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High Court of New Zealand Decisions |
Last Updated: 20 June 2011
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2010-409-002298
UNDER s 93 of the Weathertight Homes Resolution
Services Act 2006
IN THE MATTER OF an adjudication under the Weathertight
Homes Resolution Services Act 2006
BETWEEN JOHN RICHARD THOMSON AND HELEN JANET THOMSON Appellants
AND CHRISTCHURCH CITY COUNCIL First Respondent
AND GUNAC CHRISTCHURCH LIMITED Second Respondent
AND STEVEN ANDREW BAKER AND LYNDA MAY PHILPOTT
Third Respondents
AND EQUUS INDUSTRIES LIMITED Proposed Fourth Respondent
Hearing: 14 March 2010 (at Wellington)
Counsel: C R Johnstone and S E Waggott for Appellants
No appearance for First Respondent which abides the order of the
Court
No Appearance for Second and Third Respondents
Q A M Davies for Proposed Fourth Respondent (Equus Industries
Ltd)
Judgment: 28 March 2011
In accordance with r 11.5 I direct the Registrar to endorse this judgment with the delivery time of 3.00pm on the 28th day of March 2011.
THOMSON V CHRISTCHURCH CITY COUNCIL HC CHCH CIV-2010-409-002298 28 March 2011
RESERVED JUDGMENT OF GENDALL J
[1] Mr and Mrs Thomson own a property in Christchurch, which is a ―leaky home‖. They applied to the Weathertight Homes Tribunal (the Tribunal) for an adjudication under the Weathertight Homes Resolution Services Act 2006 in which they named the Christchurch City Council (the Council) as first respondent, Gunac Christchurch Ltd (Gunac) (contractors for applying a waterproof membrane) as second respondent, and Mr Baker and Ms Philpott, the vendors from whom they bought the property in March 2001. They sought to join as a proposed fourth respondent, Equus Industries Ltd (Equus) (manufacturers and suppliers of a cladding system installed at the property). That application was refused by Mr Roger Pitchforth (the Adjudicator), a member of the Tribunal, by Procedural Order No. 7 delivered on 15 September 2010.
[2] This appeal is against the decision not to join Equus as an additional respondent.
Issues on appeal
[3] Reduced to its bare essentials the issues on appeal are whether the
Adjudicator was correct in concluding:
(a) Any claim against Equus was clearly barred as being outside the limitation period provided under the Limitation Act 1950, or s 393 of the Building Act 2004, or s 43(5) of the Fair Trading Act. (The Fair Trading Act issue need no longer concern the Court as counsel accept that, by reason of the transitional provisions of the Fair Trading Act
2001, such a cause of action against Equus is barred by limitation provisions).
(b) Any claim against Equus in negligence (for the acts or omissions of its agent, Mr Hewitson) in September 2003 was untenable and must
fail, and there was no evidence that Equus owed a duty of care at that time.
[4] The determination of the Adjudicator and the appeal, turned upon three issues:
(a) Is any claim involving Equus clearly barred by the provisions of the
Limitation Act 1950?
(b) Separately, is any such claim barred by the provisions of s 393 of the
Building Act 2004 (s 91 of the Building Act 1991)?
(c) Whether evidence was available to support any possible or tenable cause of action or claim in negligence against Equus, that ought to be the subject of adjudication by the Tribunal in accordance with the resolution procedures under the Act?
[5] The Council supported the joinder application and, although abiding the
Court’s decision, nevertheless conveyed its support for the appeal.
Background
[6] Mr and Mrs Thomson purchased a modernly designed and expensive dwelling in Canterbury in March 2001. It had been constructed in 1996-1997. Within a year they observed some leaks and problems in relation to the roof of the property. They contacted Gunac and advice was obtained on site from Mr Hewitson, an agent on behalf of Equus, as to what was required. Thereafter, remedial work was carried out by installation of extra membrane. This was in the latter half of 2003. The Thomsons painted the property in 2004 but serious water infiltration defects later became apparent. They again contacted Equus requesting remedial work but were told that it was not responsible. Consequently, on 4 April 2007 an application was made to the Tribunal. An assessor’s report was completed which confirmed the Thomsons’ eligibility. Thereafter, remedial works were carried out based upon the report the cost of which exceeds $294,000.
[7] On 16 December 2009 the appellants applied for an adjudication under the Weathertight Homes legislation. They joined the Council as first respondent on the basis that it issued the building permit, Gunac being the contractors responsible for the installation of roofing sealant, and Mr Baker and Ms Philpott from whom they purchased the property.
