Heritage Heights Limited v Sinclair Bros Building Limited [2013] NZHC 905 (16 April 2013)

Last Updated: 30 June 2013

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

CIV-2009-425-000137 [2013] NZHC 905

BETWEEN HERITAGE HEIGHTS LIMITED Plaintiff

AND SINCLAIR BROS BUILDING LIMITED First Defendant

AND G J SINCLAIR Second Defendant

AND S L SINCLAIR Third Defendant

AND INVERCARGILL ENGINEERING CO.

LIMITED

First Third Party

AND D T ERSKINE Second Third Party

Hearing: 30 April 2012

Appearances: J G French for Plaintiff, First Third Party and Second Third Party

No appearance for First, Second and Third Defendants

Judgment: 16 April 2013

_{JUDGMENT OF FOGARTY J}

Solicitors:

French Burt Partners, PO Box 358, Invercargill

Copy to:

Ward Adams Bryan-Lamb, PO Box 32, Invercargill

HERITAGE HEIGHTS LIMITED V SINCLAIR BROS BUILDING LIMITED & Ors HC INV CIV-2009-425-

000137 [16 April 2013]

[1] When this case was called there were no appearances by the first, second or third defendants. This did not come as a surprise to the Court. These defendants had previously advised that they would not be participating in this hearing.

[2] The hearing then proceeded by way of formal proof. This dispute arises out of the construction of residential units on a property situated at Anderson Heights in Queenstown. The property was owned by the plaintiff, Heritage Heights Ltd. The shareholders in the plaintiff were Mr Donald Erskine and his sister, Mrs Janice MacLeod, as to 50 per cent and Messrs Graham and Stephen Sinclair as to the other

50 per cent.

[3] Heritage Heights Ltd was a company formed for the purposes of the development. It entered into a contract with the first defendant, Sinclair Bros Building Ltd, for the construction of two rows of residential units. The units were to be built on a steep sloping section. The first defendant was an established “master builder” business in Queenstown and a member of the Master Builders’ Association. The second and third defendants were the two sole directors and equal shareholders in the company.

[4] Mr Erskine and Mrs MacLeod were and are the shareholders in Invercargill Engineering Co Ltd, the first third party, and Mr Erskine is also the managing director of the first third party.

[5] It was agreed between the plaintiff and the first defendant that Mr Graham Sinclair was to be the project manager. An additional amount “at a specified rate per unit” was to be paid over and above the contract price for construction by the plaintiff in respect of project management. Mr Stephen Sinclair was the on-site foreman.

[6] There was no problem with the construction of the first row of units. There was defective work in the construction of the second row. The local Council refused the code compliance certificate in respect of the top row and then, after further investigation, brought prosecutions against the plaintiff and the first, second and third defendants.

[7] The evidence received by the Court detail a considerable number of defects. It is sufficient for the purposes of the formal proof to highlight the most significant. They are:

(a) A significant retaining wall behind the top row was defectively constructed.

(b) The application of sealant was deficient so that the walls at the rear of the units were not watertight.

(c) There were other leaking problems caused by incorrect construction or waterproofing of plumbing penetrating those walls.

(d) The units have been constructed with only one layer of “GIB” board when double layers were specified by the building consent.

(e) There was a faulty fire egress.

[8] I heard evidence from Mr Erskine, the managing director of the plaintiff. This was supported by detailed evidence by Mr P J H Laurenson, who was the building manager for Lakes Environment Ltd, which provided services to the Council.

[9] Mr Erskine detailed the history of the contractual relationships and the roles of Mr Graham Sinclair and Mr Stephen Sinclair. The story of the discovery of the defects and the remedial work was presented in considerable detail by Mr

Laurenson, who also described the prosecutions that followed. Mr Laurenson was essentially supervising the Council agents inspecting the building during construction.

[10] I also received evidence from two of the site building inspectors, Mr Cozens and Mr Arrested. I also received evidence from Mr T A Lewis, a contractor, Mr A S Major, a consulting engineer, Mr V S Daly, an employee of Constructa Ltd and who investigated the defects, and likewise Mr G D McMillan, a consultant engineer.

[11] The evidence of Mr Laurenson also included proof of pleas of guilty by the first, second and third defendants to a large number of charges arising out of the defective works.

[12] I am satisfied that the plaintiff has proved on the balance of probabilities that the work done by Sinclair Bros Building Ltd was defective.

