Yun v Waitakere City Council HC Auckland CIV-2010-404-5944 [2011] NZHC 142 (15 February 2011)

Last Updated: 26 May 2011

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

_{CIV-2010-404-5944}

IN THE MATTER OF an appeal pursuant to section 93 of the Weathertight Homes Resolution Services Act 2006

BETWEEN KAO YUN AND KIM YOUNG PHON Appellants

AND WAITAKERE CITY COUNCIL First Respondent

AND DOUGLAS FRANK KAIL Second Respondent

Hearing: 8 February 2011

Appearances: T J Rainey for the Plaintiffs

H Rice for the First Respondent

R Dillon for the Second Respondent

Judgment: 15 February 2011

_{RESERVED JUDGMENT OF ELLIS J}

This judgment was delivered by me on 15 February 2011 at 4 pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors: Rainey Law, PO Box 1648, Auckland 1140

Heaney & Co, PO Box 105391, Auckland 1143

Queen Street Law, PO Box 6908, Auckland 1141

YUN AND PHON V WAITAKERE CITY COUNCIL HC AK CIV-2010-404-5944 15 February 2011

[1] The appellants are the owners of a leaky home. In late 2009, they commenced proceedings in the Weathertight Homes Tribunal (the Tribunal), naming (inter alia) the two respondents, Waitakere City Council (the Council) and Douglas Frank Kaill, as defendants. The Council had issued a building consent in relation to the construction of the house on 24 April 2001, but did not undertake any subsequent inspections (a private certifier being engaged by the original owners in that respect). Mr Kaill was the designer of the house and had prepared the plans and specifications.

[2] On 20 August 2010, the Tribunal made orders removing the Council and Mr Kaill as parties pursuant to s 112 of the Weathertight Homes Resolution Services Act 2006 (the Act). Section 112 provides:

112 Removal of party from proceedings

(1) The tribunal may, on the application of any party or on its own initiative, order that a person be struck out as a party to adjudication proceedings if the tribunal considers it fair and appropriate in all the circumstances to do so.

(2) This section is subject to section 57(2).

[3] Section 57(2) imposes an obligation to comply with the principles of natural justice. A removal decision under s 112 is a final determination[1] under the Act and thus the appellants have the right of appeal to this Court under s 92 (the quantum of their claim in the Tribunal being greater than $200,000). It is therefore accepted by all the parties that ss 93–95 apply and that this appeal is to be determined as a general appeal to which the principles espoused by the Supreme Court in Austin, Nichols & Co Inc v Stichting Lodestar[2] and reiterated more recently in K v B[3] apply.

In other words: [4]

[T]he appellate court in an appeal by way of rehearing such as this should carry out its own assessment of the facts and should not hesitate to substitute its own findings of fact. Thus the appellate [c]ourt must apply an independent judgment to the conclusions reached by the Court of first instance. Nevertheless, Austin, Nichols & Co Inc v Stichting Lodestar makes

it clear that the onus is still on an appellant to show that the first instance

Judge or Tribunal was wrong.

Basis for the appeal

[4] The basis for the present appeal is, however, primarily legal, not factual, in nature. The appellants’ central submission is that in removing the two respondents as parties to their claim, the Tribunal breached natural justice and failed to apply the decision of the High Court in Fenton v Building Code Consultants Limited. Particular reliance was placed on [51] of that decision where Cooper J said:

In my view, s 112 is not intended to give the Tribunal a wider jurisdiction to strike out claims than possessed by the High and District Courts. Where it is sought to remove respondents on the basis that there is no reasonably arguable cause of action against them, I consider that the Tribunal should apply the same approach as that applied by the High and District Courts. That means that there is no duty on the claimant to adduce evidence directed to that question, because the question must be answered on the basis that the pleaded facts are correct.

[5] In the present case the appellants say that the Tribunal’s decision was at odds with this dictum because in deciding to remove the two respondents, the Tribunal took into account expert evidence that had already been filed by the appellants in support of their claim. The Tribunal essentially concluded that that evidence did not support the claims against the two respondents as pleaded in the appellants’ amended statement of claim (ASOC) and that they should be removed as respondents on that basis. Relying on Fenton, the appellants say the Tribunal should have determined the matter solely on the assumption that the facts alleged in the ASOC were true, and that they were entitled to wait before filing further evidence in support of those allegations.

[6] The decision in Fenton is addressed in more detail later in this judgment. At this point, it is sufficient to note that the first respondent (the Council) submits that Fenton is distinguishable from the present case, whereas the second defendant says that the decision in Fenton was wrong (while accepting, of course, that that was a finding that it was not open for the Tribunal to make).

[7] Before the correctness of those submissions can properly be assessed, it is necessary to consider certain fundamental aspects of the jurisdiction of the Weathertight Homes Tribunal and the procedures under the Act. In particular, the existence (or not) of important points of distinction between the Tribunal’s procedure and the procedures of the District and High Courts lies at the heart of the decision in Fenton and, similarly, at the heart of this appeal.

The relevant statutory provisions and procedures

[8] The purpose of the Weathertight Homes Resolution Services Act 2006 is set out in s 3, which provides that:

The purpose of this Act is to provide owners of dwellinghouses that are leaky buildings with access to speedy, flexible, and cost-effective procedures for assessment and resolution of claims relating to those buildings.

[9] The respondents submit, and I accept, that the statutory emphasis on expedition and flexibility informs the interpretation of the more substantive machinery provisions in the Act.

[10] The means by which a claim under the Act is commenced and subsequently conducted are, I think, relevant. Focussing for present purposes on dwellinghouse claims, the first step in these processes is encapsulated in s 9, which states:

A person brings a claim under this Act in respect of a dwellinghouse by applying for an assessor's report in respect of it.

[11] An application for an assessor’s report is made to the Chief Executive (of the Department of Building and Housing) under s 32. For limitation purposes, the making of such an application ―has effect as if it were the filing of proceedings in a court‖.

