Saffioti v Jim Stephenson Architect Limited [2012] NZHC 2519 (1 October 2012)

Last Updated: 17 October 2012

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-1926 [2012] NZHC 2519

IN THE MATTER OF an appeal against a decision of the

Weathertight Homes Tribunal at Auckland

BETWEEN CARL SANTO SAFFIOTI AND EIJA MARITA LINDEN SAFFIOTI Appellants

AND JIM STEPHENSON ARCHITECT LIMITED

Respondent

Hearing: 21 August 2012

Counsel: R J Hooker for Appellants

J K Goodall for Respondent

Judgment: 1 October 2012

_{JUDGMENT OF KATZ J}

In accordance with r 11.5 High Court Rules

I direct the Registrar to endorse this judgment with a delivery time of 11 a.m. on 1 October 2012.

Solicitors: Vallant Hooker & Partners, Auckland – [e-mail]

Alan Jones Law Partnership, Auckland – [e-mail]

_{Copy to: J K Goodall, Auckland – [e-mail]}

SAFFIOTI AND SAFFIOTI V JIM STEPHENSON ARCHITECT LIMITED HC AK CIV-2012-404-1926 [1

October 2012]

Introduction

[1] The appellants, Mr and Mrs Saffioti, purchased a property in Mt Albert, Auckland from the original homeowners, Mr and Mrs Ward. They later discovered it was a leaky home. They filed a claim in the Weathertight Homes Tribunal (the Tribunal) against a number of people allegedly involved in the construction or design of the home, including the respondent, Jim Stephenson Architect Limited (JSAL).

[2] JSAL applied to the Tribunal to be removed from the proceedings under s 112 of the Weathertight Homes Resolution Service Act 2006 (the Act) which provides that 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.

[3] The Tribunal concluded that the case against JSAL was unlikely to succeed and, accordingly, that it was “fair and appropriate” to remove JSAL as a party. Mr and Mrs Saffioti now appeal that decision. The key issue on appeal concerns how the Tribunal should approach applications to remove parties from proceedings.

[4] The Saffiotis argue that the Tribunal erred by not following the traditional “strike out” approach, as applied in the context of High Court proceedings. They say that if that approach had been taken, the removal application would have failed. On a strike out approach, it is generally assumed that all pleaded facts are correct and can be proven. The Court then considers, on the basis of those facts, whether the cause of action pleaded is tenable.

[5] In this case, the Tribunal considered fairly extensive evidence, including evidence that was inconsistent with the pleadings, in order to determine whether it was fair and appropriate to remove JSAL from the proceedings. JSAL argued that this was the correct approach and that it led to the correct outcome.

[6] A secondary issue on appeal is whether, as a matter of law, the claim against

JSAL was doomed to fail in any event. The basis for this submission was essentially

that JSAL owed no duty of care in the circumstances of this case, because a builder that proceeded with work in the absence of the necessary design detail would be liable for any subsequent flaw, rather than the architect.

Facts

[7] The Saffiotis purchased their home in 2004. After leaks started to appear an assessor appointed by the Department of Building and Housing determined that, in his opinion, the dwelling was a leaky building. It therefore met the eligibility criteria under s 14 of the Act.

[8] The assessor’s report identified JSAL as one of the parties potentially

responsible for the weather tightness issues, on the basis that:

There were no details in the plans of the relevant junctions as the plans were submitted for a building consent.

A claim was filed by Mr and Mrs Saffioti in the Tribunal against various respondents, including JSAL, in 2011. The statement of claim alleged that JSAL was the architect and/or designer of the dwelling and had been negligent, causing loss to the Saffiotis.

[9] JSAL applied to the Tribunal to be removed from the claim pursuant to s 112 of the Act. On 21 December 2011, after the removal application had been filed, the Tribunal issued a direction requesting a further report from the assessor. The updated assessor’s report again identified JSAL as a contributing party.