[13] The Council required the plaintiff to carry out significant remedial work, which generated significant additional costs. The plaintiff had also pre-sold some of the top units. Settlement of these purchases were delayed and the plaintiff claims interest costs. The plaintiff also claims the legal fees and fine in respect of the

_{prosecution. These three items are pursued as follows:}

(a) Remedial work, costs and expenses in respect of top units

$318,953.37

(b) Interest paid when sales of the top units were delayed

$370,544.36

(c) Legal fees and fine in respect of prosecution $26,972.00

TOTAL $716,469.73

[14] In the ensuing scrutiny of accounts the plaintiff has also identified a number of drawings from its accounts which could not be justified by this development and claims as follows from the three defendants:

(a) Cheque payments for invoices unrelated to Heritage

_{Heights Ltd}

$29,268.27

(b) Unauthorised purchases of equipment on Heritage

_{Heights Ltd’s account at Placemakers}

$2,928.25

(c) Unauthorised purchases billed to plaintiff’s credit card

$2,942.52

TOTAL $35,139.04

The plaintiff did not prove the pleaded claim of $765 for Precuts. The plaintiff is claiming interest under the Judicature Act 1908 and costs.

[15] The claim against the first defendant in respect of the remedial costs and interest costs is in contract. The same claim against Messrs Graham and Stephen Sinclair is in tort.

[16] The misappropriation claims are based on a breach of contract in respect of the first defendant and the drawings without authority are by Messrs Graham and Stephen Sinclair.

[17] The first defendant counterclaimed against the plaintiff and also joined the third parties. In this regard this is also a fixture in respect of the counterclaim and third party proceedings. Only the counterclaim defendants and third parties have appeared. Accordingly, the counterclaim defendants and third parties are entitled to judgment dismissing the counterclaim and third party notices.

Unauthorised drawings

[18] The unauthorised cheques drawn on the plaintiff’s cheque account for items not related to the project totalling $29,268.27 were all cheques signed by Mr Graham Sinclair.

[19] I am satisfied that the plaintiff has proved that these were unauthorised cheques and that accordingly there is a debt due by Mr Graham Sinclair to the

plaintiff in the sum of $29,268.27. There is no proof of participation by Mr Stephen Sinclair in respect of these drawings. The claim against him in this regard is dismissed.

[20] With respect to the Placemakers account, both Messrs Graham and Stephen Sinclair had the ability to charge goods. This sum of $2,928.25 is for the purchase of tools and equipment. The inferential argument is that tools and equipment capable of being used following the construction cannot be charged to the plaintiff as cost of the construction. I agree. While there is no evidence that these were purchased by either Mr Graham Sinclair or Mr Stephen Sinclair, an inference can be drawn that they were purchased for the benefit of the first defendant. There is judgment against the first defendant in the sum of $2,928.25.

[21] In respect of the credit card items of $2,942.52, I find as follows. The Golden Fleece purchase of $398 was made by Mr Graham Sinclair as was the Queenstown Medical Centre invoice of $120.

[22] There will be judgment in the sum of $518 against Mr Graham Sinclair in this respect.

[23] The Whakatu Tavern charge of $521.50 and the Otis New Zealand charge of

$225.75 was a drawing by Mr Stephen Sinclair. On the face of it, it is probable it is also for the benefit of the first defendant.

[24] There will be judgment against the first defendant and Mr Stephen Sinclair in the sum of $747.25.

[25] There was no proof as to whether it was Mr Graham or Mr Stephen Sinclair who incurred the alcohol expense of $1,169.92 or the takeaways of $507.35. Obviously they were expenditures for more than one person. It seems more probable than not that they were expenditures for the staff of the first defendant.

[26] There will be judgment against the first defendant in the sum of $1,677.27.

Personal liability in tort

[27] Mr French largely confined the argument for tortious liability on the traditional proposition of negligent conduct by a person who can foresee that his negligence can cause loss. It matters not that there were contractual relations with a company or that the person is a director or employee of that company. This, I think, principled approach was upheld in Morton v Douglas Homes Ltd1 but thrown into

doubt by the decision in Trevor Ivory Ltd v Anderson,2 which remains controversial.

