Bonney v Cottle [2012] NZHC 53 (3 February 2012)

Last Updated: 20 March 2012

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2010-404-427 [2012] NZHC 53

BETWEEN CALVEN DENNIS BONNEY, PATRICIA ANN BONNEY, CST TRUSTEES LIMITED AND MURDOCH HALL TRUSTEE COMPANY LIMITED

Plaintiff

AND VALERIE JOY COTTLE First Defendant

AND JOHN GILMOUR MCLINTOCK TRADING AS J G MCLINTOCK & ASSOCIATES

Second Defendant

AND ROBERT GERARDS MEDEMBLIK Third Defendant

AND LORETTA MARY BOLER AND ROBERT NEIL BOLER

Fourth Defendants

AND AUCKLAND CITY COUNCIL Fifth Defendant

AND TONY HERON Sixth Defendant

AND JOE STANTON Seventh Defendant

AND BRENT COTTLE Eighth Defendant

AND JOHN BERNARD TUCKER AND HEATHER MAUREEN TUCKER Ninth Defendants

AND ROGER WILLIAM CARTWRIGHT AND DAVID STEPHEN HUGHES

Tenth Defendants

AND BUILDING CODE CONSULTANTS LIMITED

BONNEY, BONNEY, CST TRUSTEES LIMITED AND MURDOCH HALL TRUSTEE COMPANY LIMITED V VALERIE JOY COTTLE HC AK CIV-2010-404-427 [3 February 2012]

Eleventh Defendant

AND MURDOCH PRICE BARRISTERS & SOLICITORS

Twelfth Defendant

Hearing: 17 November 2011

Counsel: J Mackie for Plaintiffs

G Keene for Fourth Defendants

Judgment: 3 February 2012

RESERVED JUDGMENT OF ASSOCIATE JUDGE SARGISSON (Interlocutory matters)

This judgment was delivered by me on 3 February 2012 at 4 pm pursuant to

Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date ..........................

Solicitors:

Fortune Manning, PO Box 4139, Auckland

Lovegroves, PO Box 25006, Auckland

[1] In these proceedings the plaintiffs, the trustees of the Calann Trust, seek damages against various defendants for losses they say they have suffered as a result of their purchase of a leaky dwelling at 12 Ronaki Street, Mission Bay, Auckland. They say that at the time of purchase they did not know that the home suffered weathertightness defects and that they now face costs of fixing those defects of approximately $800,000.

[2] Some defendants have been eliminated from the proceedings. The fifth defendant, Auckland City Council, has been struck out as a named party. The claim against the second defendant, a design engineer, has been discontinued. The tenth defendants, who are building inspectors and directors or employees of Building Code Consultants Ltd, the eleventh defendant, have also been struck out as named parties.

[3] The remaining defendants include Mr and Mrs Boler, the directors of a company called Approved Building Certifiers Ltd, which carried on business as a building certifier and applied for the building consent for the dwelling. Approved Building Certifiers also inspected the construction of the dwelling and issued the code compliance certificate. The company has since been placed into liquidation.

[4] Other defendants who remain subject to the proceeding include:

(a) Ms Cottle, the director of a company that built the dwelling;

(b) Mr Medemblik, the architect whose company was engaged to design the dwelling;

(c) Two certified building inspectors who were employed at relevant times by Approved Building Certifiers;

(d) A project manager, Mr Cottle, who is said to have project-managed the construction of the dwelling;

(e) The vendors, Mr and Mrs Tucker;

(f) Building Code Consultants Limited, a building inspection company that the plaintiffs engaged to do a pre-purchase inspection and report; and

(g) The lawyers who acted for the plaintiffs on the purchase.

[5] Mr Heron, who is named as the sixth defendant, is among those defendants who have filed statements of defence. Materially, he is said to have been a senior building inspector employed by Approved Building Certifiers and, the plaintiffs say, showed responsibility for inspections and certification. Mr and Mrs Boler say Mr Heron was in charge of the company’s day to day operations after they left New Zealand to live in Australia in August 1998. The Bolers also say that Mr Heron was primarily responsible for the project at Ronaki Road.