[10] Mr Stephenson, on behalf of JSAL, gave affidavit evidence that JSAL was not contracted to prepare construction drawings. He said that the plans it had prepared were only about 60% complete. Further, they had been altered by an engineer subsequent to their preparation and had then been sent to the Council for building consent without JSAL’s knowledge.

[11] Mr and Mrs Saffioti dispute that JSAL’s involvement was as limited as Mr

Stephenson suggested. Mr Saffioti filed an affidavit in opposition to the removal

application and also referred to other documentary material before the Tribunal. Based on this material, the Saffiotis made the following submissions:

(a) The application for building consent was signed by the builder, who identified the designer as JSAL and attached plans prepared by JSAL (dated 18 September 2000) to the building consent application.

(b) Mr Stephenson had instant knowledge of the property when contacted about it which, in Mr Saffioti’s view, indicated more extensive involvement than asserted by Mr Stephenson.

(c) There appear to have been at least five different sets of plans prepared which showed different stages of development of the plans and different dates. This was also said to reveal a more extensive involvement than that disclosed by Mr Stephenson. None of the plans showed any details as to the construction of the junctions.

(d) Mr Saffioti’s own expert’s report (from a building surveyor, Mr Gill)

considered the engineer’s additions to the plans to be normal.

(e) Mr Gill also identified failings in the design, in particular in relation to the lack of design of the junctions by JSAL.

(f) Nothing in the plans indicated they were draft or incomplete. They could be and were used for the building consent application. In granting a building consent on the basis of the plans, the Council clearly indicated that it did not believe they were incomplete.

(g) JSAL had an ongoing relationship with the builder over a period of several years and had designed a number of houses for the same builder. The appellants wish to be able to explore this factual context further.

[12] The Saffiotis argue that there are serious questions in relation to JSAL’s evidence, which they should be entitled to test at a full hearing. Mr Stephenson’s credibility is squarely under challenge.

The Tribunal’s decision1

[13] In determining whether the claim against JSAL should proceed to a full hearing, the Tribunal did not limit itself to a consideration of the pleadings only, but considered evidence relating to JSAL’s role. The Tribunal relied on Yun & Phon v Waitakere Council as authority for such an approach.2

[14] In relation to the assertions by Mr and Mrs Saffioti that JSAL must have been more involved than suggested by Mr Stephenson, the Tribunal found that the matters relied on by Mr and Mrs Saffioti did not refute Mr Stephenson’s clear evidence that JSAL did not submit the plans and that Mr Stephenson only considered them to be

60 per cent complete when he last worked on them.

[15] The Tribunal observed that although the matters referred to by Mr Saffioti in his affidavit may have caused him to assume that JSAL had more involvement than it claimed, this would have only been an assumption:3

The issues and documents he refers to do not provide a sufficient evidential basis to negate the more limited involvement outlined by Mr Stephenson.

[16] In addition, the Tribunal drew an adverse inference from the fact that the builder had not opposed the application for removal by JSAL. In the Tribunal’s view he would have been the person best placed to give contrary evidence, if it existed, regarding the involvement of JSAL.

[17] The Tribunal found that that the evidential basis supporting the Saffioti’s claim as to the extent of JSAL’s involvement was best described as “slim” and that it was unlikely that any better evidence would become available to disprove Mr

1 _{Saffioti v Ward & Ors WHT Auckland TRI-2011-100-65, 14 March 2012 (Procedural Order 9).}

2 _{Yun & Phon v Waitakere Council HC Auckland CIV-2010-404-5944, 15 February 2011.}

3 Saffioti v Ward & Ors at [7].

Stephenson’s evidence. The likelihood of any claim succeeding against JSAL was accordingly held to be remote.4

[18] The Tribunal was also concerned that the only specific allegation made by the assessor in relation to design omission is what the assessor referred to as lack of details “of the relevant junctions”. The Tribunal reviewed evidence from the Saffiotis’ expert in relation to this issue. Based on that evidence the Tribunal considered that the issues related primarily to installation or workmanship, rather than design.