Mr French’s submissions traverse the litigation since. I studied his submissions and largely adopt them in the following reasoning. I have avoided basing the judgment against Messrs Sinclair upon an assumption of responsibility for the project, given that the contract was with their company. A majority of the Court of Appeal in Body Corporate 202254 v Taylor3 has rejected the proposition inherent in Trevor Ivory that personal conduct by a person for a limited liability company can be attributed only to the company.4

Personal liability of the second and third defendants in tort

Facts relating to Mr Graham Sinclair

[28] Mr Graham Sinclair was one of two directors in the plaintiff company. He owned half of the shareholding in the plaiintiff, so he had a stake in the success of the development project. He is also a director of the first defendant, and an equal shareholder with Mr Stephen Sinclair. The profits of the venture were to be shared equally between the Erskines on the one hand and the Sinclairs on the other.

[29] Mr Graham Sinclair was the on-site project manager. He was to be paid for these duties. It was his personal responsibility to organise, supervise and monitor all aspects of the construction. These duties covered the carpentry work and all other aspects of the constructions, including other trades and suppliers. He was to ensure

_{the work was carried out to the Building Code and other required standards. His}

1 _{Morton v Douglas Homes Ltd [1984] 2 NZLR 548 (CA).}

2 _{Trevor Ivory Ltd v Anderson [1992] 2 NZLR 517 (CA).}

3 _{Body Corporate 202254 v Taylor [2008] NZCA 317, [2009] 2 NZLR 17 (CA).}

4 At [30] and [97]-[98].

responsibilities also included administering and organising the consent paperwork with the local authority. Mr Graham Sinclair as project manager failed to meet his obligations in that regard.

[30] Evidence was adduced of Mr Graham Sinclair’s District Court convictions under the Building Act 2004. Those 10 convictions comprised three for permitting work in contravention of a building consent (insufficient fire-rated inter-tenancy wallboard), two for failing to comply with a Notice to Rectify (installation of fire system and non-application for building consent before work was undertaken), two for doing work otherwise than in accordance with a building consent (both for insufficient layers of fire-rated board on inter-tenancy walls) and two for doing building work without obtaining a building consent and one for doing building work otherwise than in accordance with a building consent (fire alarm system).

Facts relating to Mr Stephen Sinclair

[31] Together with his brother, Mr Stephen Sinclair was a director and equal shareholder in the first defendant. With his brother, he was co-owner of half the shares in the plaintiff and an alternative director of the plaintiff. He also had a stake in the success of the project.

[32] Mr Stephen Sinclair was the on-site foreman. He was in charge of the physical work on the site. He liaised with sub-contractors and the staff under him, did hands-on work, communicated with suppliers, monitored progress, chased materials and other things up, made sure materials were on-site, was involved in dealings with the building inspectors, and called for building inspector meetings to get them to sign or approve work. He was involved in the nuts and bolts of the project on-site. As on-site foreman, he reported naturally to Mr Graham Sinclair. He was directly involved with Civic Corp staff (building inspectors, agents of the Council) over weather-proofing of back walls, who provided information as to methods of constructions. The building inspectors’ discussions were primarily with Mr Stephen Sinclair on-site.

[33] Mr Stephen Sinclair was convicted in the District Court of seven offences under the Building Act as follows:

• Two charges of wilful obstruction of Mr Laurenson in the execution of his duties in attempting to establish whether there had been compliance with the terms and conditions of a building consent.

• Three charges of doing building work otherwise than in accordance with a building consent, (only one layer of fire-rated board on inter- tenancy walls).

• One charge of doing building work otherwise than in accordance with building consent, (installation of fire system).

• One charge of failing to comply with the terms of a Notice to Rectify, installation of fire system without first applying for a building consent, (installation of fire system).

[34] The allegations in these proceedings of defective work against Mr Stephen Sinclair personally are significantly established by the District Court convictions against him. Those charges were founded on actions specifically taken by Mr Stephen Sinclair himself.

[35] In view of Mr Stephen Sinclair’s role as foreman and his stake in the project, on the probabilities he would have been a party to the decision to backfill the rear walls of the top units to the first level only. Similarly, he would have been party to the decision to make the consequential change to the fire egress. The change to the fire egress was in breach of the building consent and also unlawful.

[36] The weather proofing of the rear walls was grossly inadequate. In preparing an “appeal” to the Department of Building and Housing against Civic Corp’s stance, the Sinclairs described the waterproofing which they claimed to have applied prior to the Notice to Rectify being issued. If the walls had been sealed in the manner the Sinclairs described, then they would have been compliant. But the evidence shows they were not.

