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High Court of New Zealand Decisions |
Last Updated: 28 March 2012
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2010-404-006549 [2012] NZHC 241
BETWEEN BRIAN MARTEL, RHIANNON MARY MARTEL AND SHERYL ELIZABETH LANE
Plaintiffs
AND AUCKLAND CITY First Defendant
AND JOHN CHENG XIE Second Defendant
Hearing: 29 February 2012
Appearances: D Cowan for the Second and Third Defendants
K Fulton for the Fourth Third Party
Judgment: 2 March 2012
JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN
This judgment was delivered by me on
02.03.12 at 2:30pm, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date...............
Solicitors/Counsel:
D Cowan, Rainey Law, Auckland – doug.cowan@raineylaw.co.nz
K Fulton, Barrister, Auckland – kerryfulton@xtra.co.nz
BRIAN MARTEL, RHIANNON MARY MARTEL AND SHERYL ELIZABETH LANE V AUCKLAND CITY HC AK CIV 2010-404-006549 [2 March 2012]
AND JOHNSCO LIMITED Third Defendant
AND MAU SENG LING First Third Party
AND IGOR ARAKELIAN Second Third Party
AND DVK ROOFING & WATERPROOFING CO LIMITED
Third Third Party
AND AUCKLAND FRAME & TRUSS SUPPLIES LIMITED (TRADING AS PLACEMAKERS)
Fourth Third Party
Background
[1] In December 2005 the plaintiffs purchased the Bucklands Beach property of the second defendant. The plaintiffs allege their dwelling upon the property is a leaky building and that as a result of defects in design and construction of the dwelling, moisture has been able to enter the structure causing rot and decay to the framing timber. The plaintiffs have undertaken repairs and have sued to recover a cost of $633,517.22 plus consequential losses and general damages.
[2] The plaintiffs allege Mr Xie was the developer/project manager when the dwelling was built over the period December 2002 to November 2003.
[3] The plaintiffs allege the third defendant (Johnsco) was the head contractor/builder for the construction of the dwelling. Mr Xie is the sole director of Johnsco.
[4] Mr Xie and Johnsco deny they acted in the development in the capacities the plaintiffs allege. They say that if however they are found liable to the plaintiffs then they are entitled to indemnity and/or contribution from the fourth third party (AFT) in connection with the supply of external and internal timber wall framing for the dwelling.
[5] AFT were at all material times the suppliers of pre-nailed framing timber to the various Placemakers stores in the Auckland area.
[6] In or about November 2003 Steve Marshall Building Limited (SMB) trading as Placemakers were contracted by Johnsco to supply:
(a) Kiln dried and gauged radiata pine machine stressed graded H3 LOSP
treated timber frames for the external walls of the dwelling; and
(b) Kiln dried and gauged radiata pine machine stressed graded H1 LOSP
treated timber frames for the internal walls of the dwelling.
[7] SMB contracted AFT to manufacture and supply the pre-nailed frames directly to Mr Xie and Johnsco and this they duly did in December 2002 for use in the construction of the dwelling.
[8] On 10 November 2003 AFT issued a written Producer Statement to Johnsco confirming it had supplied timber frames for use during the construction of the dwelling. The Producer Statement stated that:
(a) The external timber frames that were supplied were kiln dried gauged radiata pine machine stress graded H3 LOSP treated.
(b) The timber frames that were supplied for the internal walls were kiln dried and gauged radiata pine machine stress graded H1 LOSP treated.
[9] Mr Xie/Johnsco allege that the framing timber supplied was not to the standard represented by AFT. They further say that, as a consequence of the lack of any, or any adequate timber treatment of the framing timber, the damage to the dwelling has been greater than would have occurred had the framed timber been treated to the levels represented by AFT.
The pleading of the claim against AFT
[10] In their statement of claim Mr Xie/Johnsco advanced two alternative legal arguments for liability on the part of AFT.
(i) Supplying framing timber that it represented was treated when it was not, or was not adequately treated.
(ii) Later issued a Producer Statement expressly representing the level of timber treatment in the framing timber. It is the case of Mr Xie and Johnsco that they were misled or deceived by
the conduct of AFT and that as a consequence untreated or inadequately treated timber was used in the construction of the dwelling, and that the extent of damage to the dwelling was substantially greater than it would have been had properly treated timber been used.
1936.
[11] They say that as the supplier of the framing AFT owed subsequent owners of the dwelling a duty to exercise reasonable skill and care in supplying that framing. That the duty of care was breached because of a failure to take reasonable care to supply adequately treated timber for use; and for that reason the timber framing is a contributing cause of the loss suffered by the plaintiffs and that had AFT been sued by the plaintiffs they would have been entitled to recover all or part of the damages sought from AFT.
Applications for dismissal/strike out
[12] They proceed on the basis, inter alia:
(a) There was no misleading conduct. (b) There was no causative loss.
(c) No duty of care was owed.
(d) The timber was treated to the standard permitted at the time.
(e) The test results of Mr Xie and Johnsco do not support their claim. (f) The claims are time barred.
[13] The fourth party has also filed an amended defence in which it pleads, inter alia:
(a) It admits being contracted by SMB to manufacture certain frames as specified by SMB; that SMB was contracted by Johnsco to supply frames and trusses; and that the terms and conditions of supply exclude liability and entitle AFT to the benefit of the exclusion/limitation of liability clauses.
