Auckland Council v Coleman [2012] NZHC 175 (17 February 2012)

Last Updated: 1 March 2012

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-2798 [2011] NZHC 175

UNDER the Weathertight Homes Resolution

Services Act 2006

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

BETWEEN AUCKLAND COUNCIL Appellant

AND ROBYN COLEMAN First Respondent

AND RONALD ANTHONY URLICH AND JANICE WILMA URLICH

Second Respondents

Hearing: 17 February 2012

Counsel: F Divich for appellant

J Wood for first respondent (abides decision of Court) Judgment: 17 February 2012

(ORAL) JUDGMENT OF LANG J

_{[on appeal against determination of Weathertight Homes Tribunal]}

AUCKLAND COUNCIL V ROBYN COLEMAN HC AK CIV-2011-404-2798 [17 February 2012]

[1] The first respondent, Ms Coleman, is the owner of a residential property situated at 112D Remuera Road, Auckland. She purchased that property in August

2002.

[2] Before making the purchase unconditional, Ms Coleman obtained a pre- purchase report from a Mr Hans Apers. Unfortunately, the house has proved to be a leaky building. This has led to Ms Coleman issuing proceedings before the Weathertight Homes Tribunal (“the Tribunal”). At present, the only parties she has named in the proceeding are the appellant, the Auckland Council, and Mr and Mrs Urlich, who were the original developers of the property.

[3] The Council considered that Mr Apers was also liable to Ms Coleman, both in negligence and in respect of breaches of s 9 of the Fair Trading Act 1986. It therefore applied to the Tribunal for an order joining Mr Apers as a party to the proceeding. Ms Coleman opposed the application, and in a procedural order delivered on 28 March 2011, a member of the Tribunal, Ms Pezaro, declined the application for joinder.

[4] The Council now appeals to this Court against the Tribunal’s decision not to

allow Mr Apers to be joined as a party to the proceeding.

The stance taken by Ms Coleman and Mr Apers in relation to the appeal

[5] Ms Coleman has not taken any formal steps in relation to the appeal. Although her counsel appeared at the hearing today, he abided the decision of the Court. Earlier, however, he filed a reasonably detailed memorandum raising the issue of whether or not the Court had the necessary jurisdiction to hear the appeal. I will deal with that issue at the outset.

[6] Mr Apers has been served with the appeal, and has filed a submission in which he opposes it. He points out that he was never in a contractual relationship with the Council, and that he never owed a duty of care to it. He also points out that he was only engaged to carry out a visible inspection of those areas of the property to which he had reasonable access at the time of the inspection. He says that he did

not receive instructions to view the property file held by the Council. For that reason

he was not aware of any material that might have been on the Council’s file.

Jurisdiction

[7] The right to appeal to this Court against a determination of the Tribunal is to be found in s 93 of the Weathertight Homes Resolution Act 2006 (“the Act”). It provides:

93 Right of appeal

(1) 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.

[8] At first sight, there would appear to be no right to appeal to this Court against a decision of the Tribunal declining joinder of a party to a proceeding before it. This follows from the fact that at present there is no claim before the Tribunal against Mr Apers. He is not a party to the claim at all. As a result, any decision not to permit him to be joined as a party would not appear to amount to a determination of the claim itself.

[9] That is not, however, the manner in which this Court has construed s 93. Gendall J considered this issue in Thomson & Anor v Christchurch City Council.[1] In that case, too, the Tribunal had refused to join a party to a proceeding. Gendall J did not consider that this posed any barrier to the Court hearing an appeal against the decision. He said:[2]

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[3] 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. 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.

[10] Earlier, in Kells, Asher J took the view that, where the Tribunal makes a decision that has the effect of finally determining an issue against the appellant, a right of appeal will lie. He said:[4]

It is stated at s 93(3) that “the amount” at issue in relation to a determination is the money required to be paid under the determination by the person filing the appeal, or if the Tribunal has declined to require a payment of money, the amount unsuccessfully claimed. The section therefore contemplates a final determination of the issue against the appellant before a right to appeal is triggered. It is also stated at s 95(2)(b) that the decision of the court on appeal is a “final determination of the claim”, further suggesting that the claim has otherwise been fully determined.

I consider that a final determination could also include a decision to strike out a party as that would be a final determination of the claim in respect of that party. A struck out party would be released from the proceedings. The only redress from that final result would be an appeal against the interlocutory but nevertheless final order. If however, as here, the application to strike out a party is refused, the effect of the order is not final as there will be an opportunity to appeal the substantive issues raised in the unsuccessful application in a later appeal relating to the final substantive determination.

[11] Similarly, in Fenton v Building Code Consultants Limited[5] and Auckland City Council v Unit Owners in Stonemason Apartment[6] this Court determined appeals from decisions of the Tribunal removing parties from adjudication proceedings before it.