[12] The principal purpose of an assessor’s report is to enable the Chief Executive to determine whether the claim is eligible for adjudication or mediation under the Act. In this respect s 10 provides:

A claim has been declared eligible under this Act if the chief executive has decided under section 48, or the chair has decided under section 49, that it meets the eligibility criteria.

[13] Eligibility criteria are factual in nature and (in relation to dwellinghouses) are stipulated in s 14, as follows:

The criteria are that the claimant owns the dwellinghouse to which the claim relates; and—

(a) it was built (or alterations giving rise to the claim were made to it) before 1 January 2012 and within the period of 10 years immediately before the day on which the claim is brought; and

(b) it is not part of a multi-unit complex; and

(c) water has penetrated it because of some aspect of its design, construction, or alteration, or of materials used in its construction or alteration; and

(d) the penetration of water has caused damage to it.

[14] Assessors’ reports may be ―eligibility‖ or ―full‖ reports. The contents of each are set out in ss 41 and 42, which, in relation to dwellinghouse claims relevantly state:

41 Eligibility assessor's report

(1) An eligibility assessor's report is a report stating only—

(a) whether or not, in the assessor's opinion, the claim to which it relates meets the eligibility criteria

...

42 Full assessor's report

(1) A full assessor's report is a report stating—

(a) the matters required by section 41(1); and

(b) if, and only if, in the assessor's opinion, the claim to which it relates meets the eligibility criteria, the matters required by subsections (2) to (4).

(2) If the report states that the claim meets the criteria in section 14 or 15 or

18, the report must also state the assessor's view on—

(a) why water penetrated the dwellinghouse concerned; and

(b) the nature and extent of the damage caused by the water penetrating the dwellinghouse; and

(c) the work needed to repair the damage; and

(d) the work needed to make the dwellinghouse weathertight (both in relation to the deficiencies that enabled the damage to occur and in relation to any deficiencies that are likely in future to enable damage to be caused to the dwellinghouse by water penetrating it); and

(e) the estimated cost of the work referred to in paragraphs (c) and (d);

and

(f) the persons who should be parties to the claim.

[15] Once an assessor’s report has been prepared the chief executive is required to determine eligibility under s 48. Section 48(2) stipulates that in doing so he ―must consider only the report itself and any submission made by the claimant under section 45‖. Submissions can be made by a claimant under s 45 if the assessor’s report has concluded that the relevant eligibility are not met.

[16] If there is a positive determination of eligibility, then a claimant has a right to apply to have the claim adjudicated except to the extent that the claim or part of the claim is the subject of litigation or some other dispute resolution process elsewhere: s 60. The remedies that may be sought in any adjudication in respect of the damage identified in the assessor’s report are essentially the same as those that could be sought for such damage in a court of law: s 50. If the chief executive declines eligibility, that decision can be reviewed by the chair of the Tribunal under s 49.

[17] Pausing here, it seems relevant to observe that eligibility to have a claim adjudicated at all is itself predicated upon a threshold factual inquiry: the prima facie establishment of a factual platform for the claim. This then might be thought to be the first material distinction between a claim made under the Act and a claim filed in the District or High Court.

[18] Once eligibility is confirmed, the adjudication of claims is governed by Part

5, which begins with s 57. Section 57 states:

57 Adjudications to be managed to achieve purpose of Act

(1) The tribunal must manage adjudication proceedings in a manner that tends best to ensure that they are speedy, flexible, and cost-effective; and, in particular, must—

(a) encourage parties where possible to work together on matters that are agreed; and

(b) use, and allow the use of, experts and expert evidence only where necessary; and

(c) try to use conferences of experts to avoid duplication of evidence on matters that are or are likely to be agreed; and

(d) try to prevent unnecessary or irrelevant evidence or cross- examination.

(2) In managing adjudication proceedings, the tribunal must comply with the principles of natural justice.

(3) Subsection (2) does not require the tribunal to permit the cross- examination of a party or person; but the tribunal may in its absolute discretion do so.

[19] I have already noted that the s 57(2) natural justice requirement is specifically incorporated into the s 112 removal power. That incorporation is an important aspect of this case and is thus a matter to which I shall later return.

[20] The means by which a claimant may commence an adjudication process are set out in s 62:

62 How to initiate adjudication

(1) A claimant initiates the adjudication of a claim by applying to the tribunal, in writing and in a form (if any) approved for the purpose by the chair, to have the claim adjudicated, and serving a copy of the application for adjudication on—

(a) the other party or parties to the adjudication; and

(b) the Department.

(2) The application to the tribunal must be accompanied by—

(a) a copy of the decision of the chief executive under section 48 (or the decision of the chair under section 49) on the eligibility of the claim; and

(b) the prescribed fee (if any).

(3) The application in writing in the approved form (if any) must state—

(a) the date of the application; and

(b) the nature and a brief description of the claim and of the parties involved; and

(c) the remedy that is sought; and

(d) the names and addresses of the parties to the adjudication; and

(e) if available, the addresses that the parties have specified for the service of notices.

(4) Every copy of the application that is served on another party to the adjudication must be accompanied by a copy of the assessor's report that relates to the claim, and may be accompanied by any other documents.

...

[21] As contemplated by s 62(1) an application form has in fact been approved by the Chair of the Tribunal. As well as referring to the matters referred to in s 62(3), the form requires an applicant to provide other key information such as the date the relevant dwelling was built or altered, whether remedial work has been completed, a summary of the quantum of the claim and any other orders sought. The form then goes on to stipulate that certain documents are required to be attached to it in support of the claim. These include:

(a) Particulars of the claim (such particulars to include all the information detailed in an appendix to the claim form);

(b) The assessor’s report;

(c) Other expert reports or information on which the claimant is relying; (d) Copies of invoices, quotes, tenders or estimates on which the claim is

based if other than in the assessor’s report;

(e) A copy of current certificate of title or other proof of ownership; and

(f) A list of documents proposed to be relied on in the adjudication and various other miscellaneous matters.