(b) It denies there was any contract with Johnsco but admits that it issued a Producer Statement dated 10 November 2003 and says that Producer Statement was correct and that the timber was treated to the standards stated.
(c) It denies there was any representation provided by the Producer
Statement or that it could have been causatively relied upon.
(d) That Mr Xie/Johnsco are the cause of their own loss because of their failure to construct the building to the required standards; that the products supplied by SMB were installed long before the issue of the Producer Statement was alleged to be actionable.
(e) It denies any duty of care could have been owed and says the claim fails to adequately particularise a duty of care and what was required to meet the alleged standard.
(f) As a positive defence AFT pleads that the causes of action are outside the time limits imposed; but if the timber was untreated as alleged then any reasonable builder would have identified as much or could have tested it to determine it was untreated.
Opposition to dismissal/strike out applications
[14] It is filed jointly on behalf of Mr Xie and Johnsco.
[15] The grounds are, inter alia:
(a) AFT has not filed any defence that could be considered a complete defence because:
(i) issues about the level of timber treatment at the time of delivery concern disputed questions of fact and expert opinion which cannot be resolved at this time;
(ii) the claims against AFT are in negligence only and accrue if Mr Xie and Johnsco suffered loss and that will only occur if they are found liable to the plaintiffs or occur at the earliest when the negligence of AFT was discovered on or about 18 April
2011;
(iii) loss or damage or the likelihood of same, as a consequence of AFT’s alleged misleading and deceptive conduct and trade, did not occur until on or about 18 April 2011.
AFT’s evidence
L Carpenter
[16] Mr Carpenter provides evidence of his knowledge of the practices of AFT at the relevant time. It was he who signed the Producer Statement confirming that the frames in question were treated. He has no specific recollection of the job.
[17] He said when in 2002 the job was manufactured it was more typical for frames to made using untreated timber. Accordingly, when a production request was received for frames using kiln dried treated timber the timber was sent out of AFT’s factory to have it treated using a light organic solvent preservative (LOSP) treatment process and then it would be returned to AFT. At that time AFT sent the timber to Ahead Treatment (Ahead), an independent company “with a sound reputation”. There was no reason to question their treatment processes. After the timber was treated it was repacked by Ahead, the factor of treatment having been clearly marked
on the outside of the packaging. It was then stored once again in AFT’s yard. Specific persons (detailers) would then go through building plans and then input into AFT’s software the requirements and any production requests. A production sheet would then be generated. In this case it clearly shows the H1 and H3 requirements for treated timber.
[18] When the job was ready to be manufactured crews would be brought in to uplift the timber, to unpack the timber and then to cut the timber for the job. Then another crew would nail the cut timber to make the frames, and yet another person would then load the job out.
[19] Mr Carpenter’s point is that there were at least four different points of time when the job timber would be physically seen by different people; by people who would be working off the same production records and therefore know that treated timber was being used. He considered it unlikely, due to the number of checks in place, that a mistake would have been made and untreated timber would have been used. He considers that when the frames were delivered to the construction site in December 2002 that timber would have had a distinctive odour still and a colour tinge. He states a builder should have been alerted to any issue of treatment if there was no odour or colour tinge.
L Smith
[20] He has been manager of AFT since about March 2010. He has been in the timber industry for 33 years. He refers to AFT’s files relating to the plaintiffs’ property. The records are still available.
[21] He provided copies of those business records. Included is a copy of a production request from SMB which operates Placemakers, Wairau Park, Auckland. The information on the production request is provided by Johnsco and it is signed off by Johnsco.
[22] Mr Smith then explains, from his knowledge, the relevance of certain entries on that document.
[23] He confirms there are several different people involved in the physical manufacture of the frame: the person who collects the timber from the yard; the crew that cuts it; then a different crew that nails the frames. He repeats what Mr Carpenter stated was the need for the different persons involved to have reference to the production records to show the timber being used. He states:
So, the fact that H1 and H3 is recorded on the sheets makes it unlikely that a mistake would happen as the same mistake would have to happen at three different stages of the physical manufacture.
[24] Mr Smith said using treated timber for frames was out of the normal which
was why “every effort was made to identify that fact”.
[25] Mr Smith provided a copy of the Producer Statement dated November 10,
2003 which confirmed that treated timber was supplied to the plaintiffs’ property. He notes that the statement was provided about one year after the product was delivered and says by then the dwelling would in all probability have been built.
[26] He also provides a copy of AFT’s production record for the job. This records
the timber was H1 and H3.
[27] In his opinion the test documents provided on behalf of Mr Xie/Johnsco do not support an underlying claim that the timber was not treated. He provides copies of invoices for timber that Ahead received from AFT “back around when this job was done”. He repeats what Mr Tongue of Ahead told him about the adding of colour to the treatment to give it a colour tinge; that the lack of colour and odour would alert the builder to non-treatment.
Ms Jane Cuming
[28] She is a building standards manager of Wellington being employed there by
Fletcher Distribution Limited (FDL), the majority shareholder of AFT.
[29] Ms Cuming asserts that due to her position and her experience she has gained
“a detailed understanding of the Building Code and timber standards”.
[30] Ms Cuming referred to what she says were the standards governing timber treatment in 2002; and to the different treatment classifications of H1 and H3 - the latter indicating treatment of a higher grade than needed for H1.
[31] Ms Cuming refers to the timber samples taken from wall framing and noted that all test reports noted the presence of tin, which was approved for H3 treatment standards. She concludes that on the face of these test results there is no basis for the allegations that the timber was not treated.