[12] I adopt this reasoning and conclude that a right of appeal exists under s 93 where the effect of the decision appealed from is to finally determine a claim or a proposed claim against a party or intended party. A right of appeal therefore exists in the present case, because the Tribunal has finally determined the issue of whether or not Mr Apers should be a party to the proceeding. Unless the Council has a right of appeal it has no means of challenging that determination, and Mr Apers’ liability as a

_{party, or intended party, will never be determined.}

[13] This is not to say that every interlocutory determination of a Tribunal will be amenable to appeal under s 93. The right of appeal will only arise in circumstances where the determination has the effect of finally determining a claim against a party or intended party. A further example of this principle being given effect is Burns v Argon Construction Limited, in which Asher J said:[7]

... The section contemplates a final determination of the issue against the

_{appellant before a right to appeal is triggered: Kells v Auckland City Council}

& Ors.[8]

A final determination could include a decision to strike out a party, if that is a final determination of the claim in respect of that party. Even though the order follows an interlocutory application, it is nevertheless a final order. All parties accept an appeal against a decision striking out a proceeding can properly be brought under s 93 of the 2006 Act. The appeal must be determined in accordance with Part 20 (“Appeals”) of the High Court Rules.

The approach to be taken on appeal

[14] The Court is provided with considerable powers under s 95 of the Act in determining an appeal. It may confirm, modify or reverse the decision appealed against or any part of it. It may also exercise any of the powers that could have been exercised by the Tribunal in relation to the claim to which the appeal relates. Moreover, a determination by this Court has effect as if it were a determination made by the Tribunal, and is a final determination in respect of that aspect of the claim.

[15] In hearing the appeal the Court is conducting a re-hearing. As with any general right of appeal, the approach described by the Supreme Court in Austin Nichols & Co Inc v Stichting Lodestar applies.[9] This means that the appellant must demonstrate that the decision appealed from is wrong. The appellant is entitled to have the appeal court turn an independent mind to the matter. If it considers that the original decision is wrong, it is justified in interfering with it. The appeal court has a

_{responsibility to both parties to arrive at its own conclusion on the merits.}

The approach that the Tribunal needed to take in considering joinder

[16] The Tribunal had jurisdiction to order the joinder of Mr Apers by virtue of s

111 of the Act. It provides:

111 Joinder of parties

(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.

...

[17] Before the Tribunal could make the order for joinder, it needed to determine whether the Council had established one or more of the limbs of s 111(1). The Tribunal first needed to determine, on the basis of the evidence before it, whether the Council had established the propositions of fact or law that made up the claim against Mr Apers to a tenable or arguable standard.[10] If the Council failed to establish any of the limbs to that standard, the Tribunal was obliged to decline the application. If, however, it was satisfied that one or more of the limbs had been established, the Tribunal needed to determine whether to exercise its residual discretion in favour of, or against, the application.[11]

The Tribunal’s decision

[18] When the Tribunal heard the application, it was required to determine whether Mr Apers was potentially liable to Ms Coleman under two causes of action; negligence and breach of s 9 of the Fair Trading Act. The Council does not now

_{challenge the Tribunal’s decision insofar as it relates to the proposed cause of action}

based on negligence. For that reason it is not necessary to have regard to the reasoning process that the Tribunal adopted in relation to that aspect of the application.

[19] In dealing with the proposed cause of action under the Fair Trading Act, the

Tribunal couched its conclusion as follows:

13. Under section 9 of the Fair Trading Act, the question of whether the report was misleading is addressed in three steps:

Whether the conduct was capable of being misleading;

Whether the plaintiffs were in fact misled by that conduct;

Whether it was reasonable for the plaintiffs to have been misled by that conduct.

14. While the third step is an objective one, in order to establish that Mr Apers was negligent or that his report was capable of being misleading, the Council would have to prove that Ms Coleman was misled by this report. The claimants oppose this joinder application and have given no such evidence. Without this evidence any cross claim or claim for contribution against Mr Apers will not succeed. For these reasons the application to join Hans Apers is dismissed.

[20] I consider that, in a broad sense, the Tribunal properly directed itself regarding the questions to be determined. The issue is whether or not, on the material available to the Tribunal, it was justified in concluding that no tenable claim existed.

Has Mr Apers arguably engaged in misleading conduct?

[21] Mr Apers made a visual inspection of the property on 19 August 2002. He then prepared a written report that he submitted to Ms Coleman. The first section of the report contained a general description of the property, including its method of construction and a description of the configuration of the house. The report then contained numerous sections dealing with individual aspects of the construction of the house.

