an independent appraisal, the BRANZ appraisal number 578 in 2007 described a new product known as “Ultraseal External Waterproofing Membrane” as suitable for decks up to a maximum size of 40 square metres. This is considerably smaller than the deck in the present case.
[67] Bostik’s case depended on anecdotal evidence from its employees, particularly Mr Reid and Mr de Martin that Ultraseal had been successfully used on larger decks than that of the plaintiff. In fact, UltrasealR was a relatively new product when it was recommended to Mr Iversen in 2001 and there was not much evidence of its use at all at that time. Mr Reid talked of Ultraseal being used successfully to waterproof a large roof deck of 500 square metres but gave no detail of when this was or how it was applied. He said that he was aware of a number of other occasions where the product was used externally, notwithstanding that Bostik’s own technical data did not recommend it for that use.
[68] Mr Reid also gave anecdotal evidence that he was aware of only one other occasion where there had been a problem with Ultraseal when used externally. Mr de Martin gave evidence of a similar product, DampFixPU where there had been a successful use over an area much larger than the present deck. He described this product as identical to Ultraseal. Again no detail was given as to how this was applied and, given that it was a different product from the one recommended by Bostik, we do not see it as deserving of much weight.
[69] We do not see the Bostik employees’ evidence as significantly undermining the strength of the conclusions which can be reached by consideration of Bostik’s technical data. Bostik did not expressly disavow this technical data and the fact that its employees were recommending its product for uses which were not within the recommendations in the technical data sheets does not in our view provide a proper basis for determining that the technical data sheets were wrong or unduly conservative.
[70] That brings us to the expert witnesses. As noted earlier, Andrews J essentially dismissed the evidence of Mr Jones, the expert building inspector called by the Lockwood Trustees. The key points in Mr Jones’ evidence were:

(a) He said the analysis of the deck appeared to indicate that both basic Ultraseal and UltrasealR had been applied.

(b) He considered it would be very difficult to apply Ultraseal within the parameters set out in the Bostik technical data on an area so large. This was because Ultraseal was very thick and would be difficult to apply over a large area.

(c) He disputed Bostik’s views as to why the leaking had occurred, which were largely related to the inadequacy of the application of the product. In particular, he disputed Bostik’s view that the membrane needed to be 1.3 millimetres thick, pointing to the fact that 1 millimetre was the thickness specified in Bostik’s technical data. He concluded as follows:

I would not have considered Ultraseal or UltrasealR to be a practicably suitable membrane for such a large deck area and I would not have recommended the use of either of those products.

(d) He had seen liquid applied membranes on timber decks fail too many times to be comfortable with specifying such materials. However, these were in the main acrylic membranes, and therefore unlikely to be a guide to the suitability of Ultraseal which is a urethane product.

[71] Andrews J rejected Mr Jones’ evidence, which she said had to be considered against Bostik’s evidence that Ultraseal had been successfully used to waterproof large decks and had been used successfully on tile decks constructed of fibre cement sheets over timber framing. However, the actual evidence given by Mr Reid and Mr de Martin provides a frail reed for this conclusion. Mr de Martin’s evidence related to a different product, and referred to one successful use on a large deck. Mr Reid also gave one example of successful use on a large deck. Mr Reid did not specify what the surface of the deck was, and in particular did not say it was a fibre cement sheet deck and constructed over timber framing. We note that it is not clear from Mr Reid’s evidence whether he was referring to basic Ultraseal or UltrasealR.
[72] While we do not disregard the expertise of the Bostik witnesses and the anecdotal evidence they gave, we do not see it as being a basis for undermining the expert view expressed by Mr Jones.
[73] The expert witness called by Bostik, Mr O’Sullivan, expressed the view that a building product supplier could have reasonably recommended Ultraseal as suitable for a large deck over fibre cement sheets. He also expressed the view that if the membrane had been applied to the deck taking into account known standards, trade practice and technical requirements, it should have performed adequately. He said that he had inspected decks since 1994 and this was the first time he had encountered a failure where a urethane membrane had been used. He did not, however, indicate the size of the decks or how frequently he had encountered very large decks where a urethane membrane had been used. Mr O’Sullivan did not accept that his evidence was at odds with Bostik’s own technical data sheets. He said that his view that basic Ultraseal and UltrasealR were adequate products for external use even on large decks “extended”, rather than being contrary to, the Bostik technical literature.
[74] The Judge was confronted with a clear conflict between two extremely
well-qualified building inspectors. Although she does not expressly say that she preferred the evidence of Mr O’Sullivan to that of Mr Jones, she dismissed Mr Jones’ evidence for reasons which we have found to be inadequate. In our view the combination of the evidence derived from the Bostik data sheets and the unequivocal views expressed by Mr Jones, provided sufficient evidence to support the appellant’s case that the Judge ought not to have dismissed the contention that the representation that the product was suitable for its use in this case was false.
[75] As noted earlier, however, we do not make a finding that the representation was false. We were reluctant to do so in the absence of arguments from either party on the cause of the water ingress. Rather, we remit the matter to the High Court for reconsideration of this issue in light of the conclusions we have expressed in this judgment. The Judge will need to take into account further relevant information, particularly as to the actual cause of the failure of the water proofing system in this case. If, as Bostik suggested, the failure was caused by failures in the application of the product, that does not necessarily seem to us to be supportive of Bostik’s case about the truth or falseness of the representation, because one of the aspects of suitability of basic Ultraseal and/or UltrasealR for application to the very large deck was the question as to whether it was feasible to apply it properly in accordance with the requirements for an effective membrane given its high viscosity. As just mentioned, Mr Jones’ view was that it was not an appropriate product because of this difficulty in applying it evenly. On the other hand, Bostik pointed out that the cause of the water ingress could be something quite separate from the Ultraseal membrane, such as insufficient sealing around the deck substrate joins, over the screws in the nib wall of the balustrade, or around the stone cladding on the walls that met with the deck. If that is so, it may suggest that the membrane had not failed.