[32] Ms Cuming annexes a copy of the New Zealand Standards wherein, pre- March 2004, tin solutions are notified as approved fungicides in the treatment of timber. Post-March 2004 the New Zealand Standards approved other fungicides as well as tin, including proper propiconazole and tebuconazole.
[33] Ms Cuming refers to Mr Tongue’s industry background and of his participation in policy setting and certification with the industry. She states “it is difficult to concede that Ahead Lumber would treat timber other than to the required standards giving the active role Mr Tongue takes and his knowledge in this area”.
Evidence in opposition
J C Xie
[34] Mr Xie is the second defendant in this proceeding and the sole director of Johnsco, the third defendant. Johnsco contracted with SMB for the supply of timber framing for use in the dwelling. On behalf of Johnsco he specified that “insuclad” cladding would be used. In Johnsco’s order for timber he specified treated external timber framing to H3 standards. He was aware of the potential for rotting of timber if untreated timber was to be used. He was aware of relevant weather-tightness issues and wanted to avoid those.
[35] He specifically ordered H3 treated timber to be used for the external timber framing. He said they had no way of checking whether the timber was treated or not, even after it had been delivered.
[36] Later he received the Producer Statement confirming the timber frames were treated to the requested specifications.
[37] The first he heard of any issues with the construction was when he was served with a statement of claim in October 2010. He said he learned that the timber framing originally supplied by AFT may not have been properly treated. His lawyer had arranged for test samples to be carried out. When he received the test reports he says he was shocked to learn the timber had not been treated to H3 level required.
T A Jones
[38] Mr Jones is a chartered building surveyor having worked as such since 2002. He qualifies himself as an expert in providing technical analysis of building defects, as well as in other respects. He had been instructed by the solicitors acting for Mr Xie/Johnsco to attend the plaintiffs’ dwelling to make an assessment in relation to weather-tightness issues.
[39] When he arrived at the property on 13 April 2011 he noted significant works had already commenced and most of the wall cladding had been removed. He noted several areas of the timber framing had been marked with high-glow paint. He understood those were to be removed and replaced with new treated timber framing. The length of timber involved gave no visual indicators of being decayed or moisture affected. Mr Jones considered it was unnecessary to replace those.
[40] Mr Jones was concerned to see there did not appear to be any timber samples removed from those sections of marked timber. He would have expected small cores/diameters of wood to have been removed for testing.
[41] Mr Jones detailed his concerns regarding the manner and extent to which repairs were being effected. In that process Mr Jones became suspicious that the timber framing may not have been treated at all because he could not detect tell-tale signs of odour or markings. Accordingly he obtained three samples from the building and sent them to Primaxa Laboratories for levels of decay and treatment to
be established. On 18 April Primaxa delivered its report; identified that timber samples were all sound and did not require a replacement.
[42] Because those results were not able to demonstrate conclusively that the timber had or had not been treated he sent the three samples to Hill Laboratories for testing.
A G Spiers
[43] Dr Spiers carries out research and development of products for horticulture and agriculture. He is a research director associated with Primaxa. Part of his work involves analysing wood from leaky homes. Dr Spiers qualifies himself as an expert. He received timber samples from Mr Jones and was instructed to analyse the wood for decay and treatment. He tested the wood for boron, tin and copper. All three samples tested positive for tin but none was positive for boron or copper. He said this was significant because the presence of boron or copper indicated the timber had been treated. Later Mr Jones asked whether Dr Spiers would be able to test the timber to determine if it had been treated to H3.1 levels. He said he did not have the facilities for that test and recommended the samples be sent to Hill Laboratories. Later upon receipt of the report from Hill Laboratories, Dr Spiers stated:
In my opinion the levels of tebuconazole and propiconazole are so low that the timber can be considered untreated for all intents and purposes.
[44] Dr Spiers attached a copy of his report. He concluded:
Wood in a condition similar to samples 1, 2 and 3 could be
left insitu.
The samples tested positive for tin. The presence of
treatment creates latitude for less extensive framing removal.
P F Norris
[45] Mr Norris is an operations manager for the timber testing section of Independent Verification Services (IVS), a position he has held for two years. Before then he worked as an independent forestry consultant in South Africa for
seven years and before then had been involved in the forest/timber industry in various roles for 28 years.
[46] Mr Norris says IVS partners Hill Laboratories in a joint timber testing programme carrying out analytical testing. IVS interprets the results of an analysis. Mr Norris gives evidence as an expert who was instructed by Dr Spiers and later by Mr Jones to analyse samples of timber to ascertain LOSP treatment levels. He explained how that analysis occurred.
[47] Mr Norris noted that each sample was tested and showed the presence of propiconazole and tebuconazole. He said the results confirmed that the timber exhibited very low levels of treatment when compared to the standard.
[48] Mr Norris warned however that the New Zealand standard only applies to timber before it left the treatment plant. Accordingly the test result did not indicate the level of treatment when that timber was supplied for analysis. Therefore he said the results must be treated as informative only.