[8] In the course of mediation and after disclosure material, the application to join Equus was made on 5 August 2010.
[9] The appellants relied on the assessor’s report to the Tribunal and expert evidence called on their behalf. The assessor’s report to the Tribunal makes it clear that the dwelling leaked at a number of sites. An expert building consultant, Mr R M Hadley, engaged by the appellants, provided evidence that the plaster system on the walls and ceiling was defective, and that a necessary procedure had not been adopted to the rebated surface of polystyrene blocks used in the construction. Stress was induced from changes in temperature and moisture content, leading to failure of the plaster at various locations and consequent introduction of moisture into the development.
[10] Counsel for the appellants contended that Equus should be joined because of two factors:
(a) First, the general specifications of Equus which accompanied its product, and its advice to all contractors who installed the membrane protection system, were incorrect, defective, insufficient and negligent. It was alleged initially, and still is, that there was false and misleading conduct on the part of Equus, but counsel now accepts that any claim under the Fair Trading Act is statute barred. Further discussion on the legal implications of that is not required, but if Equus is joined, there will remain an issue of factual dispute as to whether false and misleading conduct comprised negligence on its part so as to provide support to that cause of action.
(b) Separately from the specifications accompanying the application of the sealing product of Equus, there is a second allegation in negligence. That is that at the time when problems were occurring at the home in 2003, and remedial work was necessary, the work and what it required was undertaken (it is alleged) on the advice of the representative or agent of Equus (Mr Hewitson). The appellants
claim that at that time in 2003 he did not identify:
that the membrane had originally been incorrectly
applied;
the significance of matters incorporated into the
construction of the roof area;
the original membrane was not performing as expected;
and
that his recommendation to apply two further coats of
the
product to correct and remedy the problem was negligent.
To that extent it is alleged that Equus was vicariously liable for the actions and advice of Mr Hewitson, as its agent (although actually employed by a separate company).
[11] The Adjudicator refused the joinder application and that decision is the subject of this appeal.
The Adjudicator’s decision
[12] This is described as ―Procedural Order No. 7‖. It followed upon a conference convened by the Adjudicator on 30 August 2010 at which were the appellants and their legal representatives, representatives of the Council, Gunac and Equus. The Adjudicator referred to factual matters contained in the assessor’s report, and the expert evidence tendered on behalf of the appellants. He held that the cause of
action alleging false and misleading conduct under the Fair Trading Act 1986 was statute barred.
[13] In dealing with the allegations that Equus was negligent, he said that:
Even if the Building Act long stop provision does not apply on the basis that the issue is not a construction issue, any act of supply or specification for the coating is statute barred under the Limitation Act 1950, s 4 .... [The allegations in negligence] are consequently statute barred.
[14] The Adjudicator went on to say that even if that was not the case:
I cannot find tenable evidence that the supply of the plaster system or the inclusion of its specification in the plans have caused leaks.
[15] The Adjudicator then dealt with the allegations of negligence on the part of Mr Hewitson, who the appellants contended provided negligent advice or recommendations, as agent and on behalf of Equus. Amongst the Adjudicator’s conclusions were:
It cannot be established on the evidence so far produced that [Mr Hewitson] owed a duty to the complainants to inspect other parts of the dwelling and give expert advice. .... He [was] a sales representative .... [and] there is no evidence in the evidence supplied that he breached the standard of care which a sales person should have in giving the advice that he did.
[16] The Adjudicator concluded, on this topic:
It is not clear why the complainant considered that Equus owed a duty of care in relation to the recommendations not made about alleged faults not shown to the representative.
There is also no evidence that the advice given was wrong.
....
There appears to be no tenable evidence that Equus owed a duty of care in relation to other leaks as a result of its visit in relation to the leak over the garage.
[17] The Adjudicator concluded by expressing the view that he was not satisfied
―from the information provided‖ that it was desirable for Equus to be joined as a further respondent.
Right of appeal
[18] Section 93(1) of the Weathertight Homes Resolution Services Act 2006 provides that:
A party to a claim that has been determined by the tribunal may appeal on a question of law or fact that arises from the determination.