[22] The following aspects of the report are relevant for present purposes:

Base cladding Plaster on concrete blockwork

Main cladding Stucco plaster on timber framing, several cracks observed: seal with Silaflex MS or similar and touch up paintwork to prevent leaks.

Feature cladding N/A

...

Flashings Bead and sill flashings visible, concealed side flashings.

...

Handrail Cracked plaster and efflorescence: indicate moisture in construction. We advise to have framing checked and flat top plastered handrail capped to prevent moisture ingress.

...

Evidence of Leaks / Moisture/ Mould

See handrail balcony.

...

GENERAL

Structurally sound dwelling with maintenance and remedial work as per report. Main issues are: maintenance to stucco plaster cladding: seal cracks to prevent leaks / investigate if moisture damage has been done to balcony handrail, if so; rebuild handrails and fit capping over flat handrail top to prevent moisture ingress.

[23] Taken as a whole, I consider that it is arguable that Mr Apers’ report represented that the property was structurally sound and that there was no maintenance or remedial work required other than those issues identified in his report. It also arguably suggested that the only risk area in relation to moisture ingress was the handrail on the balcony.

[24] In support of its application the Council filed an affidavit by Mr Simon Paykel, a building surveyor engaged by the Council to assist with its defence of the claim. He has numerous professional qualifications and is also a Weathertight Homes Resolution Services Assessor. In addition, he is a member of the New Zealand Institute of Building Surveyors and a Registered Craftsman Plumber. He appears to have the necessary credentials to qualify as an expert in the field of house construction and building defects.

[25] Mr Paykel’s evidence is to the effect that a visual inspection of the property ought to have revealed a number of obvious defects. The principal defect was the fact that the exterior cladding of the property extended into the ground surface, and also into a deck above. He considers that any reasonable person in Mr Apers’ position would immediately have appreciated, even in 2002, that these factors represented an obvious risk so far as moisture ingress was concerned.

[26] Secondly, he points out that there are defects with the flashings and that these, too, would have been obvious to any reasonable person carrying out a pre- purchase inspection.

[27] Finally, he points out that Mr Apers was obviously alert to the fact that moisture ingress was potentially an issue with this property. He points to the fact that Mr Apers expressly referred to the possibility of water ingress having occurred in relation to the balcony handrail. That prompted him to recommend that the handrail be fitted with a metal cap.

[28] Taken as a whole, the report arguably amounts to a representation that, other than in respect of the defects that Mr Apers identified, the property did not pose a risk in terms of water or moisture ingress. Given Mr Paykel’s evidence, that representation was arguably capable of misleading Ms Coleman.

[29] A similar claim was recently upheld by Whata J in Mok v Bolderson.[12] In that case, the owners of a leaky home sued a consultant whom they had engaged to prepare a pre-purchase report. As in the present case, the report omitted to mention the existence of several defects that ought to have been obvious to any person holding him or herself out as an expert in the field of house construction. The author of the report was held to have engaged in misleading conduct. Whata J held that statements and omissions in the report were factually wrong, and that they were not reasonably based on information available to the author of the report at the time of

_{the inspection. The Judge concluded:}[13]

In summary, all of the relevant and readily available information pointed to serious risks associated with the observable and the observed defects. Their full implications were not put to the purchasers. Quite the reverse, the purchasers were told that the house in key respects was in good condition.

On that basis Mr Bolderson’s report was misleading in so far as it wrongly stated and implied that the house was in good condition and that the identified defects were not material for the purposes of purchase.

Is it arguable that Ms Coleman was actually misled by the statements in the report?

[30] The next issue is whether it is arguable that Ms Coleman was actually misled by statements made in the report. This is the critical issue that influenced the Tribunal in declining the Council’s application. In the absence of express evidence from Ms Coleman, the Tribunal took the view that the Council could not establish that she had been misled.

[31] I respectfully take a different view. When Ms Coleman purchased the property, her solicitors included an express condition in the contract requiring her to be satisfied with a builder’s report to be obtained from a suitably qualified person. She had the right to cancel the contract in the event that, acting in good faith, she was dissatisfied with any matter contained in the report.

[32] Ms Coleman’s solicitors wrote to the vendors’ solicitors on 21 August 2002 confirming that Ms Coleman had received the report, and that it was satisfactory to her other than in two respects. Two of the issues raised by Mr Apers in his report led Ms Coleman to approach the vendors and get them to agree to carry out remedial work on the property at their own expense before settlement. One of the items of work that the vendors agreed to carry out was the fitting of a galvanised cap to the handrail.

[33] This evidence establishes, in my view, that Ms Coleman must have relied significantly on the report in determining whether, and on what terms, she was prepared to continue with the purchase. It also shows that she was particularly concerned about whether or not there were issues with moisture ingress.

