Body Corporate 318596 v Mathis [2012] NZHC 373 (8 March 2012)

Last Updated: 13 September 2012

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

CIV-2009-463-285 [2012] NZHC 373

BETWEEN BODY CORPORATE 318596

First Plaintiff & Ors

AND G C MATHIS

First Defendant & Ors

CIV-2006-470-922

AND BETWEEN BODY CORPORATE S915535

First Plaintiff & Ors

AND DANEGELD LIMITED (IN LIQUIDATION)

First Defendant & Ors

Hearing: 24 February 2012 (Heard at Auckland)

Counsel: B M Easton for the Plaintiffs

G Brittain for relevant Respondents

Judgment: 8 March 2012

_{RESERVED JUDGMENT OF PRIESTLEY J}

This judgment was delivered by me on 8 March 2012 at 2.00 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date:...............................

Counsel:

B M Easton, Grimshaw & Co, Mt Mauganui.. Email: [e-mail]

G Brittain, Barrister, Tauranga. Email: [e-mail]

BODY CORPORATE 318596 v MATHIS HC TAU CIV-2009-463-285 [8 March 2012]

Introduction

[1] This review of an Associate Judge’s judgment pursuant to r 2.3 of the High

Court Rules gives rise to what counsel describe as a novel issue.

[2] The novel issue, which both counsel intimated would almost inevitably lead to an appeal to the Court of Appeal, regardless of my decision, relates to the proper construction of s 89 of the Building Act 1991 (the Act) and in particular whether alleged tortfeasors, who at the relevant time were employed by a building certifier, can be sued in their individual capacities for negligence.

[3] I have a clear view on the issue. But the near certainty of an appeal does not relieve me of the obligation to assess the parties’ submissions and to give cogent reasons.

Background

[4] The two proceedings currently before the Court involve complex claims arising out of the construction of residential apartment complexes at Mt Maunganui between 2000 and 2003. Those apartments, along with thousands of other New Zealand dwellings constructed over the last two decades, leaked (or to use the vogue term were not “weathertight”). This judgment is not the place to discuss the economic and social consequences of the new building control regime, of which the Act was a part, and which had catastrophic consequences for many New Zealand home owners.

[5] The first proceeding involves a nine unit complex called “Beachside”. The second proceeding involves a 39 unit complex known as “Cutters Cove”. In all probability the Cutters Cove proceeding will be settled but that does not affect the merits of this review hearing. Mr Brittain, who acts for the 6th to 9th defendants in the Beachside litigation and the 7th to 11th defendants in the Cutters Cove litigation, applied to have the causes of action against those defendants struck out.

[6] The strike-out application was argued before Associate Judge Doogue in

Tauranga in September 2011. The Judge’s reserved judgment, dated 7 October

2011, dismissed the strike-out application.1 For procedural reasons, over which there is no dispute, the route whereby the defendants can challenge the decision is by way of review rather than by an appeal to the Court of Appeal.

Brief Background

[7] The principles which apply to strike-out applications were common ground in the hearing before Judge Doogue, as they were on the review hearing. In general terms, the alleged facts are assumed to be true, the relevant cause of action must be clearly untenable, and the court must be certain a claim cannot succeed before it is

struck out. Courts should be slow to strike out claims which are novel.2

[8] At the relevant times the defendants who sought a strike-out were employees of Bay Building Certifiers Ltd (BBC), which under the Act was a building certifier. The responsibilities of BBC and its employees included inspecting building construction work, ensuring that new developments such as Beachside and Cutters Cove complied with the Building Code, identifying building defects and, in suitable cases, arranging for the issue of code compliance certificates.

[9] Before 1997 the relevant territorial authority, the Tauranga District Council, operated a department of building inspectors. The functions to which I have referred were carried out conventionally by Council employees. But it appears that as a result of the Tauranga District Council’s interpretation of both its statutory obligations and the policy of the Act, its building inspection arm atrophied. Indeed Mr Brittain informed the Court that many building inspector employees of the Council moved some 300 metres down the road and were instrumental in setting up or working for BBC.

