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High Court of New Zealand Decisions |
Last Updated: 7 April 2014
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV 2011-485-710 [2014] NZHC 295
BETWEEN BODY CORPORATE 90247
First Plaintiff
AND MANFRINI LIMITED Second Plaintiff
AND DAVID JAMES McCOLL AND BRENDA ELLEN McCOLL Third Plaintiffs
AND TEMPLAR RESIDENTIAL HOLDINGS LIMITED
Fourth Plaintiff
AND REDWOOD COLLIER PROPERTIES LIMITED
Fifth Plaintiff
AND WELLINGTON CITY COUNCIL First Defendant
AND DAYTONA DEVELOPMENTS LIMITED (IN
LIQUIDATION) Second Defendant
Hearing: 29 October - 1 November 2014
4 November - 8 November 2014
11 November - 15 November 2014
18 November - 19 November 2014
Counsel: D J S Parker and A V Williamson for First to Fifth Plaintiffs
L J Taylor QC and T C Wood for First Defendant
Judgment: 27 February 2014
JUDGMENT OF RONALD YOUNG J (Recalled Judgment: 21 March 2014)
BODY CORPORATE 90247 v MANFRINI LIMITED [2014] NZHC 295 [21 March
2014]
Table of Contents
Paragraph No.
Introduction [1] Background [4] The pleadings [44] Limitation [50] Scope of the CCC: preliminary issues [57]
Did the 1996 building consent (15997) lapse? [69]
Was the 1996 building consent (15997) cancelled? [81] What did building consent 71330 and therefore the June 2001
CCC relate to? [91] Retrospective Building Consent Policy [100] Communications with Mr Tait [107] Content of the consent and CCC documents [122] Conclusions in relation to scope of the CCCs [135]
Deck CCC [149] Negligent inspections [151]
Was the Council negligent in issuing the CCC relating to
building consent 71330? [153]
Scope of inspection [164]
What defects should have been seen at Glenmore Street
by a competent building inspector?
[169] Bay window flashing
[179] Window and door flashing
[181] Deck construction
[186] Monolithic cladding
[187] Steel beam repair
[189]
Roof [195] Negligence and damage caused [204] Retaining walls [207] Limitation [210]
Were the retaining walls required for a CCC? [220] Is the north east slope likely to collapse in an earthquake? [226] Likelihood of severe damage or injury [246]
North west slope [253] Under floor retaining wall [257] Solicitor’s negligence and contributory negligence [263] Solicitors’ negligence [266] Contributory negligence of solicitors [278] Plaintiffs’ liability for contributory negligence of solicitors [282] Private building inspector’s negligence [297] Causation [320] Building maintenance [342] Summary so far [349] Measure of damages [350] Loss based on diminution of value [360]
Repair measure of damages [383] Betterment [385] Post-remediation stigma [392] Discrete valuation issues [404]
(a) Replacement of the internal framing and
consequential replacement [405]
(b) Remediation and design costs [416] (c) The carpet/vinyl [420] (d) The drapes [429] (e) The roof [430] (f) Investigation cost [431] (g) Steel beam repair [438]
Peer review
[439] Damages
[440] General damages
[445] Daytona Developments
[449] Summary
[450] Costs
[451]
Introduction
[1] This case involves four leaky town house units built between 1996
and 2000 in Glenmore Street, Wellington. There is no
doubt the units suffer
from serious water entry and resulting damage. The Body Corporate and the
owners of the four town houses
now sue the Wellington City Council (the Council)
and Daytona Developments Limited (Daytona) (the “final” builder and
now in liquidation) in negligence. Daytona has not participated in the
hearing.
[2] Broadly, the Glenmore Street unit owners (Glenmore) allege
the Council owed a duty of care to them in issuing building
consents,
undertaking inspections and issuing code compliance certificates (CCC) with
respect to their town houses. Glenmore’s
case is that the Council was
negligent in its inspection of the building work and in granting a CCC, because
the building did not
in fact meet the requirements of the Building Code and the
Building Act 1991. The owners say the measure of damages is the remedial
work
(including the repair costs and consultants’ costs) to bring the building
up to code compliance. This cost, together with
a general damages claim, the
owners say totals $2,165,958.10.
[3] In addition to denying it was negligent the Council raises
affirmative defences including limitation, causation
and contributory
negligence. The Council also challenges the amount of the owners’
claims and the basis on which they
measure damages. The Council say the
appropriate measure of damages is the difference in value between the town
houses as they
were with all defects known and the value without those
defects.
Background
[4] On 26 January 1996 Remarkable Residential Housing Limited applied to the Council for a Project Information Memorandum (PIM) and a building consent to build four town houses at 14C Glenmore Street, Wellington. The application included plans and a number of engineering calculations for those plans. The town houses were some distance up a driveway from Glenmore Street. They were terraced houses on a sloping site. Unit 1 at the eastern end of the site was the lowest.
Each unit was higher than the next as the ground sloped uphill towards Unit 4 at the western end of the site. Each had their own garage at ground level and then three further levels of living space. Below and above these town houses at
14C Glenmore Street were other similar town house developments.
[5] The exterior cladding was mostly rusticated weatherboards
with some monolithic cladding especially in the exterior
junctions between the
town houses. The roof was made of iron. There were aluminium
windows.
[6] On the northern side of the property there was a steep bank which had been cut from the existing topography. It began below Unit 1 and at its highest point was
4.7 m above the building platform of Unit 1. The height of the cutting
gradually decreased as it went uphill and then rose again
on the north west
corner. In addition, a cutting had been made at the rear of the property (its
western side) beyond Unit 4 and
a retaining wall constructed there. Part of the
cut was unretained and its highest point was about five metres above the
building
platform.
[7] In May 1996 a building consent (15997) was issued by the Council
for the construction of the units. Building then
commenced. The
original Council inspection records are no longer available but they have been
(at least partially) converted
to computer records. They were produced at the
hearing.
[8] There appear to have been 24 inspections of the building by the
Council between April 1996 and March 1997. The inspections
from late
1996 until March 1997 were all related to plumbing and drainage. The last
inspection of the structure itself was in
December 1996. This was the pre-line
inspection. Such an inspection is made when most of the exterior work is
complete, including
the roof and external cladding but before internal linings
are fixed. The only issue noted by the Council inspectors at the time
as
preventing approval of the pre-line building work was that the framing timber
was too wet to fix the interior lining.
[9] After the inspection of 12 March 1997 there was a gap of over three years until the next inspection of the building by the Council. In the intervening three years it appears that the original developer was unable to complete the project. The
land was sold to a company called Tavern One Limited and the building work
contracted to Daytona, the second defendant. Tavern One,
which had borrowed
money from a law firm, also had financial difficulties. The law firm finally
took over the completion of the
work and the sale of the units.
[10] In September 2000 an application was made by Tavern One to the
Council for a building consent for the construction of a retaining
wall on the
property. The application was granted.
[11] Shortly afterwards a complaint was made to the Council about a deck
being built at the rear of Unit 4 without building consent.
A Council inspector
went to the property to discover that the four units had been almost completed
in the interim although, as I
have noted, no inspection had taken place since
March 1997.
[12] The Council then issued notice to rectify (NTR) number
C69193, dated
4 October 2000.1 The notice told the owner that (amongst other
things) the building consent2 had lapsed, the deck built on Unit 4
had been built without building consent and. Units 1 to 4 “appeared to
have been fully
completed even though the building consent has lapsed”.
The NTR went on to say in the “Particulars of
Contravention”:
You are given notice that you must apply for a retrospective building consent to authorise the works set out in clause 1 above within 30 days of this notice.
[13] On the same day, the owner was told that the building work would
have to stop.
[14] A few days later (on 9 October 2000) Mr Tait, who was a Council inspector in the Environmental Control Business Unit (ECBU), wrote to the owner of the property. He said that the purpose of the letter was to “clarify the situation in regards to building consents”. He said that the owner would “need to apply for a retrospective building consent and a building consent to satisfy the requirements of the NTR”. He then went on to describe in particular what was required. He said that once the relevant consent had been obtained the Council would be in a position to
carry out an inspection of the dwellings “when
required”.
1 Building Act 1991, s 42.
2 Consent 15997 issued in May 1996.
[15] One of the issues of concern to Mr Tait was the 100 mm x 100 mm posts in the deck attached to Unit 4. He noted that the normal sized posts would be
125 mm x 125 mm and that the Council would need certification from an
engineer to accept the lesser posts. By 17 October Steven
Young &
Associates, Wellington engineers, provided a certificate to the Council which
said the 100 mm x 100 mm posts were acceptable
and the concrete stairs to the
deck were adequately reinforced. They attached a plan to illustrate their
advice.