Reply evidence
[49] That has been provided primarily by Ms Cuming. It purports to challenge the method of testing by Mr Norris and the conclusions he, Mr Jones and Dr Spiers reached in that outcome. Ms Cuming states that “it was totally false” to claim the timber was untreated having regard to the testing undertaken. She said such testing was not approved under the relevant New Zealand standard until 1 March 2004. She states:
Auckland Frame and Truss Limited objects to being subjected to proceedings based on tests that apparently are the best that can be offered, are not on point and do nothing more than provide information, not proof and which Mr Jones acknowledges that it is not possible to accurately identify treatment levels. The plants which treat the timber are subject to audit standards and have rigorous testing procedures to ensure that when the timber leaves the gate it meets the required standards.
[50] Also provided by way of reply is an affidavit from Mr Norris who previously swore and affidavit on behalf of Mr Xie/Johnsco. He confirmed that when the
samples were sent to him there was no test for tin as a treatment chemical and because at that time (2011) his programme did not cover all wood preservatives covered by the standard.
Applicant’s submissions
[51] AFT’s claim is that the whole basis of the case of Mr Xie and Johnsco is that what was tested for by Mr Norris and Dr Spiers was not an approved treatment until well after the building was completed. Mr Norris clarified that he never tested for tin. Dr Spiers said he tested positive for tin.
[52] AFT says it has a complete legal defence; that in fact the timber was treated as tests by others clearly show “when seen in the correct context”. Mr Fulton submits that the initial tests showed evidence of the permitted treatment at the time i.e. tin, and the testing for other chemicals were not relevant because they were not authorised treatments when the frames were manufactured.
[53] Noting that the plaintiffs’ statement of claim made no allegation of an alleged defect of untreated timber, Mr Fulton comments that indeed at the time of the building work untreated timber was authorised by building standards; in any event the frames did not all require replacement; and that if the builders had done their job, the building would not leaked and the frames would have been unaffected.
[54] AFT says the claim against it concerned timber which even if untreated as alleged, remained nevertheless code compliant. As an FTA claim it had to be causally linked to the fact that the timber was untreated instead of treated and that is what Mr Xie/Johnsco have done in their reliance upon the Producer Statement in their claim against AFT. This, AFT says the builders cannot do because the Producer Statement upon which they claimed to have relied was issued well after the building was closed in and right at the end of the project i.e. nearly a year after the framing had been installed.
[55] Mr Fulton submits there is no evidence at all of what loss arises from the
Producer Statement even assuming it was false, which AFT says it was not.
[56] The FTA does not provide contract damages. Therefore AFT says the best the builders could hope for would be a difference in value between treated and untreated timber. In Harvey Corporation v Baker [1]. It was held that any damages are to be limited to the consequences of the making of the representation and did not extend to the consequences of failing to perform it. On that basis, Mr Fulton submits, there can be no joint tort/feasor issue as the damage is totally different.
[57] Mr Fulton believes the builder’s case seeks to bypass the problem it faces by its FTA proceeding by alleging the remedial works costs are higher because untreated timber was supplied. He says the claim focuses on the actual delivery before the product was installed and amounts to no more than an acknowledgment that the builders simply seek to hold AFT to performance of a contract the builders had with SMB; that the FTA proceeding cannot be permitted to be used to do that. Given that untreated timber for frames was permissible, the loss if any did not rise from the statement in the Producer Statement, but from the negligent building work. Mr Fulton said support can be drawn from the judgment of Priestley J in Body Corp
183523 v Tony Tay [2], where claims that Mr Tay was liable on a practical completion
certificate were dismissed. His Honour said:
The damage caused to the plaintiffs was not occasioned by the issue of the
31 October 1997 certificate. Rather, it was caused by the derelict performance of TTA’s architectural and supervisory responsibilities throughout the construction phase.
[58] Mr Fulton submits that AFT did not contract with the parties who are suing them, rather they contracted with SMB and that any claim would be wholly time barred. Counsel submits that the contractual arrangements between AFT and SMB make it clear that there was no assumption of responsibility to Mr Xie/Johnsco by AFT. Then he says there is the fundamental issue facing the claim that any negligence has to be an operative cause and it cannot be. Moreover, that it is not clear at all what the negligence is, as the descriptions of breach are not descriptions
of negligence.
[59] Noting the three grounds of alleged breach of duty against AFT referred to a failure to supply timber which complied with the building standard; which AFT contracted to supply; and which AFT’s Producer Statement said had been supplied, Mr Fulton submits that none of these allegations are factually or legally sustainable. He submits the builders offer no evidence that the timber framing did not at the time comply with the building standards of the time or that at the time untreated timber was approved. Also AFT says there is not a shred of evidence to contest the process it went through to make the frames and all the checks and balances they had in place.
[60] AFT’s case is that the builder’s claim faces an insurmountable hurdle because no duty of care could be owed by AFT to the builders; that any duty of care owed by AFT was to SMB. Also, the terms of supply are in their credit account and those state that Placemakers (including AFT) cannot be liable for any consequence or loss or damage nor is it liable for any damage caused by its servants or agents. Therefore the risk has been agreed and allocated to the price of the goods at worst. A clause in the contract provides that any entity authorised to trade under Placemakers name can rely on the terms; that AFT is such an entity and can thus rely on that exclusion of liability and damages cap.
[61] Mr Fulton submits that allegations which are at their core contractual have been dressed up as allegations of tort. As regards to the claim of the failure to supply timber it said it had supplied, AFT’s evidence is that it did not treat the frames themselves but sent them out for treatment. AFT claims the production records clearly show the use of treated timber. The process was explained. AFT asserts therefore there is not a single element of negligence shown against them in this case.