[22] An Appendix to the form also requires, as particulars of the claim, the following further documents or statements to be annexed:

(a) A chronology of events;

(b) Details of the construction of the house; and

(c) Information concerning the leaks and damage caused, information on how the leaks came to the attention of the claimant, information on steps taken to investigate damage and the reports obtained and steps taken to repair and carry out remedial work.

[23] In practice, these requirements mean that at the time a claim for adjudication is commenced, the Tribunal will have before it not only the assessor’s prior determination of prima facie factual eligibility but a considerable quantity of other factual material. At the time a preliminary conference is called under s 65 of the

2006 Act, the Tribunal is thus likely to be considerably more informed than is a High Court judge at the time the first case management conference is convened in that Court.[5]

[24] The purpose of a preliminary conference is to make directions and other decisions relating to the conduct and resolution of the claim. As indicated in the directions issued by the chair and discussed in more detail below, it appears to be at this point that an assessment of joinder and removal matters is routinely made.

[25] Section 66 permits, but does not appear to require, a respondent to serve on the tribunal and the claimant a written response. Failure to serve such a response does not prevent the Tribunal from determining the claim: see s 74(a) below. Section

66(2) also states that a ―response may be accompanied by any other documents‖.

[26] I note in passing ss 70 and 71, which confer the same protections on witnesses and counsel involved in Tribunal proceedings as such persons have in a

_{court of law. I do so because Mr Rainey submitted that the Tribunal’s practice of}

requiring an appellant to provide expert evidence at an early stage potentially cut across these provisions. He said that an expert’s report or draft report might well be the subject of litigation privilege and could not therefore be required to be disclosed.

[27] Without, I think, needing to decide the matter, I record my doubt as to that proposition. Sections 70 and 71 are not concerned with litigation privilege, which belongs to the party, not counsel or witnesses. Moreover, the role that litigation privilege might have to play in what in my view is an essentially inquisitorial process is far from clear to me.

[28] Sections 73 to 75 govern the powers of the tribunal in adjudication proceedings. They have assumed particular importance in this case and I set them out in full:

73 Powers of tribunal in adjudication proceedings

(1) The tribunal may do any or all of the following things in relation to adjudication proceedings or the parties to them:

(a) conduct the proceedings in any manner it thinks fit, including adopting processes that enable it to perform an investigative role:

(b) request further written submissions from any party, as long as it then gives the relevant parties an opportunity to comment on those submissions:

(c) request the parties to provide copies of any documents that it reasonably requires:

(d) consider any evidence or orders from a former owner's adjudication proceedings that it thinks relevant and applicable to the claim, as long as it—

(i) informs the parties that it intends to do so; and

(ii) gives them the opportunity to comment:

(e) set deadlines for further submissions and comments by the parties: (f) appoint an expert adviser to report on specific issues, as long as the

parties are notified before the appointment is made:

(g) call a conference of the parties:

(h) inspect the dwellinghouse to which a claim relates, as long as the consent of the owner or occupier is obtained before any land or premises are entered:

(i) request the parties to do any other thing during the course of the proceedings that it considers may reasonably be required to enable the effective and complete determination of the questions that have arisen in them:

(j) for a claim whose referral to mediation it has consented to, set a maximum period of mediation shorter than the period stated in section 82:

(k) after considering advice from the mediator, and being satisfied that the parties are near resolution of and likely to resolve their dispute if allowed more time, allow, for a claim whose referral to mediation it has consented to, a maximum period of mediation longer than the period stated in section 82:

(l) issue any other reasonable directions relating to the conduct of the proceedings.

(2) The parties to adjudication proceedings must comply with any request or direction of the tribunal made or given under this section.

(3) If the owner or occupier referred to in subsection (1)(h) is a party to the proceedings concerned, his or her consent must not be unreasonably withheld.

(4) The tribunal also has the powers specified in Part 2 of Schedule 3.

74 Parties' failures to act do not affect tribunal's powers to determine claim

The tribunal's powers to determine a claim are not affected by—

(a) the failure of a respondent to serve a response on the claimant under section 66; or

(b) the failure of any party to—

(i) make a submission or comment within the time allowed; or

(ii) give specified information within the time allowed; or

(iii) attend, or participate in, a conference of the parties called by the tribunal; or

(iv) do any other thing the tribunal asks for or directs.

75 Tribunal may draw inferences from parties' failures to act and determine claim based on available information

If any failure of the kind referred to in section 74 occurs in adjudication proceedings, the tribunal may—

(a) draw from the failure any reasonable inferences it thinks fit; and

(b) determine the claim concerned on the basis of the information available to it; and

(c) give any weight it thinks fit to information that—

(i) it asked for, or directed to be provided; but

(ii) was provided later than requested or directed.

[29] I consider that these provisions underscore the views I have already expressed above. The Tribunal is, in my opinion, materially different from a Court in a number of important ways. As I have already indicated, I largely accept Mr Dillon’s submission that the Tribunal is primarily inquisitorial in nature, although I also accept that aspects of the adversarial process do have a role to play in its proceedings. Nonetheless, it is because of its fundamental investigative role that I think it is dangerous simply to interpret or gloss its explicit statutory processes by reference to Court procedure.

[30] To complete my statutory review, I refer now to s 112, which I have set out at [2] above and which authorises the Tribunal to remove parties from adjudication proceedings. However that section needs to be read with s 111, which governs the joinder of parties, and which provides:

(1) The tribunal may order that a person be joined as a respondent in adjudication proceedings if it considers that -

(a) the person ought to be bound by, or have the benefit of, an order of the tribunal; or

(b) the person's interests are affected by the proceedings; or

(c) for any other reason it is desirable that the person should be joined as a respondent.

(2) The tribunal may make an order under subsection (1) on the application of any party or on its own initiative.