[16] On 18 October 2000 the Council received an application for a
PIM and building consent by Tavern One relating to
14C Glenmore Street. It
related to a consent for the deck, mostly completed, to the rear of Unit 4. A
copy of the building consent
application subsequently discovered in these
proceedings by the Council had a notation which said “deck consent PS 4 to
be
issued not retro. See Mark Scully”. Mr Scully was a Council employee.
Building consent number 70437 was granted for the new
deck.
[17] At about this time Mr Brodie, who was the principal of Tavern One
and Daytona, was convicted (after prosecution
by the Council) of
constructing apartments in Taranaki Street other than in accordance with a
building consent. Mr Brodie
appealed unsuccessfully to the High Court against
the conviction.
[18] On 15 November 2000 Tavern One made an application for another PIM
and building consent. This was allocated number 71330.
The work described
was “plumbing and building to complete project to Units 1 to 4 for code
compliance certificate”.
The value of the work was said to be
$10,000 and there was a description of the plumbing and building work
(primarily the installation of handrails) to be completed.
[19] Attached to the application was a set of plans for the construction of the town houses. Two of the plans had notations as to the installation of hand rails and plumbing work.
[20] In its NTR the Council had mentioned a retrospective building
consent. It seems that the Wellington City Council was the
only local
authority in New Zealand that had a “retrospective” building consent
process and as part of this process the
Council had developed a retrospective
building consent policy (dated March 1998).
[21] In his letter dated 9 October 2000 Mr Tait told the owners that they
would need to apply for both retrospective and prospective
building consents to
comply with the NTR. Mr Tait’s evidence was that he told the owner
shortly before sending that letter
there was no possibility of obtaining a
retrospective building consent for the work done from the beginning of
construction of the
building until the lapse of the building consent. The
Council said that the original building consent had lapsed in 1999. And
so Mr
Tait claimed he had told the owners of Glenmore that there could never be a
building consent for the work done from 1996 to
1999. This was when a
significant majority of the construction work on the units took
place.
[22] Building consent 71330 was granted on 29 November 2000. The
Council then carried out inspections under 71330 between January
and May 2001.
Mr Tane was responsible for inspecting the plumbing, storm water and drainage
and Mr Tait the building work. The
first inspection by Mr Tait was on 11
January 2001 and the inspections appear to have finished by 1 June 2001 when a
CCC was issued
for building consent 71330 by the Council as well as for 70437,
the deck building consent.
[23] Mr Tait gave evidence at trial. He understandably had limited
recollection of the precise details of the inspections carried
out by him in
2001.
[24] The items noted as inspected by Mr Tane and Mr Tait in both the Council inspection check lists and in correspondence from Mr Tait to the owners included: rustic plugs in the weather boards, the cladding and jointing system, gully traps, sealing around the doors and windows, deck nailing, glazing of the bay windows, drainage metal, the fibre cement cladding and the storm water system.
[25] The two inspectors carried out approximately 15 inspections.
Eventually an interim CCC was issued on 9 May 2001 for 71330.
It was said to be
“interim for units 2, 3, 4 excluding the decks and unit 1 only”.
On 1 June 2001 CCCs were issued
for 70431 for the deck attached to Unit 4 and
for 71330. The exact terms of the 71330 CCC are matters of some importance in
this
case and I will return to the content of that CCC later in this
judgment.
[26] The four units are now owned by Manfrini Limited (Unit 1),
Mr and Mrs McColl (Unit 2), Templar Residential Holdings
Limited (Unit 3), and
Redwood Colliers Properties Limited (Unit 4). Three of the four units are
therefore currently held as investment
properties while Mr and Mrs McColl reside
in Unit 2.
[27] Dr Richard Mulgan is a shareholder of Templar Residential Holdings
Limited which owns Unit 3 at Glenmore Street. He gave
evidence at trial.
Unit 3 was purchased by Dr Mulgan and his wife as trustees of the Mulgan Family
Trust in June 2001 when it was
first built. The trust then onsold the unit to
the Mulgans’ company, Templar, in July 2002. The conveyancing file
relating
to the purchase has been destroyed but there is some evidence as to the
surrounding circumstances of the purchase.
[28] The Mulgan Family Trust obtained a Land Information Memorandum (LIM)
when it purchased the property. That LIM identified
the lapse of the
building consent during the course of the construction of the property. Dr
Mulgan said that because of his concern
about the building consent and the LIM
one of his options was to cancel the contract. However, he decided to make his
own enquiries
with the Council before deciding whether to proceed with the
contract. As a result of his discussion with a Council employee, he
decided
not to cancel the contract but to delay settling the transaction until a CCC was
issued. Eventually Dr Mulgan settled the
transaction after he believed a CCC
had been issued for Unit 3.
[29] Dr Mulgan said the first time he became aware that there were significant defects affecting his unit and other units at 14C Glenmore Street, was in 2011 when he got a call from the owner of Unit 1, Mrs Ryan (of Manfrini Limited), who told him significant watertightness problems had been discovered in the building.
[30] Mr and Mrs McColl own Unit 2. They purchased it new in August 2000
as an investment property. Their sale and purchase agreement
was conditional
upon the provision of a CCC and title to the unit. There was considerable
delay in the provision of both the title
and a CCC. In October 2000 the McColls
were told that a CCC was expected to be issued in the next few days. That did
not happen.
[31] It wasn’t until May 2001 that the McColls’ solicitor received an interim CCC to Unit 2. It excluded the deck. It suggested that a CCC would be available the following week. Eventually the deck was completed and a CCC issued on
1 June 2001. Settlement then occurred. Mr and Mrs McColl now live in the
unit. They first knew about the problems with the unit
when they were told by
Mrs Ryan about the leaks.
[32] The next purchasers in time were Mr and Mrs Collier through their
company Redwood Collier Properties Limited. They own
Unit 4 at 14C Glenmore
Street. They purchased the unit as an investment property.
[33] Prior to entering into a sale and purchase agreement, Mrs Collier
employed the New Zealand House Inspection Company to provide
a building
inspection report. The report said overall the unit was in average to good
condition. She also had a builder check the
unit. He expressed no
concern.
[34] Mrs Collier took the view that the defects identified in the building report could be easily repaired and the condition of the unit improved by maintenance. Redwood agreed to buy the unit. The agreement for sale and purchase was conditional upon a Council CCC for the property. There was some delay in settlement relating to the CCC as well as finance. The solicitor approved the CCC for the property and the sale eventually proceeded. Mr and Mrs Collier did not obtain a LIM. The Colliers also first heard of the concerns about watertightness from Mrs Ryan in 2011.
[35] Mrs Ryan is a shareholder (together with her husband) in Manfrini Limited which owns Unit 1. She is the chairperson of the Body Corporate Committee. She purchased Unit 1 in 2010. Manfrini hired a property and investment company to find suitable investment properties to purchase. They identified
14C Glenmore Street as a potential suitable investment.
[36] Manfrini’s agreement for sale and purchase was conditional
upon a building surveyor’s report as well as a LIM.
Mrs Ryan searched
the Council’s file with respect to the building. In addition, a building
surveyor’s report was obtained.
It did not identify any leaky building
problems.
[37] Mrs Ryan made a number of enquiries arising from the LIM. She
consulted her solicitor about the LIM and the CCC. Eventually
the purchase
proceeded.
[38] In January 2011 Manfrini’s tenants complained about damp and
cold rooms in winter. Mrs Ryan agreed to provide thermal
curtains. When she
was installing them she noticed there was some mildew on the back of the blinds
and in other areas of the unit.
She found some rot on the bay window sill of
the downstairs bedroom. There was other damage in that area. Eventually she
checked
all of the windows and became concerned about the condition of the
windows.
[39] At about that time the roof of the complex was being repainted
because the previous paint surface had failed. It was being
repainted under
guarantee. While scaffolding was on the building Mrs Ryan arranged for a
plumber to check the roof. Her concern
about the bay windows led her to believe
that there might be hidden rot. Eventually she contacted Helfen Limited (experts
in identifying
and remediating leaky buildings) and Mr Wutzler (a witness in
this case). He confirmed there were major problems with the
building.
[40] Glenmore identifies 13 categories of defects at the
property:
(a) lack of adequate detailing of roof and cladding junctions;
(b) inadequate fixing of roof flashings and roof cladding in places;
(c) poor installation of roofing underlay and/or an inappropriate
underlay used;
(d) poor detailing of internal gutters including lack of appropriate
fall to internal gutters between units;
(e) lack of adequate detailing of timber cladding;
(f) lack of adequate detailing of fibre cement cladding;
(g) inadequate protection of the junction between the cladding and the
tops of the window and door units;
(h) inadequate protection of the junction between the cladding and the
jambs of the window and door units;
(i) inadequate protection of the junction between the cladding and the
sills of the windows and doors including installation
of the window and door
units hard down on timber sills, along with inadequate door
thresholds;
(j) defects to decks;
(k) defects in the subfloor;
(l) defects by way of inadequate retaining of ground in the subfloor area; (m) plumbing defects.