[62] The Producer Statement is a document that under the Building Act a Council can rely upon to determine code compliance. It is the Council that has to consider and issue a code compliance certificate. All the owner/builder does is collect the Producer Statement and give it to the Council. The builders therefore have no operative reliance upon the certificates because the Council has accepted it and issued a code compliance certificate. In this case the builders are not sued by the plaintiffs for failing to provide false information to gain a code compliance certificate. Mr Xie/Johnsco are not even sued for using untreated frames. AFT
surmises therefore that the problem ultimately is that the testing carried out by Mr
Xie/Johnsco proceeded on a false premise and they tested for the wrong substances.
[63] Even if the frames were untreated there is no evidence that any damage was caused as a result and the plaintiffs’ amended statement of claim does not list untreated timber as a defect.
[64] In relation to FTA section 43(5) provides that an application for relief can be made “at any time within three years after the date on which the loss or damage or likelihood of loss of damage, was discovered or ought reasonably to have been discovered”.
[65] AFT was joined on or about 9 June 2011 i.e. seven and half years after the event. Accordingly, Mr Fulton submits that the builders need to have an answer for the three year limitation period in the FTA. In this case the claim is that the frames were untreated. Mr Fulton submits that claim fails the limitation rule because of the evidence of the builder’s own expert, Mr Jones. Mr Jones said:
It is not always stamped to confirm treatment and I could not detect tell-tale odour or makings.
[66] Mr Fulton says AFT witnesses say that timber straight from treatment smells of the treatment i.e. it has a strong odour. Therefore the issue of treatment was clearly reasonably discoverable at the time the framing was installed. AFT’s Mr Smith confirmed what Mr Tongue had told him that the lack of colour and odour would alert the builder to non-treatment. Hence, AFT’s position is that if the timber was untreated, as alleged, that was easily discoverable on delivery of the product to site. It was discoverable until the walls were closed in; and any reasonable builder would have identified that.
[67] Mr Fulton submits that Mr Xie made no mention of the issue at all yet clearly he had prior knowledge of the use of treated timber with the cladding system he used. Mr Fulton invites the Court to draw an adverse inference from the fact, in effect, that Mr Xie did not say he noticed an odour, when clearly if the timber had been treated, he would have.
Summary judgment and strikeout principles
Summary judgment
[68] A defendant’s application requires it to satisfy the Court that a plaintiff cannot succeed on any of its causes of action; that a complete defence is available; that the plaintiffs’ case is quite hopeless. Of course the summary procedure is not suitable unless all relevant facts are available and when these facts are in dispute a Court must have good cause to ignore claims of a dispute about those. It follows that upon a defendant’s application for summary judgment there is no requirement for a plaintiff to provide conclusive evidence of proof of its case. Usually, tortious claims are unsuitable for disposal by summary procedure unless facts are not in dispute and
do not support the imposition of a duty of care. [3]
[69] In cases where a defendant applicant puts up evidence that shows a plaintiff’s case cannot succeed an evidential onus moves to the plaintiff to show there are issues that will require a trial to determine, and a failure to do that may result in summary judgment against a plaintiff.
Strike out
[70] This is appropriate when a cause of action cannot succeed as a matter of law. Such an application proceeds on the basis the facts pleaded in the statement of claim are true; it follows that a cause of action must be clearly untenable or cannot possibly succeed (even after amendment), if it is to be struck out. Strike out is only appropriate when it is clear there is no way a statement of claim could, even
approved, entitle the plaintiff to what is claimed. [4]
Preliminary issue
[71] A memorandum from counsel for Mr Xie/Johnsco provides notice of a challenge to the admissibility of the affidavit evidence of Ms Cuming. I have already detailed what appears to me to be the substance of Ms Cuming’s evidence. She is an employee of FDL which effectively controls all Placemakers companies, of which AFT is one. With reference to my review of her evidence I have noted what she deposes to.
[72] The challenge to Ms Cuming's evidence sets out in full the objections on behalf of Mr Xie/Johnsco. It refers to section 83 of the Evidence Act 2006 which provides the rules governing the giving of evidence by affidavit wherein it is provided that an affidavit should not contain a statement that is otherwise inadmissible.
[73] The memorandum notes that it is clear from both affidavits from Ms Cuming that she has no direct personal knowledge of any of the matters that are the subject of the proceeding; that she did not seek hear or perceive anything relevant to the issues in the application. The memorandum suggests her evidence is instead a combination of hearsay statements and statements of opinion which she was not qualified to give. Further, that she produces as exhibits to her affidavit documents which are plainly inadmissible documentary hearsay.
[74] Mr Fulton has responded:
(a) That Ms Cuming has substantial knowledge and awareness of the relevant treatment rules and can call herself an expert in them but she does not need to be an expert to articulate that background and prove the fact of the applicable rules.
(b) The areas she gives evidence in, are not in fact the sole domain of the main building surveyors and engineers, as one does not need to do a special course of study or be experienced to be able to know the matters she discusses.
(c) The relevant rules on testing standards, treatment standards and the like are all readily accessible documents.
(d) That in her role with FDL she knows the material so well she is regarded as having expertise in the area within FDL.
(e) A close reading of her evidence shows that she expresses little opinion at all, rather she proves the facts from her own knowledge, simplifies the rules and statements provided in admissible documents and helpfully summarises AFT’s position.