[31] In Auckland City Council v Weathertight Homes Resolution Service[6] (a case concerned with an identical joinder provision in the Weathertight Homes Resolution Services Act 2002) Harrison J held that, in general terms, joinder should only be ordered where there was before the Adjudicator an evidential foundation that might

_{form a basis for liability. At [27] and [28] of that decision he said:}

[27] On the assumption that Procedural Order No.1 (see paras 3.1.2-

3.1.5) correctly summarised Council's arguments, its application to join all parties was predicated on the [premise] that multiple participation in the

design and construction of a building may lead to joint and several liability

in tort with consequential rights of cross-claim for indemnity and contribution among respondents. However, this legal proposition, albeit somewhat qualified, was of little use without an arguable factual foundation. Council seemed to rely only upon the assessor's identification of factors which may have caused or contributed towards damage to the Dennerlys' home and his recommendations on joinder, coupled with an expectation that some incriminating evidence may emerge at a later stage.

[28] A proposition that one or more of the other parties involved in the project may have owed and breached duties to the Dennerlys was insufficient to justify joinder. Council was bound to point the adjudicator to tenable evidence both of breach by the architects and of a causative link to the estimated costs of remedial work. A cursory evaluation of the assessor's report indicates that less than 50% of the remedial expense might possibly be attributable to architectural negligence. Council's failure to satisfy any of the statutory criteria through an analytical and reasoned argument before the adjudicator was fatal.

[32] As I shall later discuss, Harrison J’s decision was distinguished by Cooper J

in Fenton.

[33] Lastly (in terms of the statutory matrix) it seems relevant to note that as well as the approved s 62 claim form that I have described above, the Chair of the Tribunal has, pursuant to s 114 of the Act, issued practice directions as to the conduct of claims. The directions with which I was provided during the hearing are dated August 2010. Some of the critical steps in the conduct of the appellants’ claim took place before that date and I am not aware of what directions (if any) were in place at those times. While, as s 114 states, the directions are binding only insofar as they are

―not inconsistent‖ with the Act, they do seem clearly to indicate the approach of the Tribunal to some of the matters at issue before me and are therefore worthy of note. For example they state:

1.2 The Tribunal is not a court of pleading. Tribunal applications and responses are however required to contain sufficient information to fairly inform the other parties of the nature of the claims being made or defences being raised.

...

2.4 The following documents should be filed with all applications for adjudication:

A copy of any Department of Building and Housing’s (the

Department) assessor’s report;

Confirmation of eligibility from the Department;

Any other technical report or information that the claimants intend to rely upon to confirm the orders sought;

Receipts for repairs, or quotations or estimates for repairs;

A defects list, if not included in the assessor’s or other expert’s report, detailing the defects with the dwelling, the damage resulting from those defects and the remedial work required/undertaken;

A list of all the relevant documents that the claimants are likely to produce as evidence and rely on if the claim goes to a hearing;

_{The required application fee.}

[34] The directions state that the purpose of the s 65 preliminary conference is

(inter alia) to:

Obtain further information on the people involved in the construction of the dwelling and the nature of their involvement.

Identify the documents that need to be produced.

[35] They then go on to note that the Tribunal does not require formal discovery of documents although the parties are required to provide documents that are relevant to the claim.[7] The directions also state:

Any documents that a party will be seeking to rely on at mediation or adjudication must be provided to the Tribunal and all other parties as part of the exchange of documents process.

[36] The directions also deal with the joinder and removal of parties. As to removal, they state:

Respondents may seek to be removed as a party on the grounds that they have no liability to the claimant or other respondents. The parties seeking to be removed will be required to show that the claim against them is so untenable that it is unlikely to succeed.

If there are genuinely disputed issues of fact which cannot be resolved in the context of a removal application then the removal application will be dismissed.

[37] It can be noted that the reference here to the untenability of a claim generally reflects the language of strike out under the High Court Rules[8] and the directions thus suggest a more limited test than does the wording of s 112 itself. That is an issue to which I shall later return.

[38] Finally, I note that at various other points in the directions, emphasis is placed on the speedy, flexible and cost-effective resolution of disputes and reference is made to the fact that the Tribunal is not bound by the Evidence Act 2006 but is bound by the rules of natural justice. The directions also state that:

The purpose of the hearing is to clarify and test the written evidence and witness statements that will have been provided prior to the hearing by the parties and their witnesses. The focus of the process will be an inquiry on the part of the member of the Tribunal.

[39] For what it is worth, I regard that as a generally accurate statement of the functions of the Tribunal and of adjudication proceedings and it accords with the statutory analysis I have undertaken above.

[40] It is against this background that it is now necessary to turn to the relevant facts and procedural steps that led to the Tribunal decision currently under appeal.

Facts: history of the appellants’ claim

[41] The appellants have owned the house in question since 2003. An assessor’s report was obtained by them in December 2008. It confirmed that their claim met the eligibility criteria and a claim was filed in the Tribunal in December 2009.

[42] I have already noted that the claim against the Council necessarily related only to the issuing of the building consent. The Council was not involved with inspections during and after construction. As also previously noted, the claim against Mr Kaill relates to his preparation of the plans and specifications for the house in March and April 2001 and his application to the Council for the building consent. Essentially the appellants alleged in their ASOC that the actions of the

_{Council and/or Mr Kaill were causative of damage to the house because the plans}

failed adequately to specify the methods by which various construction steps were to occur.

[43] I record at this point that it is accepted by the Council, for the purposes of the removal application, that a duty of care was owed in relation to the issue of the building consent. Both breach and causation are, however, denied. While Mr Kaill certainly also disputes breach and causation, I am not certain as to his position in relation to the existence of a duty of care.