[41] As a result the direct remediation costs are said to be $1,513,621. Further, consultants’ fees, lost rental while the repairs are undertaken, special damages, legal fees, general damages, post-remediation stigma and disbursements total a further
$537,849.10. In total $2,051,182.60. It is estimated there is a further $114,775.50 in fees from consultants to prepare for and attend the experts’ conference hearing. The total claim therefore is $2,165,958.10 based on a repair measure of damages.
[42] The plaintiffs say the proper measure of damages is remediation.
But if this
Court concludes the proper measure is loss of value then the
plaintiffs’ claim is
$1,794,000 being the unaffected value of the property ($2,094,000) less its
current value ($300,000). The Council disputes the plaintiffs’
assessment
of the property’s current value.
[43] Much of the quantum has been agreed by the quantity surveyors for
the opposing parties. I will return to that issue at the
end of the
judgment.
The pleadings
[44] Glenmore sues the Council in negligence. They say the Council owed
them a duty of care expressed in the statement of claim
in this way:
11. The Council owed the plaintiffs a duty to exercise reasonable care
and skill and to properly discharge its functions, powers
and duties as a
territorial authority in administering and enforcing the Building Act 1991 and
the NZBC. The duties owed by the
Council to the plaintiffs included the
following (inter alia):
(a) A duty when processing building consents to, after
considering an application for building consent, grant
the consent of the
Council if satisfied on reasonable grounds that the provisions of the NZBC would
mean that the building work would
be properly completed in accordance with the
plans and specifications submitted with the application.
(b) A duty to undertake all inspections necessary for the Council to
be satisfied on reasonable grounds that the building work
complied with the
building consent and the NZBC.
(c) A duty when undertaking inspections to exercise reasonable care
and skill and to ensure that the building work complied
with the building
consent and the NZBC.
(d) A duty when considering and issuing Code Compliance Certificates to
issue a Code Compliance Certificate only if the Council
is satisfied on
reasonable grounds that:
(i) The building work to which the certificate relates complied with
the building consent and the NZBC; or
(ii) The building work to which the certificate relates complied with the building consent and the NZBC to the extent authorised in terms of any previously approved waiver or modification of the building
consent and the NZBC contained in the building consent which relates
to that work.
[45] Glenmore says that this duty of care arose from the granting of
building consents, inspections and the issue of CCCs.
[46] Glenmore alleges the following breaches:
13. In breach of the duties pleaded in paragraph 11 above the
Council:
(a) Failed to adequately inspect and require rectification of
defects that ought to have been noted on inspection and/or
failed to ensure that
defects that were noted on inspection were rectified including the defects set
out in paragraph 5 above;
(b) The Council issued a code compliance certificate when there were
not reasonable grounds upon which the Council could be
satisfied that the
building work complied with the Building Consent and the NZBC.
Particulars
(i) The code compliance certificate was issued when the property was
subject to the defects pleaded in paragraph 5 above;
(ii) The defects particularised in paragraph 5 above should have
been identified by a reasonable building inspector and
rectification
required.
[47] The Council’s response is that the duties set out above at
[44] do not correctly identify the duty owed by the Council,
particularly to
future purchasers including the Glenmore owners. In any event most of the
plaintiffs’ claims are time barred.
[48] As to the building consents, the NTR, the inspections and the CCCs,
the Council denies any negligence. They say in any
event that the CCCs were
only issued in respect of narrow building consents. The Council never certified
that the whole building
was code compliant.
[49] Further, the Council says if they were negligent then there was negligent contribution by the plaintiffs, particularly through the negligent acts of the plaintiffs’ solicitors and with respect to some of the plaintiffs’ negligent pre-purchase inspections. In the alternative, the Council says the actions of the solicitors, the
building inspectors and in some cases the plaintiffs, broke the chain of
causation. Finally, there is disagreement about the measure
of damages and the
quantum of damages.
Limitation
[50] The Council’s case is that the Limitation Act and Building Act time bar much of the plaintiffs’ claim. These proceedings were filed on 21 April 2011. By virtue of s 393(3) of the Building Act 2004 and s 4 of the Limitation Act 1950 any negligent failure by the Council with respect to this building before 20 April 2001 will be time barred. Section 393(2) prohibits proceedings after 10 years from the date of the act or omission on which the proceedings are based. All the building consents relating
to 14C Glenmore Street were issued prior to 20 April 2001.3 Any
cause of action
arising from the issue of these consents is, the Council says, time
barred.
[51] Secondly, all Council inspections of the building made before 20
April 2001 giving rise to a cause of action in themselves
are also time barred.
Council inspections after 20 April 2001 and any CCCs issued after that date will
not, the Council accept,
be time barred.
[52] The Council’s position as far as it goes is correct. However,
Glenmore says that s 393 allows inspections and other
actions undertaken by the
Council which make up the CCC issued within the 10 year backstop to be
considered as part of the analysis
as to whether the CCC has been negligently
issued. The Council says the Court cannot consider any inspections prior to
April 2001
whether contributing to the CCC or not.
[53] Glenmore’s case focused on the negligent issue of the CCC on 1 June 2001. In a CCC the local authority certifies that the work carried out on a building complies with the Building Code and Act. And so the issue of a CCC by a Council is typically based on Council inspections undertaken during the building work as well
as a variety of other information available to the Council during the
building work.
In
this case, the Council inevitably had to rely upon inspections it carried out
(or failed to adequately carry out) prior to 20 April
2001.
[54] I am satisfied that the negligent act in this case which triggers
the 10 year Building Act 2004 backstop is the issue of the CCC and time
therefore runs from that date. I am satisfied that where, as here, a cause of
action arises
from the negligent issue of a CCC then for limitation purposes it
does not matter that the CCC in part depended upon inspections
made more than 10
years before the issue of proceedings.
[55] In drafting s 393(3) of the Building Act 2004 Parliament has
clearly recognised the potential for conflict given the decision to issue a CCC
is typically based on a collection
of information including building inspections
that may or may not be within the 10 year limitation period. But Parliament has
decided
that where the collective enquiry including inspections is relied upon
to issue a CCC, then “the date of issue of the [CCC]”
is the logical
start date for a limitation period.
[56] I am therefore satisfied that the claim relating to the negligent
issue of the
June 2001 CCC is not time barred by s 393 of the Building Act
2004.
Scope of the CCC: preliminary issues
[57] As I have noted Glenmore’s case is based on the
proposition that the June 2001 CCC with respect to building
consent 71330 is a
“full” CCC relating to the whole building. The Council’s
case is that this CCC relates only
to the four items of plumbing work and the
handrails specified in the building consent application and in turn in the
CCC.
[58] If the Council is correct as to the limited extent of the CCC then Glenmore’s claim overall must fail, subject to the issue of the deck to Unit 4 and its separate CCC and subject to the claim of negligent inspections. There is no evidence that the granting of the CCC for consent 71330 for the limited plumbing work and hand rails was negligent nor that inspections of that work were negligent. Nor is there any evidence that any of the damage to the building was caused as a result of any inspection of the plumbing work and building work mentioned. I must therefore
answer this vital factual question: what did the CCC of 1 June 2001 relating
to consent 71330 actually certify as code compliant?
[59] I pause to note that consent 70437 related to the construction of
the deck attached to the back (western side) of Unit 4.
A separate CCC was
issued with respect to this deck. There are allegations that the CCC relating
to this deck was negligently
issued by the Council. And so irrespective of my
conclusion about the extent of the CCC relating to 71330, the allegedly
negligent
CCC relating to the deck remains for resolution.
[60] Additionally, before I consider the detail of Glenmore’s
claims there are a number of factual and legal issues that
need to be resolved
regarding the first few years of the life of this building. Unfortunately this
was a confusing construction.
Developers came and went during the construction
stage and sometimes they did not comply with their Building Act obligations.
The Council’s performance of its obligations relating to building
consents, inspections and CCCs was often
confused, contradictory and uncertain.
Given the vital regulatory function the Council was performing, those failures
were concerning.
[61] As a result it is not entirely clear what work was done and
inspected on
14C Glenmore between 1997, when the inspections stopped, and 2000 when they resumed. It appears that there were no initial problems with the work on the property. However, some of the retaining walls shown in the plans which form the basis of the building consent were not built. The most obvious example is the retaining wall on the north face between Unit 1 and the cut slope. The plan showed a
1.5 m high retaining wall. This would typically be built before the
foundations. It was not built. There is nothing in the Council
notes that
showed its inspectors were aware of the change, nor whether it was
approved.