(f) Because AFT is in the building industry one would expect that a group like FDL would employ a person with firsthand knowledge of the relevant standards and rules. Much of her evidence that is objected to is not in the domain of an “expert”, for an employee such as she will know what the rules are, and it is simply a collation and explanation exercise to provide relevant factual context to the claim and the application.
(g) She can characterise herself as an expert in it but that does not mean the evidence is evidence that can be solely given by an expert.
(h) She has identified and produced the relevant standards and simply references the relevant ones, and that is not an opinion but an
identification of relevant factors which are in her knowledge.
Ruling
[75] I disagree with some of the submissions supporting the relevance and
admissibility of Ms Cuming’s evidence.
[76] Ms Cuming is not and cannot be an expert qualified to give expert evidence in this matter. AFL rely almost exclusively on her statements on the expert issue of the timber treatment of the framing timber in its attempt to discharge its onus of proving that the Mr Xie/Johnsco claims cannot succeed.
[77] It may be that Ms Cuming has read a lot of documents but some of those documents have not properly put in evidence and therefore any opinion of hers regarding them is irrelevant and inadmissible unless their admission has been consented to, and there is no evidence of that here. There appears to be no basis for applying any of the common exceptions to the hearsay rule in the Evidence Act e.g. when the authors of the relevant documents referred to are “unavailable”.
[78] Ms Cuming has referred to her assessment of publications she says supports her conclusions. But, there is no basis for the Court accepting at this stage Ms Cuming’s conclusions upon those publications.
[79] Ms Cuming’s evidence serves in the main the purpose of challenging the significance of the results of testing by Mr Norris and Dr Spiers. Ms Cuming has exhibited copies of the relevant New Zealand Standards. She does not need the consent of anyone in order to do so. Section 25(2) of the Standards Act 1988 provides:
(2) Without affecting any other method of proof, the production in any proceedings of a copy of a specification purporting to be a New Zealand standard shall be sufficient evidence thereof in the absence of proof to the contrary.
[80] What Ms Cuming is saying, perhaps by way of submission more than evidence, is that the tests undertaken by Mr Norris and Dr Spiers may have proceeded upon the assumption that the samples being tested for were not in fact part of the standards at all applying in 2002. In effect Ms Cuming is asking the Court to be wary of drawing any conclusions from those results that the timber in question was not treated.
Considerations
[81] The summary judgment application can only succeed if AFT have a complete defence to all claims by Mr Xie/Johnsco. In this case AFT’s application is based upon propositions:
(a) That the timber framing supplied was treated to the standard required.
(b) Even if improperly treated timber was supplied, AFT has nonetheless a complete defence to the FTA and contributory negligence causes of action pleaded against it.
[82] As to AFT’s claim of having supplied appropriately treated timber frames the Court’s task upon the summary judgment application is to decide whether or not AFT has sufficiently proved that Mr Xie/Johnsco cannot succeed in their argument to the contrary.
[83] AFT’s alternative argument of a complete and unanswerable defence if improperly treated timber was supplied, requires an analysis of whether the two causes of action pleaded can succeed as a matter of law.
Was the timber supplied adequately treated?
[84] The evidence from Mr Xie/Johnsco included scientific testing and reports which identified three types of treatment present in the timber. Dr Spiers determined the presence of tin; Mr Jones found there were two other treatments present in the timber. Mr Cowan for Mr Xie/Johnsco asserts that both sets of testing indicated that the timber was not treated to H3 levels; that the timber supplied by AFT was treated to such a low level that it was effectively untreated timber.
[85] AFT’s position is that the timber it supplied was properly treated. It does not rely on expert testing to support this conclusion, rather the assessment of Ms Cuming, who is not impartial and who does have a working relationship with AFT.
[86] AFT argues that Mr Xie/Johnsco have failed to prove the timber was not treated. Arguably they have no such obligation for upon AFT’s summary judgment application the onus of proving the absence of a defence lies with AFT. But, I do not think it is as simple as that.
[87] Mr Xie/Johnsco have been sued but not in connection with any alleged untreated framing used. Rather, it is Mr Xie/Johnsco who assert the framing was untreated or not treated to an adequate standard.
[88] It is clear that in support of their claims Mr Xie/Johnsco have by their summary judgment application provided as much information as they possibly could through the evidence of Messrs Jones, Spiers and Norris. At first blush that evidence appears conclusive, that treatment using the substances/compounds required was inadequate, indeed very inadequate.
[89] In this outcome Ms Cuming’s response in challenge seems unworthy. But, she highlighted an important factor which the testing process appeared to overlook. The experts had looked for compounds which were not part of standard’s requirements at the time Johnsco ordered its treated timber. Yet the discovery of those various compounds along with tin appears to lead to one conclusion only i.e. that the timber had been treated albeit that low levels only had been detected and about those no comment was recorded regarding the presence of tin – a treatment solvent that had been approved at the time Johnsco’s timber was delivered to it.
[90] It is part of Mr Xie/Johnsco’s case that if the timber had been treated then that treatment was inadequate. But this submission too relies upon statements built around the low density quantities of compounds approved in March 2004 and which had not been required by the New Zealand Standards before then.
[91] There is a temptation in these circumstances to default to a position which says if there is a conflict about evidence of an important kind, then the matter ought to be left for a decision at trial. On the other hand I think a robust approach is appropriate.