[37] On the balance of probabilities, Mr Stephen Sinclair must have been aware that he carried out and/or directed the work to be carried out in a short-cut manner. That seriously breached code compliance and trade practice standards.

Legal principles applicable to personal liability of Messrs Graham and Stephen

Sinclair

[38] The liability of builders has been considered by the courts on a number of occasions and frequently in cases where the plaintiffs have sued the directors of building companies.

[39] Morton v Douglas Homes Ltd was such a case in the High Court. Hardie

Boys J stated: 5

Liability of the directors

The principle of limited liability protects shareholders and not directors, and a director is as responsible for his own torts as any other servant or agent. His liability to the person injured is personal, and unaffected by any right of indemnity he may have against the company. Nonetheless, the separate corporate identity of the company must not be lost sight of, for the directors are not personally liable for the company's torts, except in the limited type of case discussed by Lord Buckmaster in Rainham Chemical Works Ltd v Belvedere Fish Guano Co, namely where the company's wrongful acts were expressly directed by them. Apart from this kind of situation, whilst a director may be liable in negligence to a person with whom the company is dealing, it will only be where he personally, as distinct from the company, owed a duty of care, and failed to observe it. His liability then arises not by reason of his office of director but by reason of a relationship of proximity or neighbourhood existing between him and the plaintiff. It may well be that it is because he is a director that the relationship arises, but the fact that he is a director does not of itself create the relationship.

(Citations omitted)

[40] Hardie Boys J went on to state:6

The relevance of the degree of control which a director has over the operations of the company is that it provides a test of whether or not his personal carelessness may be likely to cause damage to a third party, so that he becomes subject to a duty of care. It is not the fact that he is a director that creates the control, but rather that the fact of control, however derived, may create the duty. There is therefore no essential difference in this respect between a director and a general manager or indeed a more humble employee of the company. Each is under a duty of care, both to those with whom he deals on the company's behalf and to those with whom the company deals in so far as that dealing is subject to his control.

5 _{Morton, above n 1, at 593.}

6 At 595.

[41] In Morton the defendants were directors and shareholders of the landowning and development company in which they were also shareholders. The Judge held one of the directors responsible for damage caused by subsidence to two of the flats. In respect of those flats, the director was aware of the engineer’s recommendations and so he was under a duty to the purchaser to take reasonable steps to ensure the recommendations were adhered to. The director failed to meet that obligation.

[42] The other director in Morton had taken charge of the development of one of the flats. He was aware of the problem on the site and that the engineer had reported on it. He was aware the subsoil material was suspect. He neglected to ensure that the engineer carried out the work that the company relied on him to do. The second director was also liable.

[43] Dicks v Hobson Swan Construction Ltd and McDonald7 was another High Court building case where the same issues were considered. In this instance the defendant was the director of the building company with whom the plaintiff had made her building contract. The proceeding was heard by Baragwanath J who observed “[e]qually, where directors expressly direct the commission of tortious conduct they are liable for having procured the wrong”8 citing Rainham Chemical

_{Works Ltd}9 _{which had also been cited by Hardie Boys J in Morton.}

[44] Hartley v Balemi10 was an appeal from a Weathertight Homes adjudicator. Mr Balemi, a director and shareholder of the building company appealed against the adjudicator’s finding of liability against him. Stevens J referred to relevant passages in Morton and said:11

The degree of control test in Morton has been applied in recent cases. For example, in Drillien v Tubberty, Associate Judge Faire found on the facts no duty on the part of the director of the building company, as his position was factually different from the directors in Morton. There was no direct involvement on the director’s part in Drillien in the building process, other than to organise what was necessary for the specific subcontractors. He left the subcontractors to get on with the business of the actual building work by

7 _{Dicks v Hobson Swan Construction Ltd (in liq) [2005] NZHC 1657; [2006] 7 NZCPR 881 (HC).}

8 _{At [38].}

9 _{Rainham Chemical Works Ltd (in liq) v Belvedere Fish Guano Co [1921] 2 AC 465 (HL).}

10 _{Hartley v Balemi HC Auckland CIV-2006-404-2589, 29 March 2007.}

11 At [91]-[92].

themselves. This was in comparison with the directors in Morton who took a hand in specific areas. Direct personal involvement was crucial.