[62] The Council’s record keeping was poor. There is a computer record of what appear to be the notes made by inspectors at each visit in 1996/1997, but no original inspection notes from this period. There are full inspection notes for 2001.
[63] The Council building inspection notes from 2001 are likely to illustrate Council inspector practice in 1996. The Council had prepared pre-printed inspection forms for its inspectors. The pre-printed forms required the inspector on each inspection to identify what work had been inspected by using tick boxes. If necessary there was room for comment. Assuming the inspection forms of the
24 inspections from 1996 and 1997 were accurately converted to the
computer records, there is very little information
about what was
inspected, what was approved and what was not. The inspection forms from 2001
show a similar pattern. The inspection
comments are almost exclusively comments
about inadequacies in the building work. It is rare to read a report that a
particular
aspect of the building work has been properly completed. The tick
boxes in the form are rarely used. Overall it is difficult to
accurately
identify what building work has been done, what has been inspected and what has
been approved.
[64] The later inspection entries in 1996 and 1997 make it clear that the
pre-line inspections failed because the moisture level
of the framing timber was
too high for the interior lining to be affixed. At this stage the building had
the exterior cladding,
roof, walls and windows in place. They seem to have been
approved. It appears as though it was a question of waiting for the moisture
level of the framing timber to drop before the interior lining could be fitted.
March 1997 marked the last building inspection requested
under the original
building consent.
[65] At some stage, probably in 1999, the Council considered the original
building consent 15997 had lapsed. In a LIM dated 15
November 1999 the Council
said:
The following consents have no code compliance certificate and have
lapsed:
(i) number 15997 issued on 14 May 1996 for four units; and
(ii) further, note inspections need carrying out on Units 1, 2, 3 and
4. No final inspections have been requested and no code
compliance certificate
has been sought or issued.
(iii) no reasonable progress has been made within 12 months and
therefore under s 41(1)(b) of the Building Act 1991, builder
consent number
15997 has lapsed;
(iv) no recent audit of the units has been undertaken to determine the compliance with the approved building consent.
[66] On 20 September 2000 Dr Mulgan obtained a LIM. That LIM was in similar
but not identical terms to the 1999 LIM. It confirmed
that:
The following consents have no code compliance certificate and have
lapsed:
(i) 15997 issued on 14 May 1996 for four units.
[67] The LIM also said:
Note: Inspections have been carried out through the construction period on
units 1, 2, 3 and 4. No final inspections have been requested
and no code
compliance certificates have been sought or issued.
An inspection was undertaken on 18 December 2000 by officers of the
Wellington City Council. It appears that work has been
undertaken to finish the
units, even though the building consent for the units has lapsed and a new
consent was required to complete
the work.
[68] The LIM noted that a new deck on Unit 4 had been built without a
building consent. The LIM then said:
Further work is required to be completed before the units fully comply with
the Building Code 1992. A notice to rectify under the
Building Act 1991 is to
be issued for building work done without a Building Consent.
Did the 1996 building consent (15997) lapse?
[69] Glenmore’s position is that the Council had no authority under s
41 of the
Building Act 1991 to lapse this building consent. The Council argued
otherwise.
[70] Section 41(1) of the Building Act 1991 provides as follows:
41 Lapse and cancellation of building consent
(1) A building consent shall lapse and be of no effect
if—
(a) The building work concerned has not been commenced within
6 calendar months after the date of issue of
the consent or within such
further period as the territorial authority in its absolute discretion may
allow; or
(b) Reasonable progress on the building work has not been made within 12 calendar months after work has commenced or within such further period as the territorial authority in its absolute discretion may allow.
[71] The applicable provision, both parties agree, is para
(b).
[72] It seems that the Council interpreted para (b) as meaning that if in
any 12 month calendar period after a building consent
is granted, reasonable
progress was not made on the building work, then the building consent would
lapse.
[73] Strangely there is no process for a building consent to lapse under
s 41. No one is authorised to decide whether or not
reasonable progress has
been made. There is no notification of a “lapse”. Somehow it just
happens.
[74] Here, the Council did not notify the builder or developer that the
building consent had lapsed. Most probably when the Council
received the 1999
request for a LIM it looked at the consent file and realised no inspection had
been made on the building for several
years and concluded no reasonable progress
had been made. And so it notified the LIM applicant the consent had lapsed.
Neither the
builder nor the developer seems to have been notified the consent
had lapsed. It seems probable therefore they proceeded to
complete the
building in 1999/2000 believing the original consent remained
alive.
[75] The Council argued that the intent behind para (b) of s 41(1) must
be to lapse consent if reasonable progress is not made
during any 12 month
period. They submitted that otherwise after the first 12 months or any further
extended period a building consent
could remain alive for an indefinite period
and the work being done subject to that consent could be delayed for an
indefinite period
without affecting the consent.
[76] Glenmore argues that the plain words meant that the only
circumstance under para (b) where a building consent could lapse
is where
insufficient progress was made within 12 months of commencement, with the
Council having the right to extend the 12 month
period.
[77] There is no evidence before the Court as to Parliament’s intention in enacting this provision. The plain words of para (b) link the lapse of consent to a failure to make reasonable progress after commencing the building work. The Council can
provide more time than 12 months from commencement for reasonable progress to
be made. This could be exercised, for example, where
an unexpected event has
caused delay in getting started.
[78] There seems no other way to interpret para (b) other than that a
building consent will lapse and be of no effect only if
reasonable progress has
not been made on the building work within 12 months after the work has begun or
within an extended period
nominated by the territorial authority. I consider
there is no basis on the plain words of para (b) to favour the Council’s
interpretation.
[79] Neither situation provided for in para (b) applies here. It is
common ground that within the first 12 month period after
the building consent
was granted, reasonable progress was made on the construction of 14C Glenmore
Street. While it can be appreciated
that Parliament may have wished to lapse
building consents when inadequate progress was made on the work approved, the
plain words
of s 41(1)(b) do not provide such a broad or generous power of
control. The section’s plain words relate the lapse principle
to
progress in the 12 months after commencement of building only.
[80] The Council’s action in claiming that the building consent had
lapsed and was of no effect in 1999 and 2000 was therefore
wrong. On the basis
of my analysis of s 41(1)(b) the building consent had not lapsed.
Was the 1996 building consent (15997) cancelled?
[81] In the alternative the Council says it cancelled the building permit
under s 41(2) of the Building Act 1991. Section 41(2),
(3) and (4) provide as
follows:
41 Lapse and cancellation of building consent
...
(2) The territorial authority may cancel a building consent in whole or in
part forthwith if—
(a) There has been a change of circumstances such that the territorial authority believes that the proposed building work may contravene any provision of the building code as in force at the time the work commenced; or
(b) The rectification work required to be done by a notice to rectify
under section 42 of this Act has not been commenced within
a reasonable time, or
there has been a breach of a condition of any such notice.
(3) When a territorial authority cancels a building consent, all
building work to which it relates shall cease immediately,
except for work
necessary to properly secure and protect the building and to keep the site in a
safe condition.
(4) If a building consent is cancelled under subsection (2)
of this section, the owner may apply for a new consent
as if making an
application in respect of an alteration to an existing building.
[82] The claim of cancellation seems to be based on the notation in the
CCC for consent 71330. As to consent 15997 it said:
... please note this consent has lapsed and is considered cancelled
...
[83] There was no evidence as to how this “cancellation” came
about other than the words of the CCC for the 71330
consent. This comment seems
to assume that where a consent lapses it is by virtue of the lapse cancelled.
This is not at all the
process contemplated by s 41(2).
[84] Subsection (2) anticipates a different situation than provided for
in subs (1). Subsection (1) declares that a building
consent lapses if
certain events occur. Subsection (2) is concerned with the power of a
territorial authority to cancel a building
consent if certain events occur.
Subsection (2) therefore involves some form of giving of notice and some form of
exercise of discretion
by the territorial authority. For example, the
subsection requires that the Council “believe” the proposed work may
contravene the Code.
[85] I consider subs (2) has no application to the facts of this case.
There is no evidence that the Council turned its
mind to s 41(2) and
its application to consent 15997, nor that it in fact cancelled the building
consent either under subs
(2)(a) or (b).
[86] Further, neither para (a) nor (b) of subs (2) fit the facts of this case. Under para (a) if there has been a change of circumstances such that the territorial authority believes that the “proposed building work” may contravene the building code, then it
can cancel the building consent. There is no reason here to suppose that in
1999 the Council considered that proposed building work
(the only work then left
was some straightforward plumbing work and the fitting of hand rails to stairs)
would contravene the building
code.