Reactivation representation

[76] Mr McEntegart argued before us that the Judge had not considered what he called the second limb of the misrepresentation allegation. As we have already discussed, the reference to reactivation in the statement of claim is a particular to the allegation of breach of duty of care, rather than as an element of the misrepresentations said to have been made.[14] Nevertheless we accept that one element of the appellant’s case that the representation that Ultraseal was an inappropriate product for the waterproofing of the deck in this case was that, if its appropriateness depended on reactivation occurring between coats, then that topic should have been addressed by the Bostik employees.
[77] We do not comment at all on the key areas of dispute in relation to this issue, particularly as to whether the Bostik employees knew that a coat had already been applied when the representation was made, or whether the circumstances otherwise called for some reference to the need for reactivation.
[78] We also note that as pleaded the concern of the Lockwood Trustees is not that the Bostik employees did not tell Mr Iversen about the need for reactivation, but rather that they did not tell Mr Iversen that their technical data sheets did not mention this. We are not sure whether there is significance in that but again we do not express any view at this stage. Rather, we direct that this be addressed when the matter is remitted to the High Court.

Outcome

[79] We allow the appeal to the extent that we find that Andrews J did not give adequate reasons for her conclusion that the representation was not false, and that, on the evidence available to her, other than that relating to whether the product actually failed in this case, she did not have an adequate basis for rejecting the appellant’s expert’s evidence in reaching the conclusion she did. We remit the case to the High Court and direct that Andrews J reconsider the question as to whether the representation was false, taking into account our conclusions in this judgment and the findings which she will need to make as to the actual cause of the failure of the waterproofing membrane in the present case. We also direct her to take into account the reactivation argument made on behalf of the Lockwood Trustees and to deal with all other issues that logically follow. The reactivation issue should not be seen as wholly separate from the alleged representation as to the suitability of Ultraseal. As noted above,[15] the reactivation allegation may be best seen as an element of the suitability representation claim. This potential interlinking should not be overlooked.

Costs

[80] The Lockwood Trustees have been successful in this Court, but the overall success or failure of the parties is yet to be determined. In the circumstances we consider that the appropriate course is to reserve costs in relation to the present appeal and to reserve leave to either party to seek costs once the outcome of the litigation is known.

Solicitors:
LeeSalmonLong, Auckland for Appellant
McElroys, Auckland for Respondent

[1] SG Lockwood v Bostik New Zealand Ltd HC Auckland CIV-2006-404-7004, 3 June 2009.
[2] At [29].
[3] See below at [61].
[4] At [44].
[5] At [45].
[6] At [58].
[7] See our discussion below at [45] onwards.
[8] High Court Rules, r 1(3)(b)(i).
[9] Dragicevich v Martinovich [1969] NZLR 306 (CA).
[10] Judicature Act 1908, s 62.
[11] Crimes Act 1961, ss 378D, 382(2)(e) and 385(2).
[12] Civil Procedure Rules (UK), r 52(10)(2)(c).
[13] At [59]-[74].
[14] At [18]-[22] above.
[15] At [76].

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