[6] The eleventh defendant has issued cross-claims against Mr and Mrs Boler.

[7] Mr and Mrs Boler are anxious to obtain an order removing them from the proceedings in advance of trial. They rely essentially on two preliminary points.

[8] The first preliminary point concerns issues of fact and comes down to the Bolers’ contention that they did not have any involvement at all in the building project at 12 Ronaki Road. They do not dispute that their company was involved in the building project and undertook the work of a certified building inspector for the developer of the dwelling, but they say that contrary to the plaintiffs’ allegations, they did not personally:

(a) Inspect or certify the plans and specifications that were lodged with the building consent application, nor have any responsibility for the certificate that Approved Building Certifiers gave in support of the building consent application, to confirm that the dwelling would comply with the relevant statutory requirements if built in accordance with the plans and specification;

(b) Undertake the inspections of the building work that were carried out by the company during the course of construction between May 1999 and 28 January 2000; or

(c) Give the code compliance certificate that the company issued at the completion of construction on 28 January 2000.

[9] The second preliminary point is essentially a legal issue. It is that if the Bolers did not inspect the plans or building work, or issue the code compliance certificate, they could not be held to have any liability for the weathertightness defects that have caused the plaintiffs’ loss.

[10] Mr and Mrs Boler have accordingly filed several applications in reliance on these preliminary points, with the object of obtaining orders removing them as defendants. They have filed strike out and summary judgment applications, but these applications have not proceeded on the basis that an application for separate questions to be determined in advance of trial may be the more appropriate procedure. That view has as its basis apparently that the issue whether there has

been an assumption of responsibility by the Bolers (Trevor Ivory v Anderson)[1]

involves factual disputes about the Bolers’ involvement, the resolution of which might require viva voce evidence and possibly the issue of a subpoena to have an additional witness brought before the court.

[11] Mr and Mrs Boler have filed a resulting application seeking an order that several preliminary questions be tried between the plaintiffs and themselves. That

application is before me for determination.[2] The preliminary questions, as set out in

the Bolers’ application, are:

(a) With regard to the inspection and certification work, Approved Building Certifiers Ltd (“ABC Limited”) was engaged to carry out, in relation to the construction of the dwelling and garage (“the construction work”), at 12 Ronaki Road, Mission Bay, Auckland (“the property”), between May 1999 and the 28th of January 2000, which included:

(i) the initial inspection of the plans and specifications and certification to the Auckland City Council, that if the construction work was in accordance with the plans and specifications, it would meet the requirements of the Building Act and the Building Code,

(ii) inspecting all building work including plumbing and drainage work at the recognised states of construction during the construction period, June 1999 to the 28th of January

_{200, as part of the process of issuing the Code of}

Compliance Certificate dated the 28th of January 2000...

... Did either of the Fourth Defendants have any direct or actual involvement of any kind in the said inspection and certification work?

(b) If the answer to the preliminary question number 1 above, is no, is there any other basis in Law for either of the Fourth Defendants to have any liability to the Plaintiffs, in negligence, in relation to the inspection and certification work carried out by ABC Limited, in relation to the construction work carried out at the property, between May 1999 and the 28th of January 2000?

[12] These questions need to be seen alongside the relevant pleadings in the

plaintiffs’ statement of claim, which raises three causes of action against Mr and Mrs

_{Boler. Relevantly, those causes of action are based on:}

(a) Negligence as building certifier;

(b) Negligence as building inspector; and

(c) Negligent misstatement.

[13] In the first of these causes of action (negligence as building certifier), the plaintiffs allege:

58. On or about 3 May 1999 Approved Building Certifiers Limited submitted a Building Certificate pursuant to Section 56 of the Building Act 1991 which certified that it was satisfied on reasonable grounds that the proposed building work would comply with the listed provisions of the Building Code if properly completed in accordance with the listed plans. Approved Building Certifiers Limited submitted the Plans and Specifications for the dwelling together with the Building Certificate to the fifth defendant.