[87] As to rectification work in para (b), a NTR had been given to the
owners in September 2000 but there was no evidence that
the rectification work
had not been commenced within a reasonable time.
[88] Further, all of the LIM reports refer to the building consent as
being lapsed and the NTR of 4 October 2000 also referred
to the building consent
having lapsed.
[89] I am therefore satisfied that the Council had no authority to lapse
building consent 15997 under s 41(1) nor to cancel the
building consent under s
41(2). I am also satisfied that the Council did not in fact intend to cancel
building consent 15997.
[90] Unfortunately the Council proceeded on the basis that
building consent
15997 had lapsed and as consequence had been cancelled from 1999 onwards.
This erroneous view informed its decision making and its
certification with
respect to the building from then on. This view informed the LIMs, the NTR, the
advice regarding building consents,
its inspections and the issue of CCCs. Many
of the subsequent problems in the Council approvals for this building and in
this litigation
have arisen because of these errors by the Council in its
approach to this building.
What did building consent 71330 and therefore the June 2001 CCC relate
to?
[91] This is perhaps the most important factual issue in this litigation. Glenmore’s case is that the CCC from the Council on 1 June 2001 relating to consent 71330 was a full CCC for the four completed units covering all the building work. Their case is that prospective purchasers including all of the four owners of the units were entitled to rely upon the CCC as certifying that the four units complied with the Building Act and Code. And so Glenmore’s case is that each owner proceeded with the purchase of their unit believing they had a CCC which covered the whole of the construction of their unit. Their case primarily relies upon this claim.
[92] The Council says that the CCC had limited coverage. They say it
covered minor plumbing, handrails to each unit’s stairwells
and some
safety rails and nothing further. And so the Council’s case is that the
vast majority of the construction work on
the four units at 14C Glenmore Street
was not certified by the Council as code compliant. The owners of the four
units were wrong
to believe the CCC covered the whole of their units. Their
solicitors were negligent in either failing to ascertain this was a limited
CCC
or at least in failing to recognise the coverage of the CCC was not clear and
advising further investigation.
[93] A Council CCC is intended to certify that particular building work
covered by a building consent complies with the Building
Code and has been
completed. In this case there was considerable debate between the witnesses
about what was being sought in the
building consent and what was ultimately
certified by the Council.
[94] Mr Wutzler and Mr Tidd took the view that whatever the building
consent application covered, the CCC issued by the Council
covered the whole of
the building. Mr Flay took the view that whatever the building consent
application covered, the CCC at least
covered all that the Council inspectors
had noted that they inspected and that required remedial work.
[95] As I have noted, the difficulty with Mr Flay’s approach is
that it assumes the inspectors have noted on the inspection
forms all that they
inspected. In fact it seems clear from the evidence that the inspectors only
noted “problem” areas
and did not generally note on their
inspection forms building work which had been completed correctly and in
compliance
with the Code. And so it is not at all clear what in fact was
inspected by the building inspectors in 2001.
[96] Finally, there is Mr Jones and Mr Tait who say that the building
consent was only for some minor plumbing and building work
and the CCC can only
therefore cover that work.
[97] To understand these expert opinions and the issues that arise it is necessary to consider in further details the facts surrounding the issue of the CCC relating to consent 71330.
[98] As I have noted no inspections had been sought for the property by
the builder or the owners from March 1997. The building
was then at the
interior pre-lining stage. In September 2000 the Council received a complaint
about a deck being built attached
to Unit 4 which was said to be without a
building consent. The Council inspectors went to the property and found that
the four units
had been effectively completed.
[99] Mr Tait was then a Council building inspector. He gave evidence at
trial. His evidence is of significance in relation to
what happened over the
following few months.
Retrospective Building Consent Policy
[100] The Council had developed a retrospective building consent process
which was operative at the time. There was subsequently
considerable doubt
expressed about the lawfulness of any form of retrospective building consent.
The Building Act 1991 did not
appear to contemplate retrospective consents. In
any event the ECBU within the Council issued the policy. The policy was
publicly
notified and commenced in March 1998. It is no longer
operative.
[101] The policy provided that retrospective building consent was intended
to apply to “building work being carried out (or
completed) without a
building consent”. This included situations where a building consent had
been applied for but had not
yet issued; and where no building consent had ever
been applied for or issued. It applied where the work concerned was partly or
fully completed.
[102] The policy worked in this way. When the ECBU found out
about non-consented building work it would issue
an NTR. The building
work was required to stop. The fact there was an NTR with respect to the
property would be noted on
any LIM then issued.
[103] The ECBU would then decide whether the work done was of such a standard that it was necessary to issue a dangerous or insanitary notice. The owner then could do nothing or engage a “suitably qualified person to provide sufficient evidence that demonstrates the work has been done well enough not to pose a safety threat and not
to be dangerous or insanitary”. If the owner did so they could then
apply for retrospective consent.
[104] If the owner chose to do nothing then the Council would consider
prosecution or some form of enforcement action. If the
owner obtained
qualified evidence to show the work done was not dangerous or insanitary then,
apart from noting the NTR (in any LIM
issued) and that no further work would be
allowed on the building, nothing further needed to be done by the
Council.
[105] If the owner wanted a retrospective building consent, then a number
of steps were required. They included providing the Council
with:
(a) a complete set of consent plans;
(b) producer statements from suitably qualified persons covering all
aspects of the work done to date;4
(c) accompanying evidence of inspection of the building works;
(d) reasons why the building work complied with the building code;
and
(e) evidence that the consent plans matched the physical structure
actually erected.
[106] If the Council was satisfied with this evidence then a retrospective
building consent could be issued for the work done without
consent. In the
meantime no work on the building was permitted.
Communications with Mr Tait
[107] On 4 October 2000 the Council issued a NTR with respect to Glenmore including particulars of contravention to the building owner. It said that the owners
were required to rectify the building work not done in accordance with
the Building
Act as identified in an attached notice. It noted the
original building consent had lapsed. The owners were told that work on the
entire project was to cease and not to resume until written approval of the
Council.
[108] The NTR notice said:
1. On 18 September 2000 an officer of the Wellington City Council
(the Council) inspected your property and found the building
work had been
undertaken. In particular the officer observed:
(a) a deck has been built on Unit 4 (as shown in the Cutress
McKenzie Martin Proposed Unit Title Development Plan
13921) without a building consent and it fails to comply with the
requirements of the New Zealand Building Code;
(b) Units 1–4 appear to have been fully completed even though the
building consent has lapsed.
2. You were given notice that you must apply for a retrospective building consent to authorise the work set out in cl 1 above within
30 days of this notice.
[109] The NTR said that it was an offence punishable by
conviction and a substantial fine if the owner failed to comply
with the
NTR.
[110] On 9 October 2000 Mr Tait wrote a letter to the owners about
14C Glenmore Street. He referred to the NTR
and provided what he
described as “clarification” regarding the building consents that
would be required.
[111] Mr Tait said that the owners would need to apply for both a retrospective building consent and a building consent to satisfy the NTR. The retrospective building consent was for the deck on the uppermost unit (presumably Unit 4) and “any structural work that has been completed on the rest of the apartments”. He noted this would need to include the concrete stairs that had been installed to Unit 4. He noted that the work would need to be certified by an engineer. He said that “the deck has been built on 100 mm x 100 mm posts and not the 125 mm x 125 mm posts as we would normally expect”. He mentioned that the concrete path to the top unit had been poured against the weatherboards of the unit.
[112] He then said:
You will also need to apply for a building consent for the work required to
complete the apartments. When the apartments were originally
inspected no
fittings or fixtures had been installed. No taps etc, the showers had not been
completed, all the plumbing systems
had been capped off. There did not appear
to be any hot water cylinders.
[113] Once the relevant consent had been obtained the Council said it would
then be in a position to carry out an inspection of
the dwellings when
required.
[114] Mr Tait said in evidence that he had had a discussion with the owners prior to the letter dated 9 October 2000 and had made it clear to them that the retrospective policy would not allow them to get any form of building consent for the work done under the original building consent before that consent lapsed. He said that he told the owners that the only consent that they could expect to get retrospectively was consent for the work that had been done without a building consent from the time the
building consent lapsed,5 through until the work had been halted
with the NTR in
October 2000.
[115] I did not find Mr Tait’s evidence in this regard convincing or
reliable. It is extraordinary to think that Mr Tait
can now recall events 12,
almost 13 years ago in the detail claimed, including detailed discussions with a
particular owner with
regard to a particular development. Mr Tait said that he
had been involved in dozens of building consent applications for the Council
and
then as a private contractor both before these events and since.