[44] The relevant procedural background following the filing of the claim was set

out in the Tribunal’s removal order dated 20 August 2010 as follows:

7. ... At the preliminary conference convened on this claim both the Council and Mr Kaill raised the need for further particulars of the claim against them. At that stage there were no particular deficiencies in the plans noted in the assessor’s report or in the claimants’ documents on claim. Mr Rainey indicated at that conference that if in the opinion of the claimants’ expert the design work and issuing of the building consent were not contributing factors to the dwelling leaking, the claimants [were] likely to withdraw their claim against the Council and the designer. This concession was recorded in Procedural Order No 1.

8. The claimants subsequently filed their expert’s report. Their expert

records six key areas or defects which have caused leaks. These are:

Inadequate installation of the cladding system.

Insufficiently waterproofed horizontal surfaces of the balustrade walls.

Inadequately terminated membrane to the eastern balcony.

Inadequately sealed or flashed penetrations through the cladding.

Insufficiently constructed cladding base detail including a lack of cladding and floor clearances to adjacent ground.

A lack of weathertight flashings and inadequate installation of window and joinery.

9. There were in addition two further defects identified by the claimants’ expert which could be issues of future likely damage. These relate to the plant on polystyrene details and the roof to wall junctions. Neither of these are primarily design issues.

10. As a consequence at the second case conference Ms Martin, counsel for the Council, requested that further particulars of the claim against the

Council be provided as it was unclear as to the allegations being made against the Council. The claimants’ counsel at that conference agreed to file a further report or brief from their expert, Mr Wilson of Maynard Marks, and also an amended claim. This was recorded in Procedural Order no 4 and the claimants were directed to file that information by

21 June 2010.

11. Mr Rainey on behalf of the claimants then submitted there was no need for the claimants to file any further report, brief or information from Maynard Marks as he believed the report already filed dated March

2010 provided sufficient details and particulars of the claim against the

Council and the designer.

12. In Procedural Order No 5, I noted that the defects as detailed in both the claimants’ expert’s report and the assessor’s report primarily related to workmanship issues or failure to follow plans and specifications. There were no specific defects or allegations being made to implicate the design as being a cause of the leaks and resulting damage. In addition the defects listed in the statement of claim related to construction or workmanship issues rather than design. I therefore directed the claimants to file further information from Mr Wilson together with further particulars of their claim. I also noted that unless this was done then any applications for removal filed by the Council and the designer would likely be successful.

13. The claimants then filed their second amended statement of claim which contained more specific and detailed allegations of the defects they were alleging against both the Council and the designer. They did not however provide any supporting documentation or report from their expert to support the additional defects pleaded in their amended claim as they agreed to do at the case conference. To the contrary the claimants’ expert in his report provides little, if any, support for the allegations that the majority of defects pleaded against the designer and the Council were either defects or causative of leaks. In addition Mr Wilson specifically states that several of the design deficiencies alleged against the designer and the Council in the amended statement of claim dated 7 July 2010 were covered in the James Hardie technical literature.

[45] It is relevant to record at this point that before me, Mr Rainey did not accept that the Maynard Marks report was inconsistent with the claims made by the appellants against the respondents. However, he did accept that the report did not support the claims. In other words, he accepted that the report by itself was an insufficient evidentiary basis on which to conclude that the claims against the respondents could succeed.

[46] The tension that is at the heart of this appeal is clear enough from the passages from the Tribunal’s order just quoted above. Essentially, the Tribunal wished, through the exercise of its s 73 investigative powers, to ascertain whether an

evidentiary basis for the appellants’ claims (and thus the tenability of those claims) against the respondents existed prior to the commencement of the adjudication proper. The appellants, however, in reliance on what would be the position in the High Court and analogised by Cooper J in Fenton declined to co-operate in that inquiry. To be required to do so, Mr Rainey submitted, involved an impermissible reversal of the usual onus in strike out matters. The appellants therefore chose to stand on their pleadings rather than further to disclose their evidentiary hand at a preliminary stage. The critical question therefore is: what are the legal consequences of their choosing to do so?

[47] As far as the Tribunal is concerned the answer to that question is clear from its 20 August ruling:

14. Mr Rainey both in the amended statement of claim and the claimants’ opposition to the removal applications appears to have disregarded the appropriate legal tests as set out in North Shore City Council v Body Corporate 188529. (Sunset Terraces). The Court of Appeal in that case upheld Heath J’s conclusion that Councils, in issuing building consents, and designers in preparing the plans, were entitled to assume that a reasonable builder would have access to and rely on the manufacturer’s specifications and that this documentation did not need to be replicated by the designer in the plans.

15. Mr Rainey however submits that Mr Kaill was negligent in not providing details in the plans that were already covered in the technical literature and that the Council was negligent in issuing a building consent for such plans. This argument is not tenable and cannot succeed in light of the Court of Appeal’s decision upholding Heath J’s conclusions in Sunset Terraces. In addition the claimants allege that the Council was negligent due to failure by the designer to define cladding clearance details even though their own expert states that the Council had imposed a condition on the building consent that stated the minimum floor to external ground clearances. In addition Mr Wilson states that the James Hardie material specified standard details for the base of the cladding.

16. The only design defect not covered by the technical literature detailed in Mr Wilson’s report is the failure to detail how the various penetrations through the cladding should be sealed. This however is not a defect which the claimants are alleging against the designer or the council in the amended statement of claim.

17. I acknowledge that Mr Rainey is correct with his submission that Fenton is authority for the proposition that the Tribunal should accept, for the purposes of removal applications, that allegations and the statement of claim are correct. I also accept that in Stonemasons Andrews J concluded that the Tribunal should not require a party

opposing an application for removal to produce the evidence in support of their opposition. However I do not consider either of these cases provide support for the view that claimants can legitimately oppose an application for removal by amending their claim to include allegations that have no evidential support and in particular are not supported by their own or established legal precedent.