59. The fourth defendants as directors and the controlling wills of Approved Building Certifiers Limited owed the plaintiffs a duty to exercise due skill and care when their company inspected the Plans and Specifications for the dwelling so that the plans and specifications complied with the New Zealand Building Code.

60. In breach of its [sic] duties the fourth defendants failed to notice that the Plans and Specifications did not include any critical weathertightness details in respect to:

(a) Control joint details;

(b) Critical weathertight details (penetrations and balustrades).

[14] In the second cause of action (negligence as building inspector) the plaintiffs allege:

65. The fourth defendants as directors and the controlling wills of Approved Building Certifiers Limited owed the plaintiffs a duty to exercise due skill and care when inspecting the building work so as to detect and respond to any building work in breach of good trade practice and the New Zealand Building Code.

66. In breach of their duties the fourth defendant failed to notice the

defects ...

[15] In the third cause of action (negligent misstatement) the plaintiffs allege:

72. The fourth defendants as directors and the controlling wills of

Approved Building Certifiers Limited owed the plaintiffs a duty to

exercise reasonable skill and care only to issue the Code Compliance Certificate if satisfied on reasonable grounds that the building work complied with the building consent/s and the New Zealand Building Code.

73. In breach of their duties the fourth defendants issued the Code Compliance Certificate despite the existence of the defects which meant there were no reasonable grounds to conclude the building work complied with the Building Consent(s) and the New Zealand Building Code.

[16] In each cause of action the plaintiffs plead that the Bolers breached the alleged duties and that as a result the dwelling was built with weathertightness defects and they suffered losses that are a reasonably foreseeable consequence of the breaches.

[17] Counsel for the Bolers submits that a full trial would be a lengthy affair which they should not be drawn into. He contends that the proposed questions raise confined issues that will take relatively little hearing time and do not overlap with other questions that will arise for determination at the trial of the case against the other remaining defendants. Counsel submits further, that if the first of the preliminary questions is answered as the Bolers anticipate the answer to the second preliminary question would follow naturally and result in a judgment in their favour.

[18] Counsel for the Bolers submits that the evidence will be brief and contends that with respect to the first preliminary question there is a reasonable prospect that the Bolers will succeed in showing that they had no direct or personal involvement in the inspection and certification work. He elaborated by saying that the case against the Bolers turns essentially on the inspection and certification work. Counsel summarises the evidence to be presented by the fourth defendants as follows:

(a) They left New Zealand permanently in 1998 and left the primary day to day management of the company in the hands of the remaining director, Mr Mathew Palmer;

(b) They had no direct knowledge of the project at Ronaki Road. It was the sixth defendant, Mr Heron, who was contracted to the company to carry out most of the inspection and certification work;

(c) Mr Boler was not in New Zealand at the relevant times, and though Mrs Boler was in New Zealand from time to time she was simply holidaying;

(d) Though Mr Boler’s signature appears on certain site inspections records that were submitted to the Auckland City Council that is not because he personally undertook the inspections or signed the documents, but because someone else at Approved Building Certifiers used a rubber stamp to apply his signature.

[19] Counsel for the Bolers advises that the witnesses would include the Bolers, Mr Palmer and Mr Heron (both would be subpoenaed if necessary) and a handwriting expert. The handwriting expert would shed light on whether Mr Boler’s signature on the site inspection records was indeed applied by stamp.

[20] Counsel also submits that the second question has been added out of an abundance of caution, but is superfluous. He argues that in terms of the authorities, if the Bolers have had no direct actual or personal involvement in the inspection and certification work, there can be no possible basis for personal liability on their part even though Approved Building Certifiers may well be liable. (Counsel for the plaintiffs takes no issue was taken with the submission).