[10] Judge Doogue noted, at [6], that BBC’s core services were approving plans

_{for building consents, inspecting construction work, and confirming that code}

1 _{Body Corporate No.318596 v G C Mathis HC Tauranga CIV 2009-463-285, 7 October 2011.}

2 Attorney-General v Prince [1998] 1 NZLR 262 (CA) at 267; Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33].

compliance had been achieved. BBC’s services (not necessarily relevant to the strike-out application) were either as a contracting party with the Tauranga District Council, or through engagement by a developer as a private certifier under the provisions of the Act.

[11] This duality impacts in different ways on each of the two developments. So far as the Beachside development is concerned, both stages of that development involved BBC as a private certifier engaged by the developer. BBC issued two code compliance certificates in July 2003. So far as the Cutters Cove development was concerned, its construction involved two stages. Stage 1 related to the foundations, for which BBC was contracted in respect of inspection and certification work by the Tauranga District Council. The balance of the Cutters Cove construction (Stage 2), as with Beachside, involved BBC as a private certifier under contract with the developer. Both Cutters Cove code compliance certificates were issued in October

2001.

[12] BBC is in liquidation and apparently has or had no extant insurance cover. It is worthless as a defendant and potential judgment debtor. The two Body Corporates sued the defendants to whom I have referred primarily in negligence, alleging deficiencies in the relevant inspections and compliance certificate obligations of the employees of BBC.

The Associate Judge’s decision

[13] In a careful judgment, the Associate Judge reviewed the background and the relevant law. As required by Mr Brittain’s submissions, he referred to the policy set out in the Building Industry Commissioner’s report (Reform of Building Controls) presented to the Minister of Internal Affairs. These submissions were repeated with clarity and eloquence by Mr Brittain before me. The Judge correctly commented at [33] that a potential defendant was not exempted from liability merely because his alleged breach of a duty of care occurred during the course of his employment by another person. The Judge then dealt with the Court of Appeal authority of Trevor

Ivory Ltd v Anderson3 and subsequent judgments dealing with that authority in the corpus of leaky building cases.

[14] The Judge then turned to the Act and dealt with Mr Brittain’s submission that, although s 89 made no reference to individual employees of building certifiers, this was a matter of legislative oversight. I deal with that submission more fully later in this judgment. But it is helpful to record a policy argument which Judge Doogue considered might well be a counter to Mr Brittain’s submission:

[55] There is considerable discussion in the Law Commission (sic) report preceding the legislation about the risks of opening up the certification process to non-territorial authority certifiers. The discussion in the paper makes it clear that the Commission thought the insurance elements in the scheme were vital to the viability of including private certifiers in the certification process. But that does not mean that the Commission (or the legislature thereafter) considered that because the proposed insurance held by employers should provide protection, that there was no need to for (sic) the liability of individual employees to continue. Insurance might be available in many cases. But invalidating events may occur which means that cover is not provided. So while the insurer of the building certifier– employer would normally indemnify the actual certifier if he carried out the work against legal liability, circumstances could be imagined where that would not happen. For these reasons I regard it as being at least arguable that the legislature made a conscious decision to exclude liability on the part of employees of territorial authorities, but not to intervene in the case of their private sector counterparts. There were increased risks where private sector providers were engaged than there were when a local authority was carrying out the work.

[15] The conclusion of the decision under review sets out succinctly the reasons

why the defendants’ strike-out application was dismissed. I replicate them:

[64] The starting point must be that a tortfeasor is liable for his torts regardless of whether at the time when the act or omission occurred he was the employee of the company.

[65] For the reasons I attempted to set out earlier when discussing the Trevor Ivory line of cases, it is unlikely that the involvement of an incorporated company/employer will be influential to the outcome of this case.