18. In this claim the claimants have filed their expert’s report and the claimants also agreed to file further expert evidence to support their claim against the Council and Mr Kaill. They were accordingly directed to do so and a timetable was set to enable this information to be provided prior to the timeframe within which parties could apply to be removed. Rather than doing this the claimants have amended their pleadings to include a number of allegations which are not supported by either their expert’s report or the assessor’s report. This is despite the fact that the claimants’ counsel agreed that if their expert concluded that the design issues were not a contributing cause to the dwelling leaking the claim against these two parties would most likely be withdrawn. Pleading matters against parties which are unsupported by evidence and contrary to established legal precedent should not legitimately be used to oppose an application for removal. To do so could be considered to be an abuse of the Tribunal processes which amounts to bad faith.

19. It is of course possible the claimants have additional evidence to support their pleadings. However after agreeing to provide this expert evidence, and being directed to do so on two occasions, they have failed to do so. Therefore I am faced with a situation where the claimants’ amended pleadings are either not supported by their own expert’s report, or inconsistent with the clear principles set out in Sunset Terraces on designers’ liability and the liability of territorial authorities in granting building consent.

20. In summary therefore I conclude that the majority of the design deficiencies alleged by the claimants against Mr Kaill and the Council were matters covered in the James Hardie or other technical literature. The Court of Appeal has accepted that there is no need for these details to be replicated in building consent documentation. Any alleged deficiencies not covered by the technical literature have either not been implicated as causes of leaks by Mr Wilson, or have not been pleaded against the Council or Mr Kaill.

21. I accordingly conclude that body of case authority establishes that the claims against Mr Kaill and the Council are so untenable that they are unlikely to succeed. They are accordingly removed as parties to these proceedings.

(footnote omitted)

[48] As I have already indicated, in submitting that the Tribunal’s decision was wrong, Mr Rainey placed substantial reliance on the High Court’s decision in Fenton. For that reason at this point it becomes necessary to consider that decision in more detail and it is to that which I now turn.

The Fenton decision

[49] Like the present case, Fenton involved an appeal against a removal decision made by the Tribunal. As is also the case here, the Tribunal’s decision was made on the basis that there was an insufficient evidential foundation before the Tribunal to render the claims made against the relevant respondents ―tenable‖.

[50] Where the Fenton circumstances differ from the present, however, is in the fact that in reaching its conclusion of untenability, the Tribunal relied on affidavit evidence filed on behalf of the respondents rebutting key factual aspects of the claim. As far as one can tell from the judgment the claimant/appellant had not agreed or been directed to file evidence in reply and had not done so preferring, like the appellants here, to argue that the Tribunal was required to assume that the facts pleaded in the claim were true in accordance with ordinary strike out principles.

[51] There are a number of passages from Cooper J’s judgment that can usefully be noted.

[52] First, at [33] he recorded that appellant’s argument that:

... although the principles to be applied when considering an application for removal under s 112 of the Act were similar to those which applied to strike out applications in the High and District Courts, the language of the section, stating that a removal order can be made whenever the Tribunal considers it

―fair and appropriate in all the circumstances‖ indicates that the powers are

in fact broader. That broader power includes the ability to take into account affidavit evidence when considering factors relevant to the exercise of the Tribunal’s power. That approach is consistent with the stated purpose of the Act set out in s 3, namely to provide ―access to speedy, flexible, and cost- effective procedures for assessment and resolution of claims...‖.

[53] Cooper J’s own analysis begins at [39] where he said:

It may be observed that s 112 [of] the Act does not use any of the language contained in r 15.1 of the Rules. That gives rise to the possibility that its broad reference to the power being exercised if the Tribunal considers it

―fair and appropriate in all the circumstances‖ was intended to enable the Tribunal to range more widely than would be the case if it were a Court applying the High Court Rules or District Court Rules.

[54] Cooper J then reviewed other decisions of this Court in which the ambit of s 112 has been considered. He said:[9]

[40] Burns & Others v Argon Construction Ltd & Others was an appeal against a decision of the Tribunal to strike out a claim under the Act. At [17], Asher J said that the general principles relating to strike out applications in the High Court and District Courts ―can be applied‖. He continued:

―... There may be circumstances where a party chooses to rely solely on the ―fair and appropriate‖ ground in s 112. That has not been the position taken by any of the parties in relation to this application. They have conducted the argument on strike out lines. I have no doubt that if an application should be struck out following an application of strike out principles, it will follow that it is ―fair and appropriate‖ to strike out the relevant party. In Kay v Dickson Lonergan Limited, an application under the 2002 Weathertight Homes Act, which contained an equivalent provision to s 112 (at s 34), the application to strike out was considered in accordance with accepted strike out principles. I intend to proceed on this basis.‖

[41] Auckland City Council v Unit Owners in Stonemason Apartment 27

Falcon Street, Parnell was another appeal against an order made by the

Tribunal under s 112 of the Act. Andrews J held at [23] that it is appropriate that the test to be applied to striking out a person as a party to adjudication proceedings under the Act should be the same as that applicable to strike outs under the High Court and District Court Rules. As she observed, the effect of striking out a person as a party under the Act will be that a claim against that person cannot be pursued in the Tribunal. The effect of a striking out under the High Court or District Court Rules is the same. Having referred also to a decision of the Tribunal in Cousins v Plaster Systems Limited and to the decision of Ellen France J in Kay v Dickson Lanergan Ltd Andrews J said at [30]:

―[30] It can be accepted that the Tribunal’s power to strike out parties to an adjudication proceeding is akin to that of the High Court and District Courts, although arguably somewhat broader. Decisions under s 112 have not conclusively established whether it is wider in its scope. In the present case, despite setting out factors to be considered (consistent with applying a ―wider scope‖ of a power to strike out) the Tribunal’s decision in fact addresses only the question whether there is a tenable claim (expressed as a ―viable claim‖ in para 12). Thus, even if the broader interpretation were appropriate, the likelihood of success would remain the determinative factor. Accordingly, it is not necessary to express any conclusive view as to the scope of the test to be applied by the Tribunal.‖

[42] Notwithstanding those observations, in the case before her Andrews J decided the appeal on the basis that the Tribunal had incorrectly stated the law when it held that a party opposing an application for removal on the basis of disputed facts must produce or point to some cogent evidence in support of their opposition. She held (at [32]) that the appropriate approach

was to assume that the facts pleaded in the statement of claim are correct and that the relevant authorities did not support a proposition that the party opposing an application under s 112 must produce or point to ―cogent evidence‖, or indeed any evidence, to support their opposition.