Discussion

[21] The Bolers seek an order that is common to them both. There is no suggestion that there should be an order for the separate trial in the case of one of them if there is no case made out for the separate trial in relation to the other. I proceed on that basis. I also proceed on the basis that trial fixture time has been allocated provisionally, and will stand in the event that separate hearings are ordered.

[22] The grounds relied on in the Bolers’ application include that a hearing of approximately a half day would be needed to deal with their proposed questions. Counsel concedes that 1½ days is a more realistic estimate, and that may be conservative. In addition to the Bolers’ witnesses the plaintiffs intend to call

evidence. They will have at least one witness of fact and their own handwriting expert. The likely amount of time saved would not therefore be as significant at the Bolers have anticipated.

[23] I accept however, that the trial against the other remaining defendants collectively would be relatively prolonged. A trial of 14 days duration has been allocated. It is possible that on a review of recent developments in the proceeding there may be a reduction in the estimate to the trial time. The most recent development is that the plaintiffs’ case against the tenth defendants was struck out in the interim judgment of Associate Judge Bell issued on 24 November 2011.[3]

Nevertheless it is likely that at least 9 days will still be required. The remaining

causes of action primarily concern the existence of duties of care and the nature and extent of breaches of such duties. These causes of action give rise a raft of factual and legal issues.

[24] As observed in R L Lawrence and S P Lawrence v G A Power and N E Power

& Anor[4] if there is a reasonable prospect of eliminating a defendant before trial it should be considered seriously. I accept that there is a reasonable prospect that the Bolers would be found not liable on all three causes of action against them, if they were to succeed in obtaining the factual findings they seek in relation to their first proposed preliminary question. The question concerns their direct and personal involvement in certain steps taken by Approved Building Certifiers. It is common ground that that question lies at the heart of all causes of action against them. Materially, counsel for the plaintiffs made no reference to the existence of any documentary evidence that raises real questions about Mrs Boler’s involvement. There are the site inspection records that raise questions about Mr Boler’s involvement, and he has given differing explanations for the existence of his signature on them, but it may well be demonstrated that he was not in fact involved.

_{The differing explanations may be found to be perfectly understandable.}

[25] A real question however is whether the Bolers have shown, as counsel concedes they must, that there are no real impediments to a separate trial and that the usual problematic procedural difficulties of split trials can be avoided. Counsel for the plaintiffs submits that though a determination of preliminary questions before further trial may be desirable from the Bolers’ perspective, the usual dangers associated with splitting the trial process cannot be ruled out. He submits there is a real possibility of overlap or interaction between the questions that arise for determination in relation to the plaintiffs’ claim against the Bolers and also other issues that will arise for determination in respect of their claims against other parties. As a result, other parties will be drawn into two hearings. The sixth and eleventh defendants are such parties.

[26] I agree that there are inherent difficulties in splitting the trial in the manner proposed by the Bolers. My brief reasons follow.

[27] Firstly, it is common ground that a key issue, indeed the key common factual issue for determination, is whether the evidence discloses that the Bolers had any “hands on” involvement in the certification or inspections of the plans and specifications and the construction of the dwelling. Other parties will be required to give evidence or will wish to cross examine on the issue. It is unfair and potentially problematic that they may have to attend two trials. Non-party witnesses may be affected in the same way.

[28] The eleventh defendant, Building Code Consultants, claims relief by way of cross claim against the Bolers. Essentially the eleventh defendant says that if it is liable it has a right of contribution under s 17 of the Law Reform Act 1936 arising out of the Bolers’ breach in respect of onsite inspections. It can be anticipated that this defendant would seek to be heard on the plaintiffs’ claim against the Bolers.