[19] The section contemplates a final determination of an issue against the appellant before the right of appeal exists, and in terms of s 95(2)(b) the Court’s decision on any appeal is a ―final determination of the claim‖. It has not been argued that there does not exist a right of appeal from Procedural Decision No. 7, even though it has been given at an ―interlocutory stage‖. Whilst only determinations having final effect can be the subject of appeal, I agree with Asher J in Kells v Auckland City Council that a right of appeal will exist in respect of an ―interlocutory determination‖ in situations where that determination finally determines a claim
against a party or parties.1 Clearly there is a final determination of an intended claim
as against Equus. If, for example, Equus had been a party involved in the proceedings and an order was made that it be struck out or removed that would be a final determination in respect of it.
Appellate approach
[20] The Court has wide powers in hearing appeals from decisions of the Tribunal. With a general right of appeal the well known approach described by the Supreme Court in Austin, Nichols & Co Inc v Stichting Lodestar applies.2 An appellant bears the onus of satisfying the appeal court that it should differ from the decision under appeal; if the appellate court considers that the original decision is wrong it is justified in interfering with it; the appeal court has responsibility to arrive at its own assessment on the merits; no deference is required beyond the customary caution appropriate when seeing a witness provide some advantage and
because credibility may be important; the appeal court is entitled to use the reasons
1 Kells v Auckland City Council HC Auckland CIV 2008-404-1812, 30 May 2008.
2 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [4] –
[5], [13] and [17].
of the first instance decision-maker to assist in reaching its own conclusions but the weight is a matter for the appellate court. I simply record the comments of Elias CJ:3
Those exercising general rights of appeal are entitled to judgment in accordance with the opinion of the appellate court, even where that opinion is an assessment of fact and degree and entails a value judgment. If the appellate court’s opinion is different from the conclusion of the tribunal appealed from, then the decision under appeal is wrong in the only sense that matters, even if it was a conclusion on which minds might reasonably differ.4 In such circumstances it is an error for the High Court to defer to the lower Court’s assessment of the acceptability and weight to be accorded to the evidence, rather than forming its own opinion.
[21] Mr Davies urged upon me that the preferable approach was that earlier described by the Court of Appeal in May v May,5 namely that as the determination involved the exercise of a discretion, accordingly the Court ought not interfere with the exercise of that discretion unless it had been shown to have been exercised on a wrong principle, or not at all, or there had been a miscarriage of justice. But this type of appeal is far removed from the specialised situation of the Family Law
discretionary jurisdiction in May v May. The Austin, Nichols & Co Inc v Stichting Lodestar approach has been adopted frequently to appeals such as this,6 and in Kacem v Bashir the majority of the Supreme Court (Blanchard, Tipping and McGrath JJ) said:7
... the important point arising from Austin, Nichols is that those exercising general rights of appeal are entitled to judgment in accordance with the opinion of the appellate court, even where that opinion involves an assessment of fact and degree and entails a value judgment.8 In this context a general appeal is to be distinguished from an appeal against a decision made in the exercise of a discretion. In that kind of case the criteria for a successful appeal are stricter: (1) error of law or principle; (2) taking into account of irrelevant considerations; (3) failing to take account of a relevant consideration; or (4) the decision is plainly wrong.9 The distinction between a general appeal and an appeal from a discretion is not altogether easy to
3 At [16].
4 As illustrated in Wright v Powell [1982] 1 NZLR 473 (CA) (cited in original).
5 May v May (1982) 1 NZFLR 165 (CA).
11 December 2009; and Boyd v McGregor HC Auckland CIV 2009-404-5332, 17 February
2010.
7 Kacem v Bashir [2010] NZSC 112, [2010] NZFLR 884 (SC) at [32].
8 Austin, Nichols, above n 2, at [6] (cited in original).
9 See May v May, above n 5, at 170; and Blackstone v Blackstone [2008] NZCA 312, (2008) 19
PRNZ 40 at [8] (cited in orginal).
describe in the abstract. But the fact that the case involves factual evaluation and a value judgment does not of itself mean the decision is discretionary.
[22] The decision of the Adjudicator was a matter of assessment and judgment, not discretion. He made a decision on the facts, as he saw them at that stage, and the law, as he understood it. Nevertheless, I recognise his specialised knowledge and will intervene and allow the appeal only if satisfied that he was wrong, or erred in law or principle.
The Fair Trading Act 1986 cause of action
[23] The appellants now accept that such a claim is statute barred. Prior to the
2001 amendment to the Fair Trading Act, the limitation period of three years related to the behaviour complained of as being the time when the limitation period commenced. The joinder application alleged false and misleading conduct at times well outside the three years statutory period. The amendment altered the law so that a commencement of the limitation period was the loss or damage or its likelihood or it reasonably having been discovered. If that applied, then the application was within time. But the transitional provision in s 4 of the 2001 Act make it clear that once proceedings are barred by the limitation considerations before the commencement of the amendment, they cannot be revived.