(footnotes and citations omitted)

[55] At [48]–[50] of the judgment Cooper J distinguishes the earlier joinder decision of Harrison J (to which I have referred at [31] above) essentially on the grounds that the question of joinder necessarily raises different issues from removal.

[56] In terms of the substance of the Fenton decision itself, the critical paragraphs are [51] (which I have already replicated at [4] above) and [43]–[45], which I set out below:

[43] I do not consider that the language of s 112 indicates that Parliament intended claims before the Tribunal to be struck out in circumstances where the same claim would not have been struck out in the ordinary Courts. It is to be noted that the provisions of the Act in a case such as the present apply only when a claim is brought under the Act in respect of a dwellinghouse and an application for adjudication may only be made in respect of an

―eligible claim‖, that is, one that has been evaluated under s 48 or s 49 as meeting the eligibility criteria. There is nothing to oblige a person to bring a

claim under the Act although it may be assumed that the streamlined

procedures that it contains may well encourage persons with claims in relation to leaky buildings to do so. A claimant initiates the adjudication of the claim by applying to the Tribunal in writing to have the claim adjudicated and serving a copy of that application on the other parties to the adjudication.

[44] The owner of a dwellinghouse may not apply for adjudication if the subject matter of the claim is already the subject of an arbitration that has commenced or proceedings that have been initiated by the claimant in proceedings in a Court or a Disputes Tribunal, or under s 177 of the Building Act 2004. However, proceedings relating to a claim that have been commenced in the District or High Court may be transferred, by order of a Judge of the relevant Court, to adjudication under the Act. Such an order may be made if the parties to the proceedings agree or the Judge making the order believes that the transfer is in the best interests of justice.

[45] Consequently, while use of the Act’s provisions by claimants is not mandatory it is possible that a claim commenced in the ordinary Courts might become subject to adjudication under the Act. In the circumstances it seems inherently unlikely that the legislature intended that different strike out rules should apply according to which jurisdiction had been invoked.

(footnotes omitted)

Discussion

[57] At the outset of my analysis I record that, for reasons that I trust shall become apparent, I am in no doubt that the decision in Fenton was correct in terms of outcome. Similarly, I have no reason to doubt the correctness of the results reached by of Asher and Andrews JJ in the Burns and Stonemasons decisions to which Cooper J referred. However, to the extent that any or all of those judgments can properly be interpreted as saying that the s 112 removal jurisdiction is precisely analogous to the strike out jurisdiction in this court or that (as a consequence) evidence may never be referred to by the Tribunal in making removal decisions, I must respectfully demur. More particularly, I consider that any blanket prohibition on the consideration of evidence in a s 112 context:

(a) Involves unjustifiably reading down the clear wording s 112(1) and is at odds with the wider scheme and purpose of the Act; and

(b) Renders s 112(2) otiose.

[58] As to the first point, the focus in the High Court decisions to date has been on the ambit (and apparent breadth) of the words ―fair and appropriate‖ and, more particularly, whether they call into play considerations other than the tenability of the claim. Most, if not all, of the High Court judges who have considered the matter have accepted at least the theoretical possibility that they do so. As well as the comments in the decisions referred to by Cooper J in Fenton, I note by way of

further example that very recently in North Shore City Council v Wightman[10]

Mackenzie J said (at [12]):

There may be some difficulty in applying r 15.1 by direct analogy to the Tribunal, in that pleadings do not serve the same essential purpose in claims before the Tribunal that they do in claims before the High Court. Further, s 112 is expressed in much more general terms than r 15.1. Accordingly, I would not exclude the possibility that the Tribunal might properly consider it fair and appropriate to strike out a party, in circumstances other than where no arguable cause of action is disclosed. However, I need not consider that

_{aspect, since the Tribunal‟s decision, and the issues raised on appeal, all}

relate to the issue of whether the claimants have a reasonably arguable cause of action against Mr Beazley.

[59] Like Mackenzie J, I am not called upon to consider the wider circumstances in which s 112 might be applied because the Tribunal here, too applied the “no arguable cause of action” test. Nonetheless I record my agreement with him and others that the threshold contained in s 112 is plainly not so limited.

[60] Although the ―tenability‖ test is not directly in issue in the present appeal,[11] the issue with which I am centrally concerned might nonetheless be regarded as a by-product of the adoption by the Tribunal of that test. That is because the tenability test comes with baggage: the rules that have been built up by the Courts in relation to its application in a rule 15.1 context and in particular, the limitation on evidence in that context. I do not consider, however, that the two procedures can properly be analogised that far.

[61] As I have already noted above, the Tribunal is explicitly performing an inquisitorial role. To that end, it is itself empowered to seek information or evidence from the very commencement of a proceeding. Moreover it can be seen that the factual investigation exercise begins even before the filing of a claim. A gatekeeper role is performed by first the assessor and then the Chief Executive - if they are not satisfied that certain key facts have been established, then a claim is not even

“eligible” for adjudication.

[62] As well, much of the material required to be served together with a claim for adjudication is also factual in nature. A claim for adjudication is not readily comparable to a “pleading” strictly so-called and, of course, s 112 does not speak in terms of removing a pleading, but rather a party.

[63] Thus in many cases where removal becomes an issue, the Tribunal will already have before it a quantity of factual information and evidence and may even

_{have started to form views on some of the factual issues. As I have said, this may be}

compared with the position of a Court called upon to determine a strike out application. The Court will, most often, have no such material before it. In many cases no question even arises as to what factual material may be taken into account by the Court when considering such an application; there is simply no such information on the file.