[34] Furthermore, given the fact that Mr Apers did not draw attention in his report to other areas of risk, it establishes that she was arguably misled by it. Given Ms Coleman’s response to the information in the report about the balcony handrail, it can safely be assumed that she would also have responded immediately to any suggestion in the report to the effect that there were further, and more serious, concerns regarding the risk of moisture ingress.

Is there a sufficient nexus between the misleading conduct and the loss?

[35] The third element is whether there is a sufficient nexus between the misleading conduct and the loss that Ms Coleman has suffered.

[36] I consider that this is arguably established because of the fact that, had Ms Coleman been aware of the true situation, she would have had two options. First, she could have required the vendors to rectify any defects in the same way that they were obviously prepared to do in relation to the balcony handrail. Secondly, she could have cancelled the contract if she considered that the risk of purchasing the property with the potential for significant water ingress was too great. Ms Coleman was unable to avail herself of either option because of the fact that the report did not alert her to the potential defects that Mr Paykel has identified. As a consequence, she is now faced with the substantial cost of remedial repairs. I therefore consider that there is an arguable nexus between the conduct upon which the Council relies and the loss that Ms Coleman has suffered.

The residual discretion

[37] It is now necessary to determine whether the residual discretion ought to be exercised in favour of the Council or Ms Coleman. The principal factors telling against the exercise of the discretion in Council’s favour are the fact that Ms Coleman does not wish to proceed with a claim against Mr Apers, and the possibility of further delay being caused as a result of Mr Apers being joined to the proceeding.

[38] In many ways the first issue is a practical issue. It is difficult to see how a claim under the Fair Trading Act can be pursued in practical terms if Ms Coleman

does not wish to proceed with it. During the hearing, however, counsel advised me that the Tribunal has the ability to order a party other than the claimant to file pleadings where the claimant elects not to do so. It is therefore possible, if Mr Apers is joined to the proceeding, that the Council will be directed to file a claim against Mr Apers in the name of Ms Coleman should she not wish to take that step herself.

[39] I do not consider, however, that the fact that Ms Coleman does not appear to wish to pursue the claim herself is sufficient reason to decline the application, particularly when the Tribunal has the power to apportion losses between the parties to a proceeding.

[40] The issue of delay is not of any great significance in the present case either, because the Tribunal has allocated a hearing date for June. That should provide ample time for any interlocutory issues involving Mr Apers to be addressed and resolved.

[41] In my view, the factor that militates in favour of leave in the present case is that Mr Apers may be a person against whom an order may be made under s 72(1). That section permits the Tribunal to determine any liability that any party to the claim may have to the claimant. Section 90 of the Act then permits the Tribunal to make orders giving effect to its findings on liability. I have concluded that Mr Apers is therefore a person who ought to be bound by an order of the Tribunal, and that his potential liability to Ms Coleman means that it is desirable that he should be joined to the claim as a respondent.

[42] It follows that the Council has established that grounds exist under ss 111(a)

and (c) for Mr Apers to be joined as a party to the claim before the Tribunal.

Result

[43] I therefore allow the appeal, and reverse the decision of the Tribunal. In its place I make an order under s 111 of the Act joining Mr Apers as a party to Ms Coleman’s claim.

Costs

[44] The Council seeks an order for costs in its favour given the fact that it has succeeded on the appeal. I consider, however, that the jurisdictional point was properly taken by Ms Coleman. I consider that justice will be served in this case if

_{costs lie where they fall. There will therefore be no order as to costs.}

Lang J

Solicitors:

Heaney & Co, Auckland

Rainey Law, Auckland

Copy to:

Mr H Apers, Whitianga

---

[1] Thomson & Anor v Christchurch City Council HC Christchurch CIV-2010-409-2298, 28 March

_2011.
[2] _{Ibid at [19].}

[3] Kells v Auckland City Council HC Auckland CIV-2008-404-1812, 30 May 2008.

[4] _{Ibid, at [53]-[54].}

[5] Fenton & Ors v Building Code Consultants Ltd & Ors HC Auckland CIV-2009-404-6348, 15 March

_2010.

[6] Auckland City Council v Unit Owners in Stonemason Apartment HC Auckland CIV-2009-404-

003118, 11 December 2009.

[7] Burns & Ors v Argon Construction Ltd & Ors HC Auckland CIV-2008-404-7316, 18 May 2009 at

_[12]-[13].
[8] _{Kells, above n 3.}

[9] Austin, Nichols & Co Inc v Stichting Lodestar [2008] 2 NZLR 141 (SC).

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

_{004407, 28 September 2004 at [28].}

[11] Ibid, at [29].

[12] _{Mok v Bolderson HC Auckland CIV-2010-404-007292, 4 April 2011.}

[13] Ibid, at [113]-[114].