[116] Mr Tait’s evidence about his discussion with the owners was not mentioned in his letter dated 9 October 2000. Indeed this letter appears to be in conflict with this conversation. Part of the requirement for retrospective consent to be obtained in the letter related to “any structural work that has been completed on the rest of the apartments”. The letter did not restrict the structural work to that done since the lapse of the building consent. The letter appeared to include some building work
done before the building consent
“lapsed”.
[117] By 1999 the Council claimed that the
original building consent had lapsed and was of no effect. Mr Tait said that
the retrospective
policy did not apply to work that had a building consent.
Thus he said the 1996/1997 building work completed under the original
consent
could not have a retrospective consent.
[118] The principle behind the retrospective building consent process
was that where the Council could be reasonably assured
that building work that
had been done without a consent had been done in accordance with the
plans and specifications
and the Building Act and Code, it would be
prepared to grant a building consent for work already done. The policy
behind
retrospective consents focused on obtaining evidence as to whether the
Council could be reassured the building work had in fact complied
with the
Code.
[119] In this case, there was a high level of assurance that work done under the original building consent complied with the Act and Code. After all, it was the only work that had been done on this building that the Council had inspected, and was in a position to certify that the building work had been done in accordance with the Code and Act. The other building work, done after the Council inspections ended in
1997, would require certification by a third party that the work had been
done in accordance with the plans, the Act and the Code.
[120] There is also an absurd circularity in Mr Tait’s approach to the meaning of the Council’s retrospective policy. The owner obtained the building consent and built part of the building in accordance with that consent. The building consent was then lapsed by the Council. But the Council knew that the work that had been done was in accordance with the building consent and Code. The lapse of the building consent meant the building consent was of no effect, thus the building work did not have a consent. The building owner wished to apply under the retrospective policy to obtain a building consent for the whole of the building. But Mr Tait said that was impossible because when the first part of the building was completed, it was done under a building consent (although now of no effect). And so the owner did not meet the criteria for a retrospective consent. As I have noted this was the only part of the building work by 2000 that the Council had inspected and could confidentially assess for compliance.
[121] And so Mr Tait’s description of his discussion with the
owners/developers as to the meaning of the retrospective policy
made no sense.
If the building work then completed had a building consent it would not need
retrospective consent. If the building
work completed did not have a valid
building consent (including where it had lapsed and was of no effect),6
there was no reason why it should not come within the retrospective policy
and every reason why it should.
Content of the consent and CCC documents
[122] In any event the service of the NTR in October 2000 was followed by two applications for PIMs and building consents by the owners. The first application related to the deck (70437). It was an application for a PIM and a building consent for the deck to Unit 4. This deck had been built prior to the NTR. As I have noted, on this building consent application these words appear “not retro see Mark Scully”. Mr Scully was an employee of the Council. The note, however, made no sense. On the face of it the deck consent was retrospective. The deck had been all but
completed by the time the application for the building consent was
made.7
[123] Counsel for the Council speculated that it may not have been seen as
a retrospective consent because the deck itself could
be inspected even after it
was built. Whatever the Council’s capacity to inspect building
work which was completed
before a building consent was applied for,
such construction would always require a retrospective consent. If the work
had been completed before a building consent was applied for the consent could
only be retrospective.
[124] The second consent application (71330) was filed on 15 November 2000. Under the description of building work it said “plumbing and building work to complete project to Units 1 to 4 for CCC”. The value of the projected work was said
to be $10,000.
6 However, see [89].
7 Consent had to be obtained in advance of construction commencing: Building Act 1991, s 32.
[125] On the final page of the consent application there was a note
identifying plumbing items. It described tap ware, shower
mixers, toilet
suites and hot water heaters to be installed. Under the heading “building
items to be completed” it listed
hand rails to each stairwell and safety
barriers to Unit 2.
[126] Attached to the application were several sets of plans, some of which
had notations on them relating to the plumbing and building
items to be
completed, and others were unmarked. On 15 November 2000, as a result of
receiving a producer statement from an engineer,
the deck was granted a building
consent.
[127] As to the second application, a PIM and a building consent were
issued (71330). Both the PIM and the building consent had
identical project
descriptions taken from the application itself. Under “building
work”, safety barriers and hand rails
were mentioned and under
“plumbing”, the four items previously mentioned were
identified.
[128] On 18 December 2000 Spencer Holmes, an engineering firm in
Wellington, told the Council that it had been provided with the
NTR of November
2000 and had undertaken various inspections of the building at the owner’s
request. Copies of the site reports
were also available. The inspections
identified areas of non-compliance with the Code which had been addressed as the
building work
proceeded. Spencer Holmes said that:
On completion of the remedial works we confirm our intention to provide
Certification as to compliance with the relevant sections
of the Building Code
completed.
[129] The Council inspections in relation to consent 71330
began on
11 January 2001. Mr Tait undertook the building inspections and Mr Tane the plumbing inspections. Inspectors’ checklists from January 2001 through until the issue of the interim and then final CCCs make it clear that both Mr Tane and Mr Tait inspected the property at Glenmore Street far more extensively than the four items of plumbing and two minor items of building work required. I have previously noted
the extent of the inspections.8
8 At [8]–[25].
[130] It was suggested by the Council that what Mr Tait had done was to note a few self-evident inadequacies in the building and pass them on for the information of the owner. But that does not match either the inspection notes or a letter from Mr Tait of
22 March 2001 to the owner. In that letter Mr Tait said he required the
following items be fixed:
Top Unit (called unit four) unable to gain access.
Remove concrete poured up and over weatherboards where cutting has occurred
Gully trap under deck to have a surcharge pipe fitted allowing surcharge to flow to a visible outfall
Seal around all windows and doors
Complete installation of rustic plugs
Unit three. Unable to gain access
Seal around all windows and doors
Complete installation of rustic plugs
Unit two
Seal around all windows and doors
Complete installation of rustic plugs
Install air admittance valve to Kitchen sink
Seal tub against wall
Nail decking correctly
Unit one
Seal around all windows and doors
Complete installation of rustic plugs
Verify glazing to bay windows meet the requirements of New Zealand standard applicable at the time of installation
Remove drainage metal to north wall of garage to a level either below tanking or below floor level
Clip bath waste
Expose drainage pipe to rear of garage wall to determine where leak in garage is coming from
Toilet pan water traps are pulling, venting to be
upgraded and air admittance valves fitted to both toilet pans.
In regards to the fibre cement sheet cladding installed in some areas, all
joints are to be protected by a covering board as per the
detail used on the
lower units.
Some areas of the rustic weatherboard have cracks or are not fixed in place
correctly will need to be made good.
In regards to the separate building consent for the deck on unit 4 and the stairs up to Unit 1 a PS4 construction review is required from the design engineer.
[131] Mr Tane’s inspections of the plumbing also went well beyond the
four items identified in the original application for
a building
consent.
[132] Two interim CCCs were issued for the two consents without limitation
and both noted that the interim CCC “related to
the particulars of work as
described in the building consent”.
[133] The final CCC for 71330 had the following relevant
notations. Under “project description” it said
“plumbing
and building to complete consent of Units 1 to 4 for CCC relating to NTR under
SR69193”. The certificate
was said to be subject to the conditions
specified on the attached page.
[134] These conditions were:
This certificate relates only to building consent 71330. Nothing in
the certificate states or implies that the following
building work at the same
address complies with the building code:
SR15997 – New Dwelling (please note this consent has been lapsed and is
considered cancelled). Building consent 71330 is issued
for the completion of
the apartment.
Conclusions in relation to scope of the CCCs
[135] To reiterate, the Council’s case was that the CCC was limited
to the few items of building and plumbing work expressly
mentioned in consent
71330. Glenmore’s case was that the CCC related to the whole of the
building work for the four units.
[136] I am satisfied that on the balance of probabilities the best view of the oral and documentary evidence is that the building consent application and the building consent was for all the building work for the four units, and that the CCC certified the whole building as code compliant. While there was only a small (thus the reference to $10,000) amount of work for the building to be completed, the consent sought and granted related to the whole building.
[137] As I have previously said, undertaking this analysis to some degree requires an untrue assumption.9 It assumes that the original building consent (15997) had lawfully lapsed or been cancelled when it had not. Consent 15997 was alive in 2000 and a CCC could have been directly issued for the work completed up to the last inspection in 1997. The Council proceeded as if the consent was cancelled. In those circumstances the building work completed up until 1997 could have come within
the Council’s retrospective building consent process, despite Mr
Tait’s view.
[138] Thus, even if the 15997 building consent did lawfully lapse, then on
the
Council’s own policy that work would have been eligible for a
retrospective consent.
[139] I mention these matters to illustrate the confusion within the
Council. The process of building consents and the issue of
CCCs were (and are)
of fundamental importance to the purchasers of residential properties in New
Zealand. It is no exaggeration
to say that in 2000/2001 the Council’s
attention to its statutory obligations was hopelessly inadequate. While the
developers’
actions left much to be desired in constructing Glenmore, the
Council’s inadequacies triggered much of the uncertainty behind
this
litigation.