However, personal involvement does not necessarily have to mean that physical work needs to have been undertaken by the director – that is just one potential manifestation of actual control over the building process. Personal involvement and the degree of control may also include, as in Morton itself, administering the construction of the building. Therefore, the test to be applied in examining whether the director of an incorporated builder owes a duty of care to a subsequent purchaser must, in part, examine the question of whether, and if so how, the director has taken actual control over the process or any particular part thereof. Direct personal involvement may lead to the existence of a duty of care and hence liability, should that duty of care be breached.

(Citations omitted)

The challenge to the adjudicator’s relevant findings in Hartley v Balemi failed.

[45] Trevor Ivory Ltd and Morton v Douglas Homes Ltd were analysed at length in the context of a strike-out decision in the Court of Appeal in Body Corporate 202254

_{v Taylor}12 _{considered these issues.}

[46] William Young P and Arnold J observed that Morton provided authority for the view that directors of a building company with actual control of the particular building operations owe a duty of care associated with that control.13 Their judgment was adopted by Glazebrook and Ellen France JJ. Chambers J endorsed the statement of Hardie Boys J in Morton that if company directors had personal control over the building operation, they could be personally liable.14

[47] In his judgment, Chambers J referred to the involvement of Mr Taylor, the director, in deciding how the villas were to be built, fixing the budget, being personally involved in the preparation of plans, chosing the exterior cladding,

_{selecting the sub-contractors and giving directions as to how they were to undertake}

_{their part, and inspecting the villas during construction.}15

_{Chambers J did not appear}

to consider an assumption of personal responsibility was required. On my reading, the judgment of William Young P and Arnold J leaves unresolved whether an

12 _{Body Corporate 202254 v Taylor, above n 3.}

13 _{At [41]-[42].}

14 _{At [126].}

15 At [124].

imputed assumption of responsibility for the whole project is necessary.16

_{paragraphs [35] and [44].}

See

[48] Chambers J also said:17

The law in New Zealand is clear that if a builder carelessly constructs a residential building and thereby causes damage, the owners of the residential building can sue the builder in negligence. (I ignore for the present what kinds of damage the builder can be liable for; in the present case, there is no dispute that the damage the appellants have sustained is damage of a kind for which the New Zealand law of negligence will provide compensation.) That is really the long and the short of it. If Mr Taylor were self-employed, no one would have a moment’s doubt about the propriety of the appellants making the above allegations against him. It should make no difference whether or not he was employed at the time he allegedly did these careless things. The only relevance of his being employed is that his employer or employees may be vicariously liable for his tort committed in the course of employment. He and the employer would be joint tortfeasors.

All of this was stated with admirable clarity by Hardie Boys J in Morton v Douglas Homes Ltd. In that case, four flats suffered damage due to the subsidence of the foundations. The flat owners sued the building company, two of its directors, the local authority and the engineer. Hardie Boys J made it clear that, if the company directors had personal control over the building operation, they could be personally liable.

(Citations omitted)

[49] Chambers J then quoted Hardie Boys J’s statements which I have set out at [42] above. I have always thought that is the law. Because of the qualifications in the judgments of the majority, which left unresolved the need for a personal assumption of responsibility point, I consider I am free to follow Chambers J. Trevor Ivory Ltd v Anderson,18 based on its characterisation of the facts by the Court

of Appeal both in the original judgment19 and in Body Corporate 202254 v Taylor20

can be now classified as a negligent misstatement case with the special requirement of assumption of responsibility that that tort requires. I proceed on the basis that the builders’ duty of care, on these facts, is imposed by law. This is by reason of the

_{Sinclairs participation in the defective construction.}

16 _{See at [35]-[44].}

17 _{At [125]-[126].}

18 _{Trevor Ivory Ltd v Anderson [1992] 2 NZLR 517.}

19 _{At 519.}

20 Above n 3 at [23].

[50] I find that each of the Sinclairs is personally liable because on the facts they personally owed duties of care to the purchasers of these flats, and because their actions and omissions in relation to the construction work caused the defects to the construction

Recovery of bank interest paid by the plaintiff

[51] Mr Erskine gave evidence that by autumn 2002, all of the units had been pre- sold. By May 2004, the top row units should have been completed, and the sales of each unit settled.

[52] Instead, from May 2004 onwards, the plaintiff was obliged to fund remedial work and to continue servicing its existing banking accommodation. As a result, the plaintiff paid interest totalling $370,544.36 to the Bank of New Zealand on its loan accommodation. These interest payments would not have been necessary had a code compliance certificate been issued on the due date, that is, by mid-May 2004. As described in Mr Erskine’s evidence, it was not until April 2006 that the code compliance certificate was issued and the sales of the top units could be settled.