[92] If timber was supplied having been treated as required then the whole of the case against AFT fails. Nothing survives which can be pursued against them. It is clear Mr Xie/Johnsco have delivered the best evidence available to them. Counsel, Mr Cowan, on their behalf informed the Court that the timber samples that were tested have been mislaid/lost. My reasonable inference is that no further testing can be done – the Court will never receive any more information about the treatment or adequacy of it, than it already has received.
[93] It is clear the timber was treated – the presence of solvents in samples tested could not have got there otherwise. Therefore, the remaining live question is whether the timber was treated to the standard required in November 2002. Remarkably there is no evidence provided, as there should have been by Mr Xie/Johnsco about what concentrations of solvents were required pre-March 2004 to attain the standards required. Dr Spiers had been asked whether he was able to test the timber to determine if it had been treated to the specified levels. He said he did not have that research capability. That is why the samples were sent to Mr Norris. It is clear Mr Norris’ comments about inadequate levels refers to post-March 2004 standards and did not refer to the presence of tin at all.
[94] Further testing will achieve nothing apparently for there is nothing further to test. Whilst it is AFT’s responsibility to prove the case against it cannot succeed, some responsibility must in the particular circumstances of this case, fall upon Mr Xie/Johnsco to show that some evidential purpose will properly be served by reserving evidence issues until trial. No such purpose is served in this case.
[95] We know the timber was treated. We will never know whether it was adequately treated or not. There is no evidence to show that the density of treatment solvents would remain the same nine years after the event as they were when the treatment was given. In fact, the evidence suggests otherwise. Mr Norris was careful in his affidavit evidence to warn that the results of testing only indicate the level of treatment when the timber was supplied, and therefore that the results must be considered as informative only.
[96] In this Court’s assessment Mr Xie/Johnsco are unable to prove that element vital to their claim, namely that the timber was untreated or inadequately treated. It follows that AFT have a complete defence and therefore the claim against them must fail.
[97] Incase that conclusion is wrong, I address other matters for consideration upon the summary judgment/strike out applications.
Whether there is an arguable claim for misleading and deceptive conduct in trade in breach of the FTA which is not time barred
[98] For AFT Mr Fulton concedes that if the timber frames supplied were not treated then AFT’s conduct could constitute misleading and misleading conduct in trade contrary to s 9 of the FTA.
[99] AFT’s position is that nevertheless the claim against it must fail because:
(a) The misleading and deceptive conduct was not relied upon and did not cause the loss claimed.
(b) Such cause of action is time barred by the three year limitation period in s 43(5), because the lack of timber treatment was reasonably discoverable at the time the timber was supplied.
[100] This case is about AFT agreeing to supply timber of a specified standard, of delivering that timber purported to have been treated to that specified standard, and then producing a Producer Statement confirming those facts.
[101] AFT submits the claims of misleading and deceptive conduct are limited to the provision of the Producer Statement.
[102] Mr Fulton submitted that the applicant’s claims must be limited to any difference in value between the costs of treated frames and untreated frames. I disagree. A Court is able to select the best measure to fairly compensate a plaintiff for the harm done including tortious measures. Usually in building defect cases the measure adopted is generally the economic loss suffered upon discovery of the
defects and the measure of that loss is the reasonable cost of repair. [5]
[103] An overview of the current case is that the claims against AFT assert that Mr Xie/Johnsco would not now be in the position where they may have to pay for the costs of replacing the timber, if there had been no misconduct by AFT.
[104] Mr Fulton submits that the FTA claim is really a contractual claim in disguise for it alleges the delivery of a product other than that which AFT contracted (to SMB) to supply. Mr Fulton submits therefore it is a claim that can be struck out because it concentrates upon an alleged duty of care to perform a contract.
[105] Whether that is so is not a matter for conclusion upon the strike out application. The view of Young J in NZ Food Group (1992) v Amcor Trading (NZ) is appropriate [6]:
As I have earlier indicated, I think that in New Zealand much of this debate about the overlap of contractual and tortious remedies can be avoided simply, in most cases at least, by invoking the Fair Trading Act. It was a condition of the contract between Amcor and NZ Food Group that the supersocolate supplied would be of merchantable quality. By supplying supersocolate pursuant to this contact, Amcor was representing that the supersocolate so supplied was of merchantable quality. In the present case, the supersocolate was not of merchantable quality so Amcor, on this basis, would appear to have had a liability to NZ Food Group under s 9 of the Fair Trading Act because it had, in this way, been guilty of deception or misleading conduct.
[106] In this case AFT contracted to provide product for use by the builder of Mr Die’s new dwelling. In those circumstances the FTA conduct in question was arguably not just the provision of a Producer Statement one year later, but the supply one year earlier of timber that was below the specified standard.
Limitation issues
[107] AFT’s position is that if treated timber had been supplied then an odour and colour would have indicated as much. Conversely if there was neither odour nor colour then an experienced builder would have known the timber was untreated. Therefore AFT argues that from the beginning i.e. the date of supply in 2003, it was reasonably discoverable whether the timber was treated or not. AFT claim therefore that the cause of action under the FTA is out of time.
[108] This too is a matter for evidence in due course. AFT’s position draws on certain assumptions, sometimes based on statements reported as hearsay, and in particular statements attributed to Mr Tongue.
[109] Mr Xie/Johnsco do not accept the claim of reasonable discoverability. Indeed Mr Xie’s evidence explains why it was important to him that he obtained treated timber for use in the construction of the dwelling. He said further that he did not and could not have known about the level of actual timber treatment at the time of construction; that the first he knew of the issue was when the proceeding against him, and others, was commenced.