Approach to applications for joinder and applications to strike-out – should different tests be applied?
[24] Joinder of a respondent on an application of any party, or on his/her own initiative, or on the Adjudicator’s own initiative, is governed by s 33(1) of the statute. That is the starting point. It arises if the Adjudicator considers that:
(a) the person ought to be bound by, or have the benefit of, an order of the Adjudicator; or
(b) the person's interests are affected by the adjudication; or
(c) for another reason it is desirable the person be joined as a respondent.
[25] For strike-out applications or removal of a party from the proceedings s 112 provides:
(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).
Section 57(2) requires the Tribunal to comply with the principles of natural justice.
[26] Are ―fair and appropriate‖ considerations different from the s 33(1)
considerations?
[27] It is common ground that relevant principles for the strike-out equate with those applying to strike-out applications in either District or the High Courts is a power to be exercised sparingly and in clear cases.10 In usual situations strike-out applications proceed on the assumption that the facts pleaded or claimed are true and that a cause of action must be so clearly untenable that it could not possibly succeed before there could be strike-out. There are hints of a wider approach, however,
under s 112 because an Adjudicator has a very broad discretion and in Burns v Argon
Construction Ltd Asher J said:11
... 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.
[28] In Fenton v Building Code Consultants Ltd & Ors, Cooper J observed that an application for joinder under s 111 is different from an application to strike-out under s 112 and there may be differences between the approach required.12 But Cooper J also expressed the view that s 112 was not intended to give the Tribunal a wider jurisdiction to strike-out claims than then possessed by the Court.
[29] Mr Davies on behalf of Equus, essentially, argued that while strike-out applications were to be determined on the basis that facts pleaded were true, joinder
applications required rather more, namely that a prima facie basis for facts existed;
10 Kay v Dickson Lonergan Ltd HC Auckland CIV 2005-483-201, 31 May 2006.
11 Burns v Argon Construction Ltd, above n 6, at [17].
12 Fenton v Building Code Consultants Ltd HC Auckland CIV 2009-404-6348, 15 March 2010.
that is, that some evidential or arguable factual foundation had to be shown to support a cause of action before joinder could arise. So, he argued an ―evidential foundation‖ was required. He relied on the judgment of Harrison J in Auckland City Council v Weathertight Homes Resolution Service and Dennerly.13
[30] Dennerly is the only case that counsel could find which relates to an appeal against a refusal to order joinder (and my own research has not disclosed any similar case). There, the Auckland City Council, a respondent, sought an order to join architects associated with the construction of a leaky home. Significantly, in contrast to the present case, Mr and Mrs Dennerly the complainants, did not seek such joinder, and, indeed, they actively disavowed any claim as against the architects. The application for joinder by the Council arose after the assessor’s initial identification of factors which may have contributed towards the damages with an expectation that incriminating evidence against the architects might emerge at a later stage. Harrison J recorded that the Dennerly’s opposition against joining the architects was a relevant consideration to which the Adjudicator was entitled to give weight, the law recognising the presumption that a plaintiff is entitled to sue whom he wishes. Harrison J referred to the statutory factors, one of which the Council had to establish before the Adjudicator exercised discretion and concluded that an arguable factual foundation that the architects may have owed duties in tort to subsequent purchasers would not on its own justify joinder without an evidential
foundation being established. His Honour said:14
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. ....
I accept that cases may arise in the future where it is appropriate for an adjudicator to exercise his or her discretion to join a respondent or respondents against the claimant’s wishes provided that one or more of the statutory criteria is established. .... In these circumstances, given the adjudicator’s duty to determine a claim in accordance with legal principles (s
42(1)), he or she may conclude that imposition of liability on one party for the full amount of a monetary judgment without allowing a right of cross-
claim against others of patently greater culpability would be unfair,
13 Auckland City Council v Weathertight Homes Resolution Service & Dennerly HC Auckland CIV
2004-404-4407, 28 September 2004.
14 At [28] – [29].
rendering it desirable that the additional party or parties be joined as respondents. The adjudicator will also have to take into account the absence of a statutory mechanism for determining third party claims but where it authorises him or her to determine liability between [the parties] inter se (s
29(2)). Against that the adjudicator will balance factors such as delay and the amount at issue. Liability for costs will also fall into the mix (s 43).