[140] To return to the CCC. The reasons for my conclusion as to the extent
of the CCC are as follows. I accept that there is ambiguity
in consent 71330
and the CCC consequently issued. Where the CCC records the building consent was
issued for the “completion
of the apartment” the
“completion” could mean the final work to be done on the apartment
only, that is the limited
plumbing work and the hand rails. The previous clause
in the consent, noting that the original consent had lapsed, could be seen
to
reinforce this interpretation.
[141] On the other hand the issue of a building consent for the “completion of the apartments” could be interpreted as meaning that the whole of the apartments now have a building consent. The CCC condition relating to the original building consent10 could simply be advice to potential purchasers that this original building
consent had lapsed and had been replaced by another building consent,
and that it
9 At [90].
10 See above at [134].
was in respect of that consent that the CCC was granted. The two sentences
read together could mean that consent 71330 was issued
in place of the original
new dwelling consent and was in relation to completing the whole of the
building. This interpretation is
supported by the actions of the Council
inspectors.
[142] Mr Tait and Mr Tane approached the building consent and their
inspection function as covering far more than a limited installation
of the
plumbing work and hand rails. These inspectors considered building work
compliance with the Code and Act on a much wider
basis than claimed by the
Council.
[143] The purpose of the inspections was to ensure the building work
carried out complied with the building consent granted and
complied with the
Code. Thus the CCC in turn would reflect these inspections. The broad range
of inspections undertaken illustrated
that this was not an inspection limited to
a narrow range of plumbing and building work. The building consent
application,
the PIM, the building consent, and the CCC all referred in one
form or another to CCCs for a “completed” building.
[144] This was a new building. The expectation would be for a CCC covering
all the building work. If the Council was only
certifying limited building
work I consider its obligation was to expressly say so. This is especially so
in this case where the
Council claims the certification relates only to a very
modest part of the building work. The Council therefore needed to explicitly
say the CCC did not cover the whole building but only the very limited plumbing
work and hand rails. It did not do so.
[145] The inspection records from 2001 show the inspectors inspected what they could see and required remedy where they believed there was no code compliance. Based on the Council’s records it is now effectively impossible to know what the inspectors did inspect. They listed problems in their inspection sheets. But they did
not list building work which they inspected which passed code
compliance.11 Even
11 The inspection forms provided a checkbox system for items that “passed” inspection but these
were not used.
based on these limited inspection records the inspection of the property was
wide ranging.
[146] These factors together convince me that the most likely position was
that the Council inspectors were inspecting the property
for a full CCC for the
units. They had the inspection records up until 1997 which comprised the bulk
of the building work. They
could rely upon those records to satisfy themselves
the earlier building work had been completed to their satisfaction. They then
inspected what they could see of the building. Overall they had an inspection
record of the vast majority of the building work.
[147] In summary:
(a) the owner/developer was more likely than not applying for a CCC in
respect of the whole building in its November 2000 application;
(b) the inspectors undertook a broad inspection of the property which
together with earlier Council inspections covered most
if not all of the
building;
(c) the Council’s failures caused the confusion as to the
scope of consent 71330 and the CCC relating to 71330;
(d) the CCC although possibly ambiguous can be reasonably interpreted
as referring to the whole building.
[148] I am satisfied that the most probable interpretation of the CCC was
that it certified compliance with the Code of the whole
building at 14C Glenmore
Street.
Deck CCC
[149] If I am wrong in my conclusion that the CCC for 71330 only covered the limited building work identified by the Council, then the plaintiffs’ claim against the Council with respect to building consent and CCC 70437 remains.
[150] The evidence clearly establishes that the Council’s inspection
of the deck attached to Unit 4 (at the rear) was negligent
and the CCC should
not have been granted. I have previously identified those inadequacies, the
primary flaw being construction
of the deck so that the decking timber was hard
against the exterior weatherboards. This construction did not allow water to
drain
from the deck and caused both the decking timber and weatherboards to rot.
There was no separate identification of the cost of repair
of this
deck.
Negligent inspections
[151] If I am wrong and the CCC did not cover the whole of the building
then the plaintiffs allege the Council negligently inspected
the building in
2001. This claim arose from the Council’s failure to adequately inspect
the property and to identify the defects
in the building. There is a
significant difficulty with the plaintiffs’ inspection failure causes of
action. If the consent
and CCC relate only to the handrails and plumbing work,
the obligation on the Council was only to inspect that limited work.
[152] My conclusions about inspection failure leading to a negligently
issued CCC were almost exclusively about what the Council
inspectors failed to
inspect (when they should have) rather than what they negligently did inspect.
It seems to me therefore that
if the plaintiffs’ claim fails because the
CCC is of limited coverage then the inspection cause of action by itself must
also
fail.
Was the Council negligent in issuing the CCC relating to building consent
71330?
[153] I am satisfied that the Council was negligent in the issue of the CCC
of
1 June 2001 relating to building consent 71330. I am satisfied that
if Council inspections had been properly carried out
and the Council had taken
into account the other information in its possession, the Council would not have
certified the building
work at 14C Glenmore Street as compliant with the
Code.
[154] I am satisfied that Council inspectors negligently failed to identify defects in the building work. I am satisfied that the combination of the Council’s knowledge of the builder’s building practices together with the defects in the building work (that a
competent inspector would have identified) would have led to further enquiry
that in turn would have revealed further building
defects. The inevitable
investigation which followed would have uncovered many of the leaky building
problems. A CCC would not
have been issued for the building.
[155] Mr Wutzler is a registered building surveyor and remediation specialist. He has been extensively involved in the identification of weathertightness issues in New Zealand buildings and in their remediation for more than 10 years. He was called by Glenmore. He identified a range of defects in the building, and his evidence was that a competent building inspector in 2001 should have identified the
vast majority of defects in each of the defect categories he
identified.12
[156] I accept, in part, the Council’s criticism of his evidence. Mr
Wutzler sets a “gold” standard in the
identification of
building trouble spots. Mr Wutzler’s expectation of what a competent
building inspector should see
is, I consider, set at his own standard of
knowledge of leaky buildings in 2013. Council building inspectors could not be
expected
to have reached this advanced level of knowledge in 2000/2001. Any
assessment of what a building inspector could be expected to
identify has to be
tempered by taking into account reasonable standards of the day. I stress the
word “reasonable”.
[157] However, it is not enough for an inspector to simply say
“that’s how we did it in those days”. If what
the inspectors
were doing was inadequate, judged by a reasonable standard of the day, then it
is no excuse to simply say “that’s
how we did it then”. There
was a significant element of this approach in Mr Tait’s evidence as to his
inspections of
the building work.
[158] The evidence given by Mr Saul and Mr Tidd as well as Mr Flay related directly to the standards of a building inspector in 2001. They gave specific evidence as to what a competent building inspector should have observed of the building work at Glenmore Street. Mr Tait who was the Council’s building inspector
for 14C Glenmore Street in 2001 gave evidence of what he could recall,
and of
12 For the categories of the building defects see [40].
Council inspection standards of the time. The evidence of Messrs Saul, Flay
and
Tidd focused on the list of defects identified by Mr Wutzler.
[159] Mr Saul is a building consultant with 30 years’ experience in
residential and commercial buildings. Between February
2000 and July 2008 he
was employed by Wellington City Council, initially as a building officer and
later as a consents officer which
involved approvals of complex commercial
construction. More recently he has run his own building consultancy and
teaches Building
Code Compliance and Construction.
[160] Mr Flay qualified as a carpenter in 1981. He was then self-employed
as a builder for over 10 years. In 1996 he began working
as a building
inspector and was eventually promoted to Team Leader of building consents.
Since that time he has primarily worked
for various local authorities in
inspection and building consents. He now runs his own consultancy
business.
[161] Mr Tidd has been involved in building for 40 years primarily in
residential and commercial construction. He has worked for
a number of local
authorities including Wellington and Auckland City Councils on building
inspections and consents in a direct and
supervisory role. More recently he has
been employed by private companies in construction supervisory
roles.
[162] I found Mr Saul an impressive witness who did his best to objectively
assess what a reasonable inspector would see. I thought
all three witnesses
gave their best assessment of what they believe was an adequate inspection
standard for 2001.
[163] I am satisfied that there were many defects in this building that
were evident and should have been identified by a competent
Council
inspector.
Scope of inspection
[164] As I have mentioned above, it is not now possible, based on a reconstruction of Council records from 1996 to 2001, to know exactly what the Council inspected of this building.