[66] In his judgment in Body Corporate 202254 v Taylor, Chambers J

said:

The primary tortfeasor is the natural person whose acts or omissions led to the harm in question. It is possible that the net of defendants

3 Trevor Ivory Ltd v Anderson [1992] 2 NZLR 517 (CA).

might be widened to include others, such as employers or principals. The doctrine of vicarious liability is the means by which the law widens the net. But the primary focus is [nonetheless] on the individual or individuals whose acts or omission caused the harm.

[67] There would, with respect, be convincing reasons why Chambers J’s approach would be followed in the present case. That points to the individual inspectors being liable rather than the company.

[68] As I have also tried to explain, some aspects of the background legislation are also relevant to the existence of a duty of care.

[69] There are several authorities that have warned against the difficulties inherent in attempting to embark upon analysis of causes of action which are very much fact-dependent enquiries at the stage of a strike out application.

[70] In Trevor Ivory the Court declined to strike out the proceeding before trial. The Court said:

In the end, the answer to the questions associated with the negligence claim will have to be very fact-specific. Because we do not know the exact detail of the role and conduct of Mr Taylor, we are required to deal with this case in a frustratingly abstract context. Further, an analysis of the relevant policy considerations will necessarily be more complete if it occurs in the context of factual findings, which the trial Judge will be in a position to make. And, as foreshadowed in the passage we have cited from [Attorney-General v Prince and Gardener [1998] 1 NZLR 262 (CA)], there is also more scope at trial than there is in this Court on a strike-out appeal for evaluation of the competing policy considerations.

[71] I do not consider that the question of whether an employee in the position of the building inspector in this case ought to be personally liable for his alleged defaults is a matter that ought to be disposed of on a strike out application. Cases involving claims against building inspectors of this kind have to be considered in context. The necessary matters for consideration will include the background to the rights of residential homeowners to depend upon persons such as building inspectors carrying out their statutory obligations under the (then) Building Act 1991.

Discussion

[16] Mr Brittain accepted that a strike-out application was not the appropriate cockpit in which to resolve difficulties which might arise from the Trevor Ivory judgment. He accepted too that the precise relationship between the relevant defendant and BBC would involve a factual inquiry, as indeed would the plaintiffs’ specific allegations of negligence against them.

[17] Mr Brittain’s central submission was that a scrutiny of the policy of the Act and its scheme in their entirety led to the conclusion that the Act was inconsistent with casting a duty of care on employees. Essentially, as a matter of statutory policy, the causes of action against BBC’s employees were prohibited. Accordingly, the claim should be struck out.

[18] Undoubtedly it was open to an entity other than a territorial authority (including companies) to apply for approval as a building certifier.4 Approval would not be given unless the Building Industry Authority were satisfied there was an approved scheme of insurance against civil liability.5 Building certifiers could be engaged on certain terms by developers or territorial authorities, the core terms of engagement being specified in s 57(3).

[19] Section 35 retained the right of territorial authorities to issue building consents. Building certifiers could issue code compliance certificates (s 56(2)(a)) but the territorial authority was obligated by s 50 to accept such certificates and also to issue s 35 consents.

[20] Mr Brittain is correct that threading through ss 52 and 57 is a Parliamentary awareness of claims arising out of building inspections and the need for adequate indemnity. Hitherto the only target for relevant negligence claims had been the local or territorial authority. The principle articulated by the Privy Council in Invercargill

City Council v Hamlin,6 the essential financial soundness of local authorities, and the

centrality of family homes to the residential property-owning aspect of New Zealand society are self evident. There is no requirement for me in this judgment to assemble supporting judicial dicta.