[31] The crucial factors which emerged from this decision was that not only did the claimants not seek to join the architects and indeed disavowed any claim against them, but the application was based upon a speculative proposition that evidence or documents might later emerge. The Procedural Order that was the subject of the appeal made it clear that the claimants:
had looked closely into the matter and decided there was no design issues arising and did not wish to make any claim against either of those parties. In that case and again because there is presently no evidence whatsoever to implicate those persons, I decline to join them as respondents under s 33.
[32] So that was a case where there was no tenable evidence likely to support a cause of action against the architects.
[33] I do not think it is necessary for me to determine whether the approach for strike-out or joinder should necessarily be the same. The joinder test is contained in s 33. Clearly if there is no tenable evidence of factual foundation put before the Adjudicator to provide some support for a cause of action against an intended party then joinder would be inappropriate. It would all depend upon the circumstances and material before the Adjudicator, whether emerging from the assessor’s report or other evidence tendered at that stage.
[34] In this case the Adjudicator had the assessor’s report, as well as the expert opinion evidence of the appellants’ consultant. It was not disputed that the product used was that of Equus, nor was there any contest that the specifications which accompanied the product were that contained in the documents before the Adjudicator. Nor was there any contest that when the problems arose in 2003
Mr Hewitson and Equus were engaged (possibly by the builders/contractors on behalf of the appellants) to assess and advise the appellants. Equus claims that this was limited to a specific problem and not as to deficiencies in the sealant and the
roof as a whole, but the Tribunal had evidence from the appellants’ expert that at the
time of that inspection:
there was sufficient evidence ... to alert Mr Hewitson to the fact that the membrane was not performing as expected. Further investigation should have been carried out, or at least recommended, to establish the cause of the premature deterioration of the roof’s membrane; at that stage the roof was approximately five years old. Simply applying an additional coat or coats of the Equus product ... over the existing defects would fail to address the underlying constructions faults in the installation of the membrane substraight.
[35] Mr Hewitson himself, in a letter to the builders (name – not introduced earlier) of 14 October 2003, stated that:
We visited this property on 12 September 2003 on the pretext [sic] to sort out a leak in the roof structure and generally check the roof over at the invitation of M D Allan Builders Ltd. ....
[36] Whilst the Adjudicator expressed a view that Mr Hewitson described as ―a sales representative‖ could not owe a duty of care, or be expected to meet the standard of care required, that is by no means certain as a matter of law. In addition, an argument may remain available to the appellants that Equus as the expert suppliers were being asked to perform the task of assessing leaks, and it is they that had a primary duty to exercise reasonable care in performing that task. The claim, in this area, may well fall into the consideration of the assumption of responsibility and reliance concepts, where it is alleged that services were negligently performed, and whether it is fair and just and reasonable to deem an assumption of responsibility so as to give rise to a duty of care. Much depends on a combination of many factors as
discussed in Rolls-Royce New Zealand Ltd v Carter Holt Ltd.15 Naturally, any
argument in this area as advanced by the appellants might well fail. But can it be rejected, at this stage outright? I return to discuss this point at [47] – [55].
[37] This case is very much different to that of Dennerly. If the appellants had chosen to initially join Equus, along with the other respondent in the formal application dated 9 December 2009, I doubt that any application by Equus that they
be struck out would have succeeded. It does not follow that the joinder application
15 Rolls-Royce New Zealand Ltd v Carter Holt Harvey Ltd [2005] 1 NZLR 324 (CA) at [99].
must succeed, but whether the Adjudicator erred in law in his approach to determining whether the statutory criteria in s 33(1) had been met.
Application of Limitation Act
[38] This discussion does not initially relate to the separate issue of whether s 393 of the Building Act 2004 applies, which is dealt with later.
[39] The appellants’ position is that there are two separate causes of action against Equus, upon which it relies. The first relates to the specifications of Equus as supplier of the product issued in January 1996. That cause of action and negligence finally accrued when the appellants’ distinct damage or loss was identified. If the ten year long stop provision in s 393 of the Building Act 2004 applies, then the ten year period expired in early 1996, so that this cause of action will be out of time. The second cause of action alleged is that acts or omissions of Mr Hewitson, being negligent for which the appellants contend Equus is principally or vicariously liable. The appellants’ claim is brought within three years six months of that alleged negligent advice and is therefore within time. The Adjudicator did not find otherwise. He rather expressed the view that there was ―no tenable evidence that Equus owed a duty of care‖.