[19] The Tribunal noted that designers were entitled to expect builders and other construction parties to follow good trade practice when constructing dwellings and would be liable for a failure to do so. The Tribunal commented in this context that:

[18] In this regard I note that the plans were for building consent purposes only and there is no allegation that JSAL was contracted to provide any more detailed plans that what was required for building consent. If construction details were omitted from the plans the person who undertook that work in the absence of a prescribed detail is primarily liable. As noted5 that person has two choices, either to ask for further detail, or to design the detail themselves. If they chose to design it themselves then the complaint is against that person that fails and not the architect.

[20] The Tribunal found that the difficulties in establishing a causative link between any of the alleged omissions in JSAL’s design work and the defects causing leaks in the dwelling were significant.

The correct approach to removal of a party under s 112

[21] The key issue in this appeal is whether the Tribunal took the correct approach to removal of a party under s 112, or whether it should have taken the general strike

_{out approach, as applied in the Courts.}

4 _{At [9]}

5 Carter v Tulip Holdings DBH claim 692, 30 June 2006.

The traditional “strike out” approach

[22] In High Court proceedings, an application can be made under rule 15.1 of the High Court Rules to strike out all or part of the pleading in the following circumstances:

15.1 Dismissing or staying all or part of proceeding

(1) The court may strike out all or part of a pleading if it—

(a) discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or

(b) is likely to cause prejudice or delay; or

(c) is frivolous or vexatious; or

(d) is otherwise an abuse of the process of the court.

[23] The classic statement of the correct approach to strike out applications in the context of court proceedings is that of the Court of Appeal in Attorney-General v Prince & Gardner.6 In a frequently cited passage Richardson P, delivering the judgment of himself, Thomas and Keith JJ said:7

A striking out application proceeds on the assumption that the facts pleaded in the statement of claim are true. That is so even though they are not or may not be admitted. It is well settled that before the Court may strike out proceedings that the causes of action must be so clearly untenable that they cannot possibly succeed ... the jurisdiction is one to be exercised sparingly, and only in a clear case where the Court is satisfied it has the requisite material ... but the fact that applications to strike out raise difficult questions of law and require extensive argument it does not exclude jurisdiction. ...

[24] More recently, the Supreme Court considered the appropriate principles in Couch v Attorney-General.8 Elias CJ, delivering the judgment of herself and Anderson J said:

[33] It is inappropriate to strike out a claim summarily unless the Court can be certain that it cannot succeed. The case must be “so certainly or clearly bad” that it should be precluded from going forward.

6 _{Attorney-General v Prince & Gardner [1998] 1 NZLR 262.}

7 _{At 267 (references omitted).}

8 Couch v Attorney-General [2008] 3 NZLR 725.

[25] There is a general presumption against the consideration of evidence inconsistent with the pleadings. A strike out application is usually dealt with on the basis that the pleaded facts can be proved.9 However, evidence can and will be considered in relatively limited circumstances:

(a) Uncontested evidence is allowed. An affidavit that is not contradicted and does not itself contradict the pleadings can be taken into account.10

(b) Documents the status of which is incontestable can be exhibited.11

(c) The Court is not required to assume the truth of a pleaded allegation which appears entirely speculative and without foundation.12

(d) Affidavit evidence will be admitted to show that an essential factual allegation is plainly wrong.13 Where an essential pleaded factual allegation is demonstrably contrary to indisputable fact, the matter ought not to be allowed to proceed further.14

(e) Any agreement or other document relied on should be construed in the way most favourable to the impugned pleading.15

[26] Although it is possible to consider evidence in these fairly limited circumstances, this does not alter the fact that the power to strike out is to be

_{exercised sparingly and only in exceptional cases. The Court must be able to say}

9 Attorney General v McVeagh [1995] 1 NZLR 558 at 566, Southern Ocean Trawlers Ltd v

_{Director-General of Agriculture and Fisheries [1993] 2 NZLR 53, at 62-63.}

10 Peerless Bakery Ltd v Watts [1955] NZLR 339, Bishop v New Zealand Airline Pilots Association [1992] 2 NZLR 237, Southern Ocean Trawlers Ltd v Director-General of Agriculture and Fisheries at 62.