[110] It would be inappropriate upon this application for the Court to disregard claims by AFT that the absence of an odour should have alerted Mr Xie to the lack of timber treatment.
[111] Issues about ‘reasonable discoverability’ too are best left for a trial.
Whether contractual limitations in SMB’s contract of supply, precludes a claim
[112] In short it cannot. A party cannot contractually exclude or limit the application of the FTA to their conduct. A contractual exclusion may be relevant to the reasonableness of any reliance placed on alleged misleading and deceptive conduct but such reliance is an issue which should be determined at trial. [7]
Is there an arguable claim of negligence?
[113] Mr Xie/Johnsco sought contribution from AFT as a joint tort/feasor. To succeed they need to prove AFT owed the plaintiffs a duty of care as subsequent owners; that the duty of care was breached; and that the breach caused or contributed to the loss suffered by the plaintiffs.
[114] As the submissions of Mr Cowan helpfully demonstrate it is the case that
New Zealand Courts have not demonstrated the reluctance of overseas courts to
recognise a duty of care owed by those involved in the construction of defective buildings, albeit beyond immediate contractual obligations. Claims of negligence could survive notwithstanding the nature of a contractual relationship between the parties.
[115] The Supreme Court in Sunset Terraces and Byron Avenue [8] has confirmed that persons involved in the construction process may all owe a duty of care to subsequent owners of residential dwellings built by them and that this may occur despite contractual arrangements between parties. Also such duty of care may be owed even if there was a contract with the original owner expressly excluding liability in tort. [9]
[116] In this case AFT supplied treated timber frames for the construction of the dwelling. There is no principal basis for treating AFT any differently than a Court would the position of a carpenter subcontracted to obtain the timber and build the frames on site.
Is there an arguable breach of that duty?
[117] Mr Xie/Johnsco claim that AFT were contractually required to produce frames with treated timber and that reasonable care ought to have been taken to ensure that occurred. Mr Xie wanted it. The plans submitted specified for the use of it. That is why the Council required the Producer Statement confirming the timber treatment before it would issue a code compliance certificate.
[118] AFT have submitted that untreated timber complied with the New Zealand Building Code at the time of construction. As Mr Cowan submits, that claim is not based on any of the affidavit evidence filed in this application. Further, he submits it is wrong. He asserts that, according to New Zealand Standards, untreated timber could be used to achieve compliance for the durability requirements of the New
Zealand Building Code in the following circumstances:
Radiata pine framing members that have been kiln dried at 74°C or above, to
18% moisture content or less and have been planer gauged do not require preservative treatment, provided they are not exposed to ground atmosphere
or in any position where the timber moisture content would exceed 18%.
[119] As Mr Cowan submits, in this case Johnsco and Council contemplated a possible exposure to moisture in excess of 18% and for that reason wanted to use treated timber. It follows that it is arguable that a breach of duty arose in the circumstances.
Whether the alleged breach arguably caused or contributed to the plaintiffs’ loss
[120] If Mr Xie/Johnsco are to be held liable to the plaintiffs it is their claim that but for the alleged defects in the design and the construction of the dwelling an issue may remain about whether the frames had been built with due skill and care. In this respect the claim against AFT for contribution is orthodox and that had the plaintiffs sued AFT directly it would have been liable as a concurrent tort/feasor with a claim for economic loss suffered on the discovery of the defects and damage to the plaintiffs’ home.
[121] As Mr Cowan submits it is at least arguable that the extent of that loss is greater because of the alleged negligence in the construction of the timber framing for this dwelling.
Conclusions
[122] I have determined there is not sufficient evidence, nor will there ever be such to prove the timber supplied for the construction of the dwelling on the plaintiffs’ property was untreated or treated to an adequate standard. It follows that the claims against AFT must fail. Accordingly, summary judgment is granted for AFT upon its application.
[123] Except for that critical finding regarding the treatment timber used in the dwelling construction, I would not have struck out the AFT claim or the claim for contributory negligence brought by Mr Xie/Johnsco. I would have ruled against AFT on each of its points raised in support of a strike out application.
Costs
[124] I fix these on a 2B basis, payable to AFT.
Associate Judge Christiansen
[1] [2002] 2 NZLR 213 (CA).
[2] Auckland High Court, CIV 2004-404-4824, P?
[3] Westpac Banking Corporation v M M Kembla New Zealand Limited [2001] 2 NZLR 298; Young v
Holden (High Court, Auckland, CIV 2006-404-6989 8 November 2007, Associate Judge Gendall).
[4] Westpac
Banking Corporation v M M Kembla New Zealand Limited (supra); A – G
v Prince & Gardner [1998] 1 NZLR 262 (CA) at 267; Collier v
Panckhurst (1999) CA 136/97 6 June 1999; Re Lucas & Son (Nelson Mail)
Limited v O’Brien (1978) 2 NZLR 289 at
294.
[5]
Invercargill City Council v Hamlin [1996] 1 NZLR 513 (PC).
[6] (1999) 9 TCLR
184.
[7] See the
discussion in Body Corporate 202254 v Taylor [2009] 2 NZLR 17, 60 –
64.
[8] [2011] 2
NZLR 289.
[9]
Body Corporate 183523 & Anor v Tony Tan & Associates Limited & Ors
(HC) AK CIV 2004-404-4824 at [65].
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