[21] The policy of the Act and the brave new equivalent world which it is meant to introduce, is helpfully summarised by the Court of Appeal in Attorney-General v

_{Body Corp 200200 (Sacremento):}7

4 _{Section 51}

5 _{Section 51(3)(b) and s 52(6)(c)}

6 _{Invercargill City Council v Hamlin [1996] 1 NZLR 513 (PC).}

7 Attorney-General v Body Corp 200200 [2007] 1 NZLR 95 (CA).

[7] The 1991 Act largely implemented a 1990 report (Reform of Building Controls) by the Building Industry Commission to the Minister of Internal Affairs. This report recommended the introduction of a performance-orientated scheme to replace the existing regulatory scheme which the Commission saw as overly prescriptive and stifling of innovation. The report is permeated with a high level of confidence that a combination of light-handed regulation and the mechanisms of the market would produce better outcomes than the existing scheme. By way of example, the Commission considered that judicial decisions in the 1970s and 1980s holding local authorities liable for building defects had incentivised local authorities to impose increasingly onerous requirements on those engaged in building works and had thereby produced costs which were higher than “the private owner would have chosen” (see 123 of the report). Further, a key recommendation of the Commission was the breaking down of what it saw as the monopoly position of territorial local authorities as to certifying compliance. In this respect the Commission recommended that independent “approved certifiers” should have the right to vouch for building code compliance and that territorial local authorities should be required to accept the certificates of such certifiers.

[8] The Commission recognised that a corollary of the implementation of this recommendation would be that building certifiers would have a liability in tort in relation to building defects which corresponded to that of local authorities but, of course, would not have corresponding financial resources to meet resulting claims. The Commission addressed this problem as follows at paras 4.86 – 6.30:

4.86 The potential for liability of an Approved Certifier must be capable of realisation. This can only occur if there is adequate insurance indemnification. It would be the responsibility of an applicant to satisfy BIA that appropriate cover was available.

4.87 Insurance indemnification is based upon the likelihood of a claim or claims, and this risk cannot be evaluated without an appreciation of the time scale within which a claim could be launched. The Law Commission’s recommendations for replacing the Limitation Act 1950 have not as yet been considered by Parliament. Until this has occurred, it is not possible for the insurance industry or the Commission to suggest a formula for providing a generally applicable basis for ensuring that Approved Certifiers will be able to meet a claim for which they may be held liable. In the meantime, the Commission recommends that BIA be given the discretion of approving applications for certification it if is satisfied in any particular case that insurance cover will be available to provide for claims lodged within the present statutory period.

4.88 The Commission’s working group on insurance has advised that indemnification cover for Approved Certifiers would be available for up to 10 years within the building professions. Premiums are unlikely to be appreciably higher than present professional indemnification for producers of equal qualifications and experience, because the likelihood of a claim is lessened by having the original producer’s work checked independently.

...

4.92 When a building producer is at fault – be that the architect, engineer, builder or any other member of the building team – the owner has a right of action for damages or for breach of contract. If the fault lies with the builder in common with the [territorial local authority] and/or the Approved Certifier, there is no reason why liability should not fall upon any one or more of them where it belongs, in accordance with the general law.

4.93 A builder can evade liability by bankruptcy or winding up, but a [territorial local authority] cannot. The purpose of insisting upon an Approved Certifier having adequate insurance cover is to protect the owner from any exercise of this means of avoiding liability.

...

6.26 The alternative procedure of certification for all or part of the work by Approved Certifiers will be slow to develop unless indemnity insurance for potential liability to be carried by Approved Certifiers is available at reasonable cost. This will be reflected in the charges and readiness of people to offer these expert services and the cost advantage to the owner for a particular project.

6.27 Such insurance would have to cover defects discovered some time after a negligent act, and the Commission has considered the level of insurance cover required for Approved Certifiers in relation to the open-ended cover afforded by [territorial local authorities].

6.28 Owners choosing the alternative certification route are in a position to weigh the risk of their future loss in the event of negligent certification and damage not covered by the Approved Certifier’s liability insurance. The qualifications of Approved Certifiers are to be approved by BIA. Possible loss to the owner would be limited by the fact that in general, an Approved Certifier will certify only part of the building: air conditioning, structure, or fire systems, for example, although these could in some cases have consequential effects on other parts. The owner can be expected to choose the producers with some care. It is up to the owner, then, to decide whether the advantages of the Approved Certifier route for that particular project outweigh the residual risk of future claims based on negligent certification not being covered, taking into account other arrangements the owner could make for property protection insurance.