11 NZ Guardian Trust Company Ltd v Peat Marwick (1990) 3 PRNZ 423 (a trust deed annexed to

an affidavit was admitted). In Wilkins v Auckland District Court (1997) 11 PRNZ 232 a document was admitted on the basis that the Court should adopt the construction of it most favourable to the impugned pleading.

12 Collier v Panckhurst CA 136/97, 6 September 1999 and Siemer v Stiassny HC Auckland CIV

_{2008-404-6822, 30 November 2009.}

13 Attorney-General v McVeagh, AG & CA Henriksen Ltd v Carter Holt Harvey Ltd HC Auckland

_{CP 141/98, 20 October 1999.}

14 _{At 566.}

15 Wilkins v Auckland District Court at Auckland (1998) 11 PRNZ 232; Kynaston v Clark HC Christchurch CP 124/97, 7 August 1998.

with confidence that the plaintiff has no case. If there is doubt as to whether a claim might lie, or if there are disputed questions of fact, then the case will be allowed to proceed to a full hearing. Successful strike out applications are relatively rare.

Previous approach of High Court in appeals regarding s 112 removal applications

[27] This Court has considered appeals from decisions of the Tribunal to remove a party to a claim under s 112 in a number of previous cases. However, the issue of the correct approach has seldom been fully argued, as the parties have generally accepted that the general strike out approach is appropriate. As a result, almost all of those cases16 have proceeded on the basis that the traditional strike out approach should be applied.

[28] Despite the fact that most appeals have proceeded on a strike out basis, this Court has recognised on a number of occasions that the words “fair and appropriate” in s 112 could possibly encompass wider considerations than those considered under the general strike out approach.17 For example, in North Shore City Council v Wightman, McKenzie J observed that:18

There may be some difficulty in applying r 15.1 by direct analogy to the Tribunal, in that pleadings do not serve the same essential purpose in claims before the Tribunal that they do in claims before the High Court. Further, s 12 is expressed in much more general terms than r 15.1. Accordingly, I would not exclude the possibility that the Tribunal might properly consider it fair and appropriate to strike out a party, in circumstances other than where no arguable cause of action is disclosed. However, I need not consider that aspect ...

[29] Andrews J made similar observations in Auckland City Council v The Unit

Owners in Stonemason Apartment & Ors, where she said that “the Tribunal’s power

_{to strike out parties to an adjudication proceeding is akin to that of the High Court}

16 Kay v Dickson Lonergan Ltd HC Auckland CIV-2005-483-201, 31 May 2006, Burns v Argon Construction Ltd & Ors HC Auckland CIV-2008-404-7316, 18 May 2009, Auckland City Council v The Unit Owners in Stonemason Apartment & Ors HC Auckland CIV-2009-404-3118,

11 December 2009, Fenton v Building Code Consultants Ltd HC Auckland CIV-2009-404-6348,

15 March 2010, Wong v Weathertight Homes Tribunal & Ors [2011] NZCCLR 5 and Thomson v

_{Christchurch City Council HC Christchurch CIV-2010-409-2298, 28 March 2011.}

17 Burns v Argon Construction Ltd; Auckland City Council v The Unit Owners in Stonemason Apartments & Ors; Thomson v Christchurch City Council and Fenton v Building Code Consultants Ltd.

18 North Shore City Council v Wightman HC Auckland CIV-2010-404-3942, 30 November

2010 at [58].

and District Courts, although arguably somewhat broader” and that the decisions under s 112 had not “conclusively established whether it is wider in its scope”.19 In that particular case, however, her Honour approached the appeal on a traditional strike out basis.