[29] There is also the plaintiffs’ claim against Mr Heron, the sixth defendant. The claim involves the self-same issues as those raised in the claim against the Bolers. Issues of credibility arise. The plaintiffs say the Bolers and Mr Heron shared personal and direct responsibility for inspection and certification work which the Bolers deny. Mr Heron denies involvement. In each case evidence will likely be

required from Mr Heron that is common to these claims. Such evidence will also likely be required from Mr Palmer, who was senior employee of Approved Building Certifiers. Their evidence could be critical to the factual determination of whether Bolers were involved in the manner alleged in the plaintiffs’ causes of action. It is also conceivable that evidence from Mr Cottle, the eighth defendant, who was apparently on site and acting as project manager throughout, may also be required. Additionally, evidence of the two handwriting experts may be relevant to the claims against Mr Heron as well as the Bolers.

[30] I am mindful of submissions by counsel for the Bolers that Mr Heron’s statement of defence, only recently filed, is invalid because there is no address for service, and that omission will deprive him of the right to defend. For present purposes I do think it realistic to treat that as a permanent state of affairs. Mr Heron has indicated, by filing a statement of defence (albeit a defective statement) that he considers he has defence and should have the opportunity to be heard. The Bolers have made plain that they require that he be heard and will issue a subpoena if necessary. In these circumstances it can be expected that he will seek to provide an address for service. There can be no real prejudice to the Bolers in his doing so.

[31] Secondly, unlike the position in the Lawrence case, the disputed factual issues are unlikely to be resolved simply on the basis of documentary evidence. Viva voce evidence and cross examination will be required and though the Bolers’ passports will be material, their contents may not be determinative of the question of the Bolers’ personal involvement. The passports will show when the Bolers were out of New Zealand, and they may be determinative of the question whether they could not have undertaken critical site inspections. But on the basis of the extracts from the passports that have been produced so far, that remains to be seen. Moreover, the Bolers’ absence from New Zealand may not be determinative of whether Mr Boler inspected the plans that were lodged with the Council for the purpose of obtaining building consent for the work. It is conceivable that he had electronic or other copies. And his own evidence is that before he left for Australia, his practice was to check such plans. The fact that Mr Boler’s signature appears on some certificates and the related dispute about authenticity are factors that inevitably raise the possibility of cross examination about the full nature and extent of his involvement.

[32] Thirdly, there is the possibility of appeal, either by the fourth defendants or the plaintiffs, on the outcome of the determination of the proposed separate questions. Such possibility cannot be ruled out and there are no undertakings by either of these parties that rights of appeal will be forgone or that they would seek to delay the trial pending the outcome of such appeals. There is therefore a risk of appeals that could disrupt the imminent trial which is scheduled to take place in May

2012.

[33] In addition, counsel for the Bolers concedes that, as disputed issues of fact arise split trials should be presided over by the same Judge. That is a further factor that supports a single hearing and militates against splitting of the proposed questions for a separate hearing.

[34] Though not a difficulty, I also bear in mind that it will be open to the Bolers to raise with the trial Judge whether their evidence, and the evidence of others relevant to the causes of action against them, can be “partitioned” during the trial, should the sixth defendant’s defence not proceed. That would avoid unnecessary attendances by them or their counsel.

Result

[35] Balancing all the factors, I am not persuaded that a split trial would be of sufficient advantage to justify its inherent risks.

[36] I am satisfied the proper course is to disallow the application made by Mr and Mrs Boler for an order for the decision of preliminary questions separately from other questions before further trial in this proceeding. I so order.

[37] As costs follow the event under the statutory costs regime I make an order for costs against the fourth defendants in favour of the plaintiffs on a 2 B basis plus

_{disbursements as fixed by the Registrar.}

Associate Judge Sargisson

---

[1] Trevor Ivory v Anderson [1992] 2 NZLR 512

[2] The application is made under High Court Rule 10.15 which states:

Orders for decision

The Court may, whether or not the decision will dispose of the proceeding, make orders for:

(a) the decision of any question from any other question, before, at, or after any further trial in the proceeding; and

(b) the formulation of the question for decision and, if though necessary, the statement of the case.

[3] Bonney v Cottle HC Auckland CIV-2010-404-427 24 November 2011.
[4] HC Auckland CP27/96, 29 June 1998, (Fisher J).