6.29 The position of second and subsequent owners must also be considered if the alternative certification procedure was chosen by the first owner. The purchaser would have the first owner’s occupancy consent, together with the names of the Approved Certifiers. Some time for latent defects to appear would have already elapsed. The purchaser’s interest would not be limited to Code deficiencies but would extend to deficiencies in meeting their own requirements as well, so they could be expected to carry out inspections on their own behalf and to weigh their risks accordingly. Finally, latent defect insurance could be available to them if they

required it. The cost of this insurance would be a factor in determining the purchase price.

6.30 It is proposed that the type and minimum amount of professional indemnity insurance to be carried by Approved Certifiers should be laid down from time to time by the BIA. The Commission suggests that the public interest would be satisfied if the indemnity insurance provided forward cover for a period of 10 years from construction completion and issue of an occupancy consent, of not less than $200,000 for small buildings, including housing, and not less than $400,000 for other buildings.

...

[13] Territorial authorities had primary responsibility for the administration of the building code (see s 24(a) and (e)). Thus all building works required authorisation by a building consent issued by the relevant territorial local authority (s 32). Such consent was required to be given if the local authority was satisfied on reasonable grounds that the provisions of the building code would be met if the building work was properly completed in accordance with the plans and specifications which were submitted (s 34(3)). Likewise territorial authorities were responsible for issuing code compliance certificates in respect of completed building works (s 43).

[14] In all of this, the role of building certifiers was extremely important. The 1991 Act provided for a register of building certifiers who were approved as such by the BIA (see s 51). Territorial authorities were required to act on certificates from building certifiers when issuing building consents and code compliance certificates (see ss 34, 43 and 50(1)(a)). So, if a building certifier certified code compliance, there was no second guessing of that by the relevant local authority.

[22] So, from that platform Mr Brittain submits the statutory scheme demonstrates that building certifiers, so far as negligent building consents and inspection certifications are concerned, were to be the equivalent of local authorities. They were a legitimate target for compensatory damages flowing from negligent inspections. And the deep pockets of local authorities (with access to rating revenue) was to be replicated by approved indemnity insurance. Thus, submitted Mr Brittain, the statutory exemption given to the employees of territorial authorities by s 89 should, as a matter of construction and policy, extend to the employees of building certifiers.

[23] Section 89 provides:

89 Civil proceedings against members, employees, etc

No civil proceedings shall be brought for an act done in good faith under this Act against a member, building referee, or employee of the Authority, or a member or employee of a territorial authority, or a member of a committee appointed by the Authority or a territorial authority.

[24] Linked perhaps to this provision is s 90, which limits civil proceedings against a building certifier (in respect of the certifier’s statutory function) to proceedings in tort not in contract.

[25] The statutory shield provided by s 89 clearly, on its wording, extends to members, building referees or employees of the Building Industry Authority, members and employees of a territorial authority, and committee members appointed by either the Authority or a territorial authority. Lying outside the protection of that statutory shield would be any member of the protected classes who is not acting in good faith (male fide).

[26] So, for the reasons he has canvassed, Mr Brittain submitted that, added to the protected classes specified in s 89, should be employees of building certifiers.

[27] Mr Brittain attempted to buttress that submission with a supplementary submission. He submitted that when the Tauranga District Council was performing its various statutory functions, it was unable to delegate such functions on the delegatus non potest delagare principle. It could still be sued in respect of those functions. Thus, in circumstances where the Council had engaged BBC, the Council would remain liable for negligent actions on the part of BBC’s employees. Thus s 89 should extend to BBC’s employees since they were effectively the employees of a territorial authority.

[28] Mr Brittain adopted the following converse proposition, which I put to him in argument. Were s 89 to be interpreted in a way other than that for which Mr Brittain contended, inconsistent results would flow. When a Council issued a code compliance certificate by the default s 43(3) route, a building certifier’s employees

are probably, or de facto, the Council’s employees. So, if s 89 protects Council employees, Parliament would not intend to expose them to liability in tort and remove the s 89 shield solely because the building certifier had been engaged by the owner and the code compliance certificate had been issued under the alternative ss 43(1) and (2) routes.