[30] Similarly, Cooper J in Fenton observed that the language used in s 112 may confer a wider scope than r 15.1.20 However in that case his Honour also followed the traditional strike out approach, which the Tribunal had also adopted.21 Cooper J considered it “inherently unlikely” that different strike out approaches would apply in different jurisdictions.22 Rather, an interpretation of s 112 that placed claimants in the same position in both jurisdictions was “consonant with the purpose of the Act”, particularly the objective of providing cost-effective procedures for the resolution of claims.23

[31] Cooper J concluded as follows:24

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

[32] Fenton was followed in Thomson v Christchurch City Council, and a similar approach was taken in Wong v Weathertight Homes Tribunal. In the latter case Venning J considered that it was accepted that the appropriate approach under s 112 was that taken to a strike-out application.25 His Honour noted that the Tribunal was

_{entitled to dismiss a pleading in reliance on indisputable affidavit evidence that is}

19 Andrews J referred to Cousins v Plaster Systems Ltd WHT TRI-2008-107 Procedural Order 3,

_{23 January 2009 and Kay v Dickson Lonergan Ltd.}

20 _{At [39].}

21 Burns v Argon Construction Ltd and Auckland City Council v Unit Owners in Stonemason

_{Apartment at [23].}

22 _{At [43] and [45].}

23 _{At [47].}

24 _{At [51].}

25 At [15], citing Fenton, Burns v Argon Construction Ltd & Ors and Auckland City Council v The

Unit Owners in Stonemason Apartment & Ors.

contrary to the pleading (though in Wong, as the evidence was both contrary to the proceedings and disputable, it could only be resolved at a hearing).26

An alternative approach to removal applications?

[33] The above line of authority was critically considered by Ellis J in Yun & Phon v Waitakere City Council. The appellants in Yun & Phon owned a leaky home and had commenced proceedings naming the Council and the designer of the house as defendants. The Tribunal considered the tenability of the claims by testing their evidentiary basis. Having filed initial expert evidence (which the Court found did not support their claims against the designer and Council) the appellants refused to cooperate further in the factual inquiry, despite having previously agreed to file further supporting evidence. They did, however, file an updated pleading.

[34] The Tribunal concluded that as the evidence provided by the appellants did not support their claims, the respondents should be removed. The appellants appealed, arguing that the Tribunal should have determined the matter solely on the assumption that the facts alleged in the statement of claim were true.

[35] Ellis J comprehensively reviewed the relevant statutory provisions. Her Honour noted that the Tribunal’s processes ensure that a claimant’s eligibility is determined by a threshold factual inquiry. Thus, when a claim for adjudication is commenced, the Tribunal has the assessor’s prior determination of prima facie factual eligibility, as well as a considerable amount of other factual material.27

[36] Accordingly, at the time a preliminary conference is called under s 65 of the Act, the Tribunal is likely to be considerably more informed than is a High Court Judge at the time the first case management conference is convened in that Court, at which stage a High Court will generally have no evidence beyond the pleadings.28

[37] While agreeing with the outcome in Fenton (and other cases which had applied traditional strike out principles) Ellis J made it clear that she did not accept

26 _{At [31].}

27 At [17] and [23].

the general proposition that an application for removal under s 112 should be treated in the same way as a strike out application in the High Court:29

[T]o the extent that any or all of these judgments can properly be interpreted as saying that the s 112 removal jurisdiction is precisely analogous to the strike out jurisdiction of this court or that (as a consequence) evidence may never be referred to by the Tribunal in making removal decisions, I must respectfully demur. More particularly, I consider that any blanket prohibition on the consideration of evidence in a s 112 context:

(1) Involves unjustifiably reading down the clear wording in s 112(1)

and is at odds with the wider scheme and purpose of the Act; and

(2) Renders s 112(2) [natural justice] otiose.