The operation of “long stop” provisions of the Building Act
[40] Section 393 of the Building Act 2004 provides:
393 Limitation defences
(1) The provisions of the Limitation Act 1950 apply to civil proceedings against any person if those proceedings arise from—
(a) building work associated with the design, construction, alteration, demolition, or removal of any building; or
(b) the performance of a function under this Act or a previous enactment relating to the construction, alteration, demolition, or removal of the building.
(2) However, civil proceedings relating to building work may not be brought against a person after 10 years or more from the date of the act or omission on which the proceedings are based.
(3) ....
[41] This section replaced s 91 of the Building Act 1991 and ―building work‖ is defined in both the 1991 and 2004 Acts in similar terms. Section 7 of the 2004 Act provides:
building work
(a) means work—
(i) for, or in connection with, the construction, alteration, demolition, or removal of a building; and
(ii) on an allotment that is likely to affect the extent to which an existing building on that allotment complies with the building code; and
(b) includes sitework; and
(c) includes design work (relating to building work) that is design work of a kind declared by the Governor-General by Order in Council to be restricted building work for the purposes of this Act; and
(d) ....
[42] Mr Davies contended that the provision or supply of the cladding system and accompanying specification for its use comprised building work. He said it was
―design‖ work on the home so that the ten year limitation period applied. Mr Johnstone on behalf of the appellants, on the other hand, submitted that the negligent deficiencies or omissions in the Equus specifications were a manufacturer’s specifications and recommendations as to the use of the product that it supplied, and could not come within the category of ―building work‖. Indeed, they were not ―work‖ at all. He contended that the Adjudicator did not in fact deal with the point, only saying, that ―even if the Building Act long stop provision does not apply‖ the act of supply or specification was barred under s 4 of the Limitation Act
1950.16 That later finding, as is acknowledged by Mr Davies, was not correct. But
Mr Davies contended that it is implicit that the Adjudicator found, first, that the long stop provision did apply.
16 At [35].
[43] The legislative history of s 91 of the 1991 Act (now s 393) is discussed by Glazebrook J in Klinac v Lehmann.17 The legislative policy was to provide certainty for those involved in building work so they could ―rest easy‖ after ten years and was designed to provide a balance between the interests of consumers and of those involved in the construction industry and, in particular, local Government. There were concerns about liability of those authorities in negligence. The relevant act or
omission, where a claim is of negligence, is the actual breach of duty rather than the date of discovery of damage.
[44] If Mr Davies’ argument is correct then any claim in negligence against Equus arising out of the original provision of the product and specifications, is absolutely barred by statute. He points to Carter Holt Harvey Ltd v Genesis Power Ltd (No. 8)18 as authority that ―design work‖ is captured by the long stop provision as falling within the definition of building work. That will obviously be the case where the work is associated with a design of any building. In that case Rolls-Royce was
contracted to design, manufacture and construct a plant at a timber mill and the issue before Randerson J was whether work in the nature of a seismatic design carried out by a partnership, from whom Rolls-Royce sought contribution or indemnity was captured by the long stop provision so as to entitle that partnership to rely upon the then s 91(2) as an absolute defence. The Judge held that such work in relation to seismic analysis for a boiler installed at the plant was directly related to its design and came within the definition of ―building work‖. Mr Davies contends that Equus was designing an element of construction in preparing its set of specifications and accordingly was entitled to protection under the long stop provisions of the Act.
[45] The question of what is building work, or for that matter design work, within the meaning of the section must be a fact specific issue and entirely dependent upon an assessment of all the surrounding circumstances. At one end of the spectrum design of integral parts of a building such as elevators, staircases, lift wells, windows, would clearly come within that category. Obviously, architectural design
of a building to be constructed or altered, is building work. At the other end of the
17 Klinac v Lehmann HC Whangarei AP15-01, 6 December 2001.
18 Carter Holt Harvey Ltd v Genesis Power Ltd (No. 8) HC Auckland CIV 2001-404-1974,
29 August 2008.
spectrum there may be products provided for use in a building, designed for a specific purpose, yet not being performed ―in connection with‖ the design, construction, etc of the building. Whilst I find force in the arguments presented by Mr Davies, correspondingly the assertion on behalf of the appellants is not unarguable. On one side of the coin, a specification (for the purposes of the argument deemed to be faulty) as to how a product is to be applied in the construction of a building could well fall within the definition of s 7 of the 2004 Act as it is work associated with the construction. On the other hand, as Mr Johnstone argues, it may simply be a manufacturer’s specification or advice as to how a particular product should be used. Whether or not that product is to be applied in connection with the construction of a building remains dependent upon a separate specification or choice of the person constructing the building, or the engineer or architect specifying use of that particular product.