[29] Mr Brittain argued by analogy, although accepting the precedent was not on all fours, from Sheehan v Watson.8 That judgment involved scrutiny of s 269 of the Property Law Act 2007 which exonerates a lessee from liability if premises were damaged by fire, flood, or other perils against which the lessor was insured. The Court examined s 269 (drafted in significantly different terms from s 89 of the Act). The lessor in Sheehan claimed that damage to commercial premises had been caused by the negligence of the lessee’s employees and sued. The argument was raised (analogous to Mr Brittain’s) that s 269 did not expressly refer to the lessee’s agent

and thus the lessee’s employees were not exonerated.

[30] The Court of Appeal rejected this argument and upheld the High Court’s judgment. The Court cautioned that the plain meaning of a statute should always be cross-checked against its purpose. A drafting error in an Act could be corrected by the addition, omission, or substitution of words if the Court was sure there had indeed been a drafting error. The Court reviewed various authorities on this issue and concluded:

[39] We are satisfied that the principles discussed in the above authorities are applicable to the present case. If the situation that has occurred in this case had been drawn to its attention, in our judgment, Parliament would have redrawn the relevant provisions so as to extend the benefit of the statutory protection to the lessee’s agents, to give effect to that clear purpose that those for whom the lessee is responsible at law are exonerated as well as the lessee who can only act through them.

[31] Although the principles and approach of Sheehan are analogous, the situation is different. In Sheehan the Courts resisted an attempt to bypass the exoneration provided by s 269 of the Property Law Act by suing the lessee’s employees. As the Court of Appeal observed, such an approach would have destroyed the clear Parliamentary intention to protect lessees in situations where the lessor had insurance

cover. In the case before me, policy arguments relating to the Act are being advanced to add a category to the protected classes of s 89. Section 269 protected lessees. Nowhere in the Act is there any protection afforded to building certifiers. Indeed, the requirement for insurance cover, coupled with s 90 specifically contemplate building certifiers (unlike lessees) being sued. So a building certifier’s employees are in a different situation from the agents of lessees where the lessor is insured.

Conclusion

[32] I unhesitatingly reject Mr Brittain’s submissions, well-constructed and interesting though they were. The starting point must be that the employees of building certifiers are nowhere mentioned in s 89. It is drawing a very long interpretative bow to justify the s 89 shield extending to an unmentioned class. I do not consider that the policy of the Act justifies an interpretation which requires a court to write words into a statute which are not there. The Property Law Act policy discussed in Sheehan is qualitatively different.

[33] Quite apart from that obstacle, there is some force in Associate Judge Doogue’s observation9 that the framers of the Act and Parliament might well have deliberately decided to omit the employees of building certifiers to add an extra set of pockets beyond the undoubtedly legitimate targets of the building certifier and its indemnifiers. The Parliamentary materials, counsel assure me, shed no light on this topic. Nonetheless, as a matter of policy, as the Judge observed, there are increased risks when private sector providers undertake work which hitherto had been carried out by a territorial authority. Certainly such has proved to be the case.

[34] That observation, however, is not determinative. What is determinative, in my judgment, is that, as pleaded, the relevant defendants are alleged tortfeasors. The fact that their employer BBC, which would undoubtedly have been vicariously liable, is no longer available to be sued, has no relevance. There is nothing in s 89 or elsewhere in the Act that provides the defendants with an unquestionable shield from their pleaded liability in tort.

[35] Finally, as is apparent from the introduction of this judgment, the point raised by the defendants is novel. I would have thought that ultimately the alleged liability in tort of the defendants would depend on the evidence which emerges at trial (if there ever is one). Added to that, in strike-out terms, is the novel interpretation raised by Mr Brittain. Were this submission decisive, then clearly a strike-out application is not precluded. But it is not decisive. Even if my total rejection of Mr Brittain’s argument were to be wrong, then inevitably, on a defendant-by-defendant basis, there would be nuances and variations depending on the precise nature of the negligence.