[38] A difference in approach was seen as consistent with the Tribunal’s primarily inquisitorial role, in which it may seek information and evidence from the commencement of a proceeding.30

[39] Ellis J concluded that natural justice did not require the Tribunal to “be held hostage by a recalcitrant or uncooperative party”31 and that, having sought information that the appellants refused to provide (despite having previously agreed to do so) the Tribunal was able to determine the issue on the expert evidence before it.32 Her Honour concluded, in a paragraph relied upon by the Tribunal in this case, that:

[70] ... If there is to be any prospect of hearing and determining such claims in an expeditious and cost-effective way, the Tribunal must be able to perform an active gate-keeping role in terms of both the joinder and removal of parties. If early receipt and assessment of evidence assists it to sort the wheat from the chaff, then I am of the view that the Act not only contemplates but arguably requires that, subject to the requirement of fundamental fairness that is reflected in s 112(2).

Discussion regarding correct approach to removal applications

[40] The language of r 15.1 (set out in [22] above) and s 112 (set out in [2] above)

is quite different. Under r 15.1 the main ground for striking out a pleading in High

_{Court proceedings is that it “discloses no reasonably arguable cause of action”.}

29 _{At [57].}

30 _{At [61].}

31 At [67].

Under s 112, the Tribunal may strike out a party to a claim if it “considers it fair and appropriate in all the circumstances”.

[41] The language in r 15.1 denotes a fairly strict objective standard in which the Court takes into account the pleaded facts and the relevant law and asks whether a “reasonably arguable cause of action” is disclosed. If not, the relevant pleading will be struck out.

[42] In contrast, the words “fair and appropriate” combined with “in all the circumstances” in s 112 have a somewhat broader focus. The Tribunal is required to consider “all the circumstances”, before deciding whether it is “fair and appropriate” for a party (as opposed to a cause of action) to be struck out.

[43] Taking into account the different wording and the different statutory context I agree with the conclusion reached by Ellis J in Yun & Phon that s 112 confers a somewhat wider jurisdiction than r 15.1, for the reasons set out in that decision, as summarised in [33]-[39] above.

[44] Nevertheless, it is my view that the cases where it will be “fair and appropriate” for the Tribunal to remove a party from a proceeding in circumstances where the relevant causes of action would not be struck out on a traditional strike out grounds will be relatively rare. Section 112 should not be seen as providing carte blanche to strike out parties at a preliminary stage in circumstances where the claims asserted against them are tenable, but weak. Often in litigation claims which appear weak at an early stage may gain momentum at trial, whereas other claims which appeared strong at the outset are later revealed to be fatally flawed.

[45] It is necessary to be cautious when approaching applications under s 112 in order to prevent injustice to claimants who may in fact have a good claim once all the evidence is before the Tribunal, including through cross-examination in appropriate cases. Too broad an approach to the jurisdiction under s 112 would involve a risk of injustice to claimants. It is important that claims which may ultimately prove to be meritorious not be prematurely struck out at an interlocutory stage.

[46] Although I concur with Ellis J that the s 112 jurisdiction is wider than the comparable jurisdiction under r 15.1 of the High Court Rules, I do not accept that the parameters of that jurisdiction are wide enough to justify the removal of JSAL from the proceedings in this case on the “fair and appropriate” ground.

[47] The present case differs significantly from the facts before the Court in Yun & Phon. That case involved a party who was described as “recalcitrant” and “uncooperative.” Having initially agreed to provide more information as to the evidential basis of their claim, the claimants then declined to do so, preferring to rely on the pleadings alone. The claimants had already filed their expert evidence at the time of the removal hearing and it did not support their claims. They agreed to provide further information, but then refused to do so. Yun & Phon is therefore not a case where the Tribunal was faced with disputed or conflicting evidence. Rather, the claimants’ own expert evidence did not support their pleaded case. Yun & Phon is accordingly not authority for the proposition that the Tribunal can consider and resolve genuinely and reasonably disputed issues of fact, or determine matters of credibility.