[46] The Court is not aware of any decided case that deals with the parameters of
―design work‖ and the manufacturer’s production of specifications would seem to fall near the outer limit of that concept, for present purposes. Given there is very little case law guidance, the appellants have a tenable argument that the long stop provisions do not apply. Both parties would have the right or ability to appeal the Adjudicator’s decision, made after full argument, in that respect to either the District Court or the High Court. It is only when the Adjudicator receives and tests all the evidence (which may include expert opinion) and material necessary to decide the issue that there can be a fully informed decision, but he did not reach that step in his Procedural Decision No. 7. It is not necessary for the Court on this appeal to decide that point because the question is whether the appellants have a tenable or arguable case to advance before the Adjudicator. Given the alleged 2003 conduct is clearly not statute barred, and (as I will now come to) there is clearly a tenable argument that a non-delegable/primary duty of care was owed by Equus at that time, as well as vicarious liability arising. Regardless of the long stop issue in relation to the 1996 conduct, Equus should have been joined for the reasons which now follow.
“Tenable” evidence as to Equus’ duty of care, and breach?
[47] Whether or not a person or party owes a duty of care to another, and if so the standard of care required, is a mixed question of law and factual analysis. The existence of a duty of care arising as a matter of law depends upon whether the combination of facts, relationships and circumstances which bring about a particular situation where a duty of care is said to arise. It is sufficient to refer to the well known dicta of Lord Bridge in Caparo Industries Plc v Dickman when he discussed the inability of any single general principle to provide a practical test to every
situation so as to determine whether a duty of care is owed.19 His Lordship said:20
What emerges is that, in addition to the foreseeability of damage, necessary ingredients in any situation giving rise to a duty of care are that there should exist between the party owing the duty and the party to whom it is owed a relationship characterised by the law as one of ―proximity‖ or
―neighbourhood‖ and that the situation should be one in which the court considers it fair, just and reasonable that the law should impose a duty of a
given scope upon the one party for the benefit of the other. But it is implicit in the passages referred to that the concepts of proximity and fairness
embodied in these additional ingredients are not susceptible of any such precise definition as would be necessary to give them utility as practical tests, but amount in effect to little more than convenient labels to attach to
the features of different specific situations which, on a detailed examination of all the circumstances, the law recognises pragmatically as giving rise to a
duty of care of a given scope.
[48] The appellants’ case against Equus (relating to the remedial actions in 2003) is that it failed to identify that the membrane had been incorrectly applied; that there was sufficient evidence available to it, as the expert suppliers; that the membrane was not performing correctly and that further investigation was required; and that critical comments made lack of maintenance were unfounded. A claim to lack of skill or experience by an employee is not in law a defence to a claim in negligence, if what is required demands greater knowledge or experience, especially where specialist advice or assistance has been sought of a person who delegates that task either to an employee or, in some circumstances, independent contractor. There can be personal liability where an independent contractor is hired to perform a tortuous
act or is given a direct instruction or is to be incompetent. There may be situations
19 Caparo Industries Plc v Dickman [1990] 2 AC 605 (HL).
20 At 617 – 618; see also Rolls-Royce New Zealand Ltd v Carter Holt Harvey Ltd, above n 11, at
[58] – [64].
where a principal is under a non-delegable duty to take care and in the case of skilled professionals or tradesmen the standard of conduct must conform to that which ought to be attained by persons holding themselves out as possessing the relevant skills. Whether that is in fact the case in any particular situation depends upon all the circumstances.
[49] As was said in Mount Albert Borough v Johnson,21 it is not easy to state principles about when an employer will be held liable in tort for the negligence of an independent contractor, but where a company has a duty to see that proper care and skill is exercised in the building (and repair or remedial work on) of the houses, that duty cannot be avoided by delegation to an independent contractor. Or, in my view, to claim that the employee or agent who the company entrusted to that task was not qualified or had sufficient expertise or ability to perform that task.
[50] Put in another way, a company upon which a duty of care may exist in any particular circumstance or factual situation, owes a duty to ensure that its an employee or agent engaged to undertake the task requested of it is competent and able to do so and cannot avoid liability and negligence simply by relying upon a claim that that employee/agent did not breach his or her individual duty of care because they were unqualified for the task required of them.