[53] The plaintiff received loan funding from Invercargill Engineering Co Ltd (the Erskine company) totalling $71,000.00 between May 2004 and April 2006. But for this funding, the interest paid to the bank would have been significantly more than the amount claimed.

[54] In tortious claims a plaintiff must show the defendant caused the damage for which the plaintiff seeks to recover and also that the kind of damage was not too remote from the defendant’s act or omission.

[55] In both tortious and contract claims, if the defendant foresaw or contemplated loss of the general character of the loss in question, the plaintiff will recover damages for loss of that type, even if the defendant did not foresee or contemplate the precise manner in which the loss in question occurred or the exact extent of the damage.

[56] Having regard to the history of this matter, including the project plans for the development of the site, sales of the units and the obtaining of bank finance, I am satisfied that the damages claimed by way of bank interest were foreseeable. It would have been contemplated by the parties and was reasonably foreseeable by them that if there was defective workmanship, the sales would be delayed and remedial work costs would be incurred. As well, it was foreseeable that this would require ongoing banking accommodation (including payment of interest to the bank)

_{until the code compliance certificate was obtained and the sales could be settled.}

_{[57] In Taupo Borough Council v Birnie,}21

_{the plaintiff owned a hotel on a}

property through which two streams ran. Downstream from the hotel, the streams passed under a road through two concrete culverts. The culverts flooded from time to time and further works by the Council upstream aggravated the problem. Eventually, there were two significant floods that caused substantial damage to the hotel. Later, the hotel business was placed into receivership and sold at a substantial loss. The Court of Appeal upheld the trial Judge’s finding that it was reasonably foreseeable by the Council that the flooding of the hotel grounds caused by its construction works would have the effect not only of causing damage to the property but also of making the hotel less attractive to the public. The loss of accommodation profits and the losses sustained by a mortgagee sale were held to be a kind of

_{damage that was foreseeable.}

[58] In view of the defendants’ close association and knowledge of this project, the kind of damage, suffered by the plaintiffs including bank interest paid, was reasonably foreseeable. The bank interest damages claim is properly recoverable

_{from all three defendants.}

Quantum

[59] For reasons explained above, I do not allow a joint judgment of misappropriated funds against the three defendants. The misappropriations were unjustifiable expenses incurred by Messrs Graham and Stephen Sinclair separately.

_{Accordingly, the result is a joint liability of all three defendants as to the repair costs}

21 Taupo Borough Council v Birnie [1978] 2 NZLR 397 (CA).

of $318,953.37, bank interest and damages of $370,544.36, and fine and defence solicitor fees arising out of the prosecution of $26,972, which comes to a total of

$716,469.73.

[60] In addition, there is judgment against Mr Graham Sinclair in respect of the unjustifiable cheques in the sum of $29,268.27. There is judgment against the first defendant for unauthorised purchase of tools and equipment in the sum of $2,928.25.

[61] There is judgment against Mr Graham Sinclair in the sum of $518 in respect of the Golden Fleece purchase and the Queenstown Medical Centre invoice. There is judgment against the first defendant and Mr Stephen Sinclair in the sum of

$747.25 being the Whakatu Tavern and the Otis New Zealand costs.

[62] In respect of the food and alcohol expense, there is judgment against the first defendant in the sum of $1,670.27.

Summary of Judgments

First defendant $716,469.73
2,928.25
747.25
TOTAL $721,822.50

Second defendant $716,469.73
29,268.27
518.00
TOTAL $746,256.00

Third defendant $716,469.73
747.25
TOTAL $717,216.98

[63] The defendants filed a defence and a counterclaim. They also issued third party claims against Invercargill Engineering Co Limited and Mr Erskine. By virtue of the non-appearance of the defendants to pursue these claims, the plaintiff is entitled to judgment against the defendants dismissing the counterclaim, and the third parties are entitled to judgment dismissing the third party claims.

[64] The plaintiff and the third parties are entitled to costs on a 2B basis against the first, second and third defendants, such costs totalling $84,269.72 for the plaintiffs, and $3,760.00 for the third parties, as per the schedule attached to the memorandum filed in support of the judgment for sealing at the Invercargill Registry on 5 March 2013.