[36] With regard to novel negligence claims, the Supreme Court in Couch v Attorney-General10 has made it very clear that strike out applications are inappropriate vehicles to decide novel points and the metes and bounds of relevant duties of care:

[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. Particular care is required in areas where the law is confused or developing. And in both X v Bedfordshire County Council and Barrett v Enfield London Borough Council liability in negligence for the exercise or non-exercise of a statutory duty or power was identified as just such a confused or developing area of law. Lord Browne-Wilkinson in X thought it of great importance that such cases be considered on the basis of actual facts found at trial, not on hypothetical facts assumed (possibly wrongly) to be true for the purpose of the strike-out. Lord Slynn in Barrett was of the same view:

the question whether it is just and reasonable to impose a liability of negligence is not to be decided in the abstract for all acts or omissions of a statutory authority, but is to be decided on the basis of what is proved.

[34] Proper and necessary limits to liability in negligence do not require blanket immunity through over-restriction of the circumstances in which a duty of care arises. There is particular risk of such over-restriction on summary consideration on strike-out where policy considerations are said to preclude a duty of care. Policy considerations arise and overlap at all three inquiries in a claim for negligence: duty of care, breach, and remoteness of loss (once “but for” causation in fact is established). Lord Morris thought the policy argument against liability in Dorset Yacht (inconsistency between liability and the public interest in rehabilitation of borstal trainees – the sort of consideration that weighed with Young P and Chambers J in the Court of Appeal in the present case) was relevant to breach, rather than duty of care. The policy of rehabilitation was important “when considering the measure of

any duty of care which the officers might owe to the company and whether

they failed to do what in the circumstances they ought to have done”:

but it in no way determines the question whether the officers did owe some duty of care.

A similar approach was taken by the Supreme Court of Canada in Just v British Columbia. Cory J, for the Court, thought it important to keep duty of care distinct from the standard of care required. Policy considerations as to whether liability should be imposed on a highway authority obliged to prioritise its spending for failure to remove a hazard were appropriately to be weighed by the trial judge in considering whether the system of inspection operated by the highway authority was reasonable. Whether it had a duty of care to highway users did not depend on such policy factors. These approaches strike us as sound.

[35] Where liability for negligence is determined at trial, it should not much matter whether questions of policy are considered as going to duty of care or its breach. But on strike-out on a threshold question of duty of care, it may matter a great deal. The facts as eventually found may make it clear that the policy consideration was not engaged in what happened and is not a justification for denial of responsibility. This was a reason why Lord Browne-Wilkinson was not prepared to strike out the claim in Lonrho plc v Tebbit:

Therefore, far from being able to perform the necessary analysis of all the facts and circumstances, I am asked to decide the question of the existence of a private law duty of care in the absence of even detailed factual allegations, let alone knowledge of the facts themselves. I know nothing of the factors which the defendants either did take into account or should have taken into account. For all I know, the reason for the delay in releasing the undertaking was a purely administrative blunder (eg the papers being wrongly filed), involving no considerations of policy at all.

Similar concerns led Lord Hutton in Barrett to refuse to strike out on policy grounds a claim in respect of harm suffered by a child taken into care:

It is not known at this stage what factors the defendant and its officials and social workers did take into account in making decisions relating to the plaintiff and in planning his future. It may be that no matters of policy involving the balancing of competing public interests or the allocation of limited financial resources were involved in the decision and it may be that at trial the judge, in the words of Mason J in the Sutherland Shire Council case, would be called upon: “to apply a standard of care to action or inaction that is merely the product of administrative direction, expert or professional opinion, technical standards or general standards of reasonableness”.

These policy observations certainly apply here.

Result

[37] For these reasons, the application for review is dismissed. The judgment of Associate Judge Doogue given on 7 October 2011 stands. The causes of action against the specific defendants who brought the strike-out application remain to be determined at trial.

..........................................
Priestley J