[48] Yun & Phon provides an illustration of particular circumstances where the High Court found that fairness allowed it (and the Tribunal) to consider evidence which was inconsistent with (or did not support) the pleading. However, even on a traditional strike out approach, the Court is not required to assume the truth of a pleaded allegation which is speculative and without foundation. In the High Court context that principle has applied only rarely and in the most clear-cut of cases. Yun

& Phon represents a somewhat more liberal application of that principle, reflecting the different statutory test and the broader statutory context in which the Tribunal operates.

[49] Here, the evidence filed by JSAL was disputed. The Saffiotis filed an expert report which claimed that the plans were deficient. They also relied on the assessor’s two reports, which identified JSAL as a contributing party (albeit with minimal supporting detail as to the basis for this). Mr Saffioti filed an affidavit raising various further issues and concerns in relation to Mr Stephenson’s affidavit.

[50] Mr and Mrs Saffioti also provided comprehensive submissions, supported by references to evidence where appropriate, outlining the areas where they wanted to test Mr Stephenson’s evidence if the matter proceeded to a full hearing. They attacked Mr Stephenson’s assertion of limited involvement in the design and building consent process and drew upon the Council file and other material to raise factual issues which they submitted needed to be examined at a substantive hearing.

[51] Although it is obviously not possible to form a view on the substantive merits at this stage, the issues raised by the appellants are relevant and appropriate matters for further exploration at a substantive hearing. Mr Stephenson’s credibility has been squarely put in issue. Mr and Mrs Saffioti say that Mr Stephenson’s affidavit should not have been regarded as sufficiently compelling to justify JSAL’s removal, because it was no more than an untested denial by him of the facts on which the appellants rely.

[52] There is force in the appellants’ submission that the approach taken by the Tribunal essentially required it to assess the probability of the claimants succeeding at trial by assessing the veracity of Mr Stephenson’s evidence, determining factual matters in dispute and drawing inferences from the facts as found in the pleadings, reports and evidence before the Tribunal.

[53] Having undertaken this exercise the Tribunal concluded that the claims against JSAL were weak and that JSAL should accordingly be removed. However, where the evidence is contentious and challenged, or a party’s veracity is in issue, the Tribunal should be wary of attempting to resolve such matters in the context of a removal application. Genuinely and reasonably disputed factual issues, the outcome of which could impact on the success or otherwise of a claim, are generally not suitable for summary determination.

[54] There may well be merit in Mr Stephenson’s evidence about the limited nature of his involvement in relation to the design of the dwelling. If his evidence is ultimately accepted by the Tribunal, the appellants’ claim against him may well fail. Those issues will, however, need to be explored at the substantive hearing and are unsuitable for determination under s 112. The disputed issues are such that it is

appropriate that they be determined at trial rather than determined summarily at an interlocutory stage.

Alternative argument – claim against JSAL cannot succeed as a matter of law

[55] A secondary issue on appeal is whether, as a matter of law, the claim against JSAL was doomed to failure in any event. The respondent submitted that it owed no duty of care in the circumstances of this case, because if a builder proceeded with work in the absence of the necessary design detail being provided then the builder, rather than the architect, would be liable.

[56] As set out in [19] above, the Tribunal held that, if construction details were omitted from the plans, the person who undertook that work in the absence of the prescribed detail would be “primarily liable.” I note that the use of the word “primarily” introduces some uncertainty into the analysis, as it suggests that the designer could also possibly be liable, albeit secondarily. In any event, the Tribunal stated that in such circumstances the person who undertakes the work has two choices, to ask for further detail, or to design the detail themselves. If they chose to design it themselves then the complaint is against that person and not the architect.