[64] When the role of the Tribunal is considered in the context of the wider statutory scheme, it seems to me that it cannot be correct to interpret the very broad language of s 112 as somehow prohibiting the Tribunal from taking account of the evidence it has before it. And it is, I think, precisely for that reason that s 112 includes subsection (2), which in my view, is vital. Given that the s 57(2) requirement to comply with the rules of natural justice is itself of general application, (the Tribunal thereby being required to manage all its proceedings in accordance with natural justice) it is difficult otherwise to see why it is repeated in s 112.

[65] Accordingly the signal point is that consideration of evidence in a removal context is permitted, but subject to compliance with the principles of natural justice. So if, as in the Fenton case, the evidence in question favours the party that benefits from the removal decision and no formal opportunity has been afforded to the other side to adduce evidence to the contrary, then natural justice necessarily requires that evidence to be ignored. That is why the outcome of the Fenton appeal was plainly (with respect) correct.

[66] It is of course also in this critical way that the present case is different from Fenton. Here, the Tribunal did specifically and formally seek evidence from the appellants to support their claims against the respondents but they declined to provide it. The Tribunal then proceeded to determine the removal issue on the expert evidence that the appellants had already provided, namely the Maynard Marks report. That evidence was not disputed by the respondents and was the material before the Tribunal that was necessarily the most favourable to the appellants’ position. There is no suggestion that consideration was given to, or reliance placed on, evidence or information of any kind from either of the two respondents. There

was accordingly no failure by the Tribunal to hear from the appellants; rather, the appellants chose to decline to be (further) heard.

[67] Importantly, as well, it appears to me that what the Tribunal did here is precisely what is contemplated by ss 74 and 75 of the Act. Those sections (which permit the Tribunal to determine a claim in the absence of information it has requested but which has not been provided) are not only reflective of the Act’s central concern for expedition but also consistent with the operation of natural justice as I have described it above. It seems to me that those sections make it clear beyond doubt that natural justice does not require the Tribunal to be held hostage by a recalcitrant or uncooperative party. What, rather, is required is the giving of an opportunity to be heard. There is no obligation upon the Tribunal to ensure that the opportunity is acted upon.

[68] In Fenton, Cooper J appears to have been somewhat swayed (as reflected in certain of the paragraphs quoted above) by the fact that persons wishing to make a claim in relation to a leaky home have a choice of forum, and that cases are sometimes transferred from the Tribunal to a Court. It was, I think, for that reason that he concluded at [45] that it is ―inherently unlikely that the legislature intended that different strike out rules should apply according to which jurisdiction had been invoked‖.

[69] Even putting to one side the reasons I have given above for respectfully disagreeing with that conclusion, it is not unheard of for a Tribunal having a parallel jurisdiction with the High Court to operate under different procedural rules. By way of example only I refer to the cases in which it has been held that taxpayers whose proceedings have been transferred to the High Court from the Taxation Review Authority are not entitled to the benefit of confidentiality that is conferred on those who remain under the jurisdiction of the Authority: Muir v Commissioner of Inland

Revenue.[12] And back in the leaky building context I note also that while the hearing

of a claim in the District or High Court would necessarily involve cross-examination of witnesses, the Act stipulates that cross-examination is entirely at the Tribunal’s

_{discretion in adjudication proceedings.}

[70] In terms of what might be regarded as the relevant underlying policy considerations it seems to me that the Tribunal is required to deal on a daily basis with claims that are technically and factually complex. As a result of the rush to spread, share or avoid liability, many of those claims frequently involve numerous defendants as well as a plethora of second, third and even fourth parties. If there is to be any prospect of hearing and determining such claims in an expeditious and cost-effective way, the Tribunal must be able to perform an active gate-keeping role in terms of both the joinder and removal of parties. If early receipt and assessment of evidence assists it to sort the wheat from the chaff, then I am of the view that the Act not only contemplates but arguably requires that, subject to the requirement of fundamental fairness that is reflected in s 112(2).

Result

[71] For all the reasons I have given I consider that the appellants’ appeal must be dismissed. In what is I trust the unlikely event that 2B costs are unable to be agreed, counsel are to file memoranda with the court within 10 working days.

[72] I end this judgment by reiterating what I said at the close of the hearing of the appeal. I compliment all counsel and thank them for their extremely lucid and

_{helpful submissions.}

Rebecca Ellis J

---

[1] _{Fenton v Building Code Consultants Ltd HC Auckland CIV-2009-404-6348, 15 March 2010 at [2].}
[2] _{Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] NZSC 103.}
[3] _{K v B [2010] NZSC 112.}
[4] Burns v Argon Construction Ltd & Ors HC Auckland CIV-2008-404-7316, 18 May 2009 at [14].

[5] As a result of recent rule changes the position in the District Court since is now somewhat different from that of the High Court in this respect.

[6] Auckland City Council v Weathertight Homes Resolution Service HC Auckland CIV-2004-404-

4407, 28 September 2004.

[7] Any obligation on a party to disclose adverse documents is not entirely clear.

[8] The wording now used in rule 15.1 is “discloses no reasonably arguable cause of action”

[9] Fenton v Building Code Consultants Ltd HC Auckland CIV-2009-404-6348, 15 March 2010 at [40]–[42].

[10] North Shore City Council v Wightman HC Auckland CIV-2010-404-3942, 30 November 2010.

[11] As I have already noted, Mr Rainey accepted that in the event that I were to find that the Tribunal was entitled to take account of the Maynard Marks Report, that Report did not by itself constitute a sufficient evidentiary basis to support the claims made by the appellants against the two respondents. It is thus accepted that the tenability test was not met here.

[12] Muir v Commissioner of Inland Revenue (2004) 17 PRNZ 376 (SC).