[51] Naturally, whether any of those arguments, in the end, avail the appellants is very much open to debate and the subject of future consideration. But they are tenable arguments available to the appellants in support of their allegations that there was negligence on the part of Equus arising out of inspections and advice.
[52] At a preliminary stage it is at least arguable that Equus owed a duty of care to the appellants, through its agent Mr Hewitson acting for and on behalf of it, where it might be responsible for loss arising if there was a breach of that duty, if such was causally responsible for the loss (or part of it). It is not necessarily the case that Mr Hewitson separately owed a duty of care. It is possible that Equus is not only vicariously liable for any negligence on the part of Mr Hewitson, but also under a
primary, non-delegable, duty of care to the appellants through (it is alleged)
21 Mount Albert Borough v Johnson [1979] 2 NZLR 234 (CA) at 240.
negligently providing a product which is alleged to have failed and for which later services of it through Mr Hewitson, were sought.
[53] Those of course are only arguments, but they may be available to the appellants depending on all the evidence and detailed investigation had not taken place. As the Supreme Court said in Couch v Attorney-General:22
[assessment as to breach of duty of care] cannot be made without close consideration of the facts as to the nature of the function being fulfilled and the circumstances in which the function was carried out. Knowledge of risk, extent of risk and the available options are likely to be key. They are not suitable for determination on the basis of assumed difficulties and facts.
And:23
We consider that a claim should not be struck out as disclosing no duty of care unless there is clear legal impediment to its succeeding at trial.
And further:24
... care needs to be taken in strike-out determinations to ensure that the facts are sufficiently known to enable it to be confidently said that no duty of care can be owed. In difficult cases, duty of care is no more suitable for peremptory assessment on assumed facts than questions of breach or damage. The sequence in which the elements of negligence are considered should not matter. Since considerations relevant to determination of duty of care are also relevant to breach of duty or causation and remoteness of damage, only high level and generalised legal policies may be suitable for consideration in relation to duty of care on strike-out. Consideration of the particular circumstances of the case may more properly be treated as bearing on the remoteness of damage or breach, by which ultimate responsibility under a duty of care owed by the defendant to the plaintiff is determined.
[54] Naturally, Couch was concerned with the striking-out (as opposed to joinder) of a claim brought in negligence. I consider the same general approach ought to be applied in a case where joinder is sought by a claimant who alleges a duty of care existed for which there was a breach giving rise to damage. Unless the proposition is so clearly wrong or unsustainable (and this would involve close inquiry of all the
surrounding involving factors such as relationship between the parties, the nature of
22 Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 (CA) at [38].
23 At [40].
24 At [43].
the duty alleged and its breach and so on) it is premature to decline joinder simply on the basis that, as the Adjudicator said:
It cannot be established on the evidence so far produced that he [that is Mr Hewitson] owed a duty to the complainants to inspect other parts of the building and to give expert advice. (Emphasis added)
[55] It may be that it is not established that a duty of care existed or that there was any breach of duty, whether vicariously or through the existence of a primary duty of care, by Equus, but that must await full inquiry.
Conclusion
[56] I am satisfied that the Adjudicator erred in concluding that Equus should not be joined as a respondent. In terms of s 33(1) it is arguable that Equus ought to be bound by an order of the Adjudicator depending on his/her findings on the law and facts after full consideration of all matters. There exist arguable causes of action in negligence in two aspects (1996 and 2003) and that, in relation to the 1996 allegations, the long stop provision of the Building Act may (not must) apply depending on whether a manufacturer’s specifications are relevant ―design work‖. It is desirable that Equus be joined to enable its liability, if any, to the appellants (or to other parties in the form of contribution) to be determined.
[57] The appeal is allowed. Equus Industries Ltd is to be joined as an additional respondent in the adjudication. Timetable and other directions are to be fixed at a further conference to be convened by the Adjudicator at a suitable time to him and the parties.
[58] The appellants are entitled to costs which are fixed on a Category 2B basis.
[59] Leave is reserved to the parties to apply further if other directions of this
Court are necessary.
J W Gendall J
Solicitors:
Wynn Williams & Co, Barristers and Solicitors, Christchurch for Appellants
Gascoigne Wicks, Lawyers, Blenheim for Intended Fourth Respondent
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URL: http://www.nzlii.org/nz/cases/NZHC/2011/261.html