[57] Counsel for JSAL relied upon a decision of Heath J in North Shore Council v Body Corporate 188529 (the “Sunset Terraces” case)33 and subsequently in the Court of Appeal in support of this proposition.34

[58] In Sunset Terraces the Court of Appeal (and Heath J in the High Court) considered was that where a builder had access to the manufacturer’s details or specifications it is not necessary for the plans and specifications drawn up by the architect or designer to include those in the plans and specifications. The duty of care of the designer was supplanted by the builder in the circumstances where they had access to manufacturer’s specifications regarding a particular issue. The Court

_{of Appeal said:}

33 _{North Shore Council v Body Corporate 188529 [2008] 3 NZLR 479.}

34 North Shore Council v Body Corporate 188529 [2010] NZCA 64; [2010] NZLR 489.

Negligent preparations of the plans

[120] Heath J pointed to certain flaws in the plans and specifications. But he found that a reasonable builder would have access to the manufacturer’s specifications and would not require greater detail to achieve a workmanlike result.

[121] I agree with the Judge. No purpose would be served by requiring a designer to incur the cost of providing detail not reasonably necessary for the task. There being no carelessness it is unnecessary to discuss the leading authorities Voli v Inglewood Shire Council and Bowen, which impose liability on a negligent designer whose carelessness causes loss.

[59] JSAL argued that the Sunset Terraces decision applied on the facts of this case and accordingly the removal of JSAL would be “fair and appropriate” in terms of s 112. If a claim cannot succeed, as a matter of law, it is obviously appropriate that it be struck out.

[60] The Saffiotis’ case, however, was that Sunset Terraces is distinguishable. The junctions were poorly built because of the absence of adequate specifications in the plans. Unlike Sunset Terraces, there were no manufacturer’s specifications to guide the builder which he could reasonably have been expected to follow.

[61] JSAL relied on BRANZ documentation as being, in effect, analogous to manufacturers’ specifications. The appellants denied that any such analogy was appropriate and said that, in any event, the BRANZ documentation demonstrated the importance of the plans incorporating the design of the junctions. The Saffiotis submitted that the correct approach, on the facts of this case, is that set out in the judgment of White J in Coughlan v Abernathy:35

[64] It is well-established that an architect or designer like Mr Coughlan owes a duty of care to subsequent purchasers such as the Abernethys to ensure that plans are drawn with due skill and care to avoid foreseeable losses to them arising out of his or her work.36

[65] An architect or designer may not avoid liability for foreseeable losses arising from his or her lack of due skill and care by shifting responsibility to a labour-only builder for failing to build something that is not detailed in the plans or according to a manufacturer’s technical information when the information is not referred to in the plans or attached to them. In the absence of adequate supervision, as in the present case, the

35. Coughlan v Abernethy HC Auckland CIV-2009-004-2374, 20 October 2010 at [64]-[67] (references modified).

36 Citing Bowen v Paramount Builders Ltd and Sunset Terraces.

plans and specifications should have been sufficiently detailed so that the contractors did not have to guess at details of construction.

[62] In my view this case is not on all fours with Sunset Terraces. That case does not go so far as to say that, as a matter of law, a designer will never owe a duty of care in circumstances where the plans were silent on a design aspect that led to or caused damage.

[63] Accordingly the issue of whether JSAL owed a duty of care on the facts of this particular case is open for argument at the substantive hearing. The claim against JSAL is not doomed to failure, as a matter of law. At a substantive hearing, having considered all the relevant evidence and heard legal argument, the Tribunal may conclude that the underlying principles in Sunset Terraces should be extended to the present fact situation. Alternatively, it may find the reasoning in Coughlan persuasive. The issue cannot however be determined at this preliminary stage. It needs to be resolved at a full hearing, in light of all the available evidence.

Result

[64] The appeal is allowed and the Tribunal’s decision to remove JSAL from the

claim under s 112 of the Act is accordingly quashed.

[65] The appellants are entitled to costs on a 2B basis. If the parties are unable to agree on the quantum of costs, a memorandum should be filed and served on behalf of the appellants within one month. Any response for the respondents should be

_{filed and served within a further month.}

Katz J