[165] The fact that an aspect of the building work was not
mentioned in the inspection reports did not indicate whether
it had been
inspected or not. Even if a competent inspector had noted only those defects
seen by Mr Tait and Mr Tane the need for
a more detailed inspection of the
building, prior to any CCC issue, would have been established. This was
especially so given the
Council’s knowledge of the building
company’s prosecution in 2000 for building without consent.
[166] In any case, a building inspector must ensure that building work is
done in accordance with the building consent and complies
with the Building Act
and the Code. Obviously a Council inspector cannot and does not need to be on
the site each day of construction,
nor does he or she need to inspect every item
of work done.
[167] But overall, a Council has to be able to certify that each part of
the building was built to the standard required in the
Code. A claim of
inadequate inspection cannot therefore be met by an inspector saying that they
did not look at that aspect of
the building, because the inspector has an
obligation to look at each aspect. If a CCC is issued, the Council is
certifying that
all the work covered by the certificate is built according to
the Code.
[168] Given my conclusion that the CCC was a “full” certificate
for the building, I proceed on the assumption that the
Council inspected all the
essential elements of the building sufficient to certify this “new
build” was code compliant.
What defects should have been seen at Glenmore Street by a competent
building inspector?
[169] The essence of the plaintiffs’ case is that a competent building inspector undertaking an inspection of Glenmore Street in 2001 should have picked up a range of defects in the building even on a superficial inspection. This in turn should have led to a more detailed inspection, which ultimately should have led to a refusal to certify the building as code compliant, recognising the weathertightness problems of the building.
[170] I am satisfied that given the defects the Council inspectors noted
and given the building defects the inspectors should have
seen during their 2001
inspections, there should have been a more detailed inspection of the building.
This in turn would have led
to the realisation this was a building seriously
vulnerable to water entry.
[171] As Mr Saul pointed out, Mr Tait specifically noted (in his
letter of
22 March 2001 and in a number of building inspection forms) that there were a
number of defects in the building. The letter of 22
March 2001 described at
least these defects: concrete had been poured up to and over weatherboards;
inadequate gully trap installation;
failure to install rustic plugs around the
weatherboards; inadequate nailing to the deck; drainage metal removal below
floor level
of Unit 1; inadequate fibre cement cladding joint installation; and
cracks or inadequate fixing of weatherboards and inadequate sealing
around all
the windows and doors of all the units. Some of these defects related directly
to watertightness issues.
[172] In Mr Tait’s and Mr Tane’s 2001 inspection records, there
were questions noted about the cladding system, the
jointing system, cover
boards to unflashed horizontal joints, water in the garage of Unit 1 and many
other issues.
[173] Mr Tait’s evidence was that he had not inspected
Glenmore beyond the building work required (essentially the
installation of
handrails) but had noticed some defects in the course of his inspection. He had
noted these defects to assist the
owner. He said that these observations
were simply coincidental to this main purpose.
[174] I do not accept this evidence. The extent and type of the defects,
including the number of visits to the building made by
Mr Tait and Mr Tane,
illustrate that the observations they made of defects and requirements to fix
were not simply coincidental.
[175] Between them Mr Tait and Mr Tane made 14 inspector visits to the site (often together). If Mr Tait is correct, all he had to inspect were some handrails. One inspection, after he was notified the handrail construction was complete, would have
been sufficient. In fact none of the inspection reports mention any
inspection of the handrails.
[176] The defects listed in the letter of 22 March 2001 and the
defects in the inspection sheets needed to be fixed,
and the inspectors
returned to the site to ensure this had been done. In respect of many of the
recorded defects, there is no record
that the required remediation work was
actually done. This process is consistent with a broad inspection of building
work. And
so the inspectors began with a significant list of defects they
observed and required the builder to “put right”.
[177] The inspectors knew that this had been a troubled construction. The
original builder and developer had not completed the
work. No inspections had
been carried out for a period of three years between 1997 and 2000. By then
further work had been done
and had not been inspected. It seems probable that
the Council inspectors were aware of these problems and undertook a detailed
inspection of the building.
[178] In addition to this list of defects identified by the building
inspectors, there were other obvious defects in the building
which should have
alerted the inspectors to serious concerns about the construction of Glenmore.
I now identify some of these defects.
Bay window flashing
[179] The three bay windows at the front of Unit 1 were not flashed. I am
satisfied that the lack of flashing at the bay windows
was an obvious and
serious defect. Council inspectors were well aware that windows needed to be
adequately flashed to avoid water
entry to a house. By 2000/2001 they would
have known that significant water entry often occurs through inadequately
installed or
flashed windows. The lack of flashing on the lower bay windows
could probably have been seen from the driveway and could certainly
have been
seen from inside Unit 1.
[180] Given the inspectors would have known of the dangers of water entry through poor flashing, the absence of flashing should have been seen by them as a serious defect. The inspectors had already noted concern about the adequacy of the glass in the bay windows given the building was in a high wind zone. They had
expressed concern in their defects list about the sealing of all windows.
Their attention had therefore been drawn to the bay windows.
This should have
led the inspectors to check the other window and door flashings in all four
units. This, in turn, would have
revealed a wider window flashing
problem.
Window and door flashing
[181] It is possible (although unlikely) that without the bay window
trigger the inspectors may not have seen the full extent of
the inadequacy of
some of the flashing on the other windows and doors. The flashing around most
doors and windows on the lower
levels could be easily seen. Many were just
above eye level (particularly the doors) or could be seen from inside the
building.
Even a casual look at these doors and windows would have given
reason for a competent inspector to be concerned.
[182] On some of the windows the flashing was shaped so that the water ran
back into the building. This was obviously unacceptable
and undermined the
whole purpose of the flashing. It seems that flashings were
installed after the weatherboards
by making a cut in the weatherboard with a
skill saw and slotting the flashing up from behind. This was not a traditional
method
of installation. While it may be possible to install a sufficient length
of flashing behind the weatherboards using such a method,
it is likely to be
extremely difficult. This unorthodox method of installation should have
triggered further enquiry by the inspectors.
[183] The incorrect shape of the flashing and the flashing installation
should have raised serious concern with the inspectors.
Together with the
absence of flashings over the bay windows alarm bells should have been ringing.
Here were reasons to be seriously
concerned about the weathertightness of the
doors and windows to the building. These combined inadequacies went to the
heart of
the building’s weathertightness.
[184] Mr Tait, in his letter of 22 March 2001 to the developers, had himself noted that all the doors and windows in all of the units had to be “sealed”. It is not now clear exactly what he meant. At least it seems clear he was concerned about the weathertightness of the doors and windows. Further, it is reasonable to assume on
the basis of this letter that Mr Tait had inspected at least some of the
doors and windows, that there was inadequate sealing, and
that he had reason to
believe the inadequacy was repeated throughout the four units.
[185] The removal of one of the window flashings of concern would have been
relatively straightforward. It would not have been
a major intrusion into the
integrity of the building, and would have revealed the inadequacy of the
flashing uplift. It would have
shown that this work had not been done to Code
standard. And the obvious inference from this inadequate work was that the
builder
had cut corners. There should at that point have been an accumulation of
evidence pointing to serious concerns about the building.
Deck construction
[186] Many of the decks had inadequate clearance between the deck timbers
and the walls of the house. This was likely to cause
water pooling and rotting
of both the decking timbers and the weatherboards, allowing water to enter the
house. This defect was
easily seen. It related directly to building
weathertightness.
Monolithic cladding
[187] Some of the lower monolithic cladding had been embedded in concrete.
This had the capacity to rot the weatherboards and cover
boards. It indicated a
very poor quality of workmanship. It was easily viewable by the inspectors.
And indeed the inspection reports
noted the defect.
Underfloor defects
[188] Underneath the house some bearers were not connected to the joists. Drainage pipes were not properly installed. These defects would all have been obvious on inspection. In combination they should have concerned the inspectors. The extent and type of the defects should have told them that this building needed close inspection, including weathertightness checks, before the Council could say it was Code compliant.
Steel beam repair
[189] The steel beams in the subfloor area had primer paint but no other
protective coat applied. There was conflicting evidence
from the
expert witnesses as to whether the Council would have insisted on a further
sealing coat in 2001 and therefore whether
the Council were negligent in issuing
a CCC without requiring the beams to be painted with “top” coat.
Today the steel
beams are showing signs of surface corrosion and need to be
scraped back, primed and sealed. The estimated cost is $16,448 and is
part of
the plaintiffs claim.
[190] Mr Wutzler’s evidence was that the steel beams should
not have been approved as Code compliant by the Council
with only a primer
coat. Mr Flay accepted that primer only might not meet the durability
requirements under the Code but noted
that an engineer’s certificate
relating to the beams may have covered the situation. An engineer had provided
a certificate
relating to the beams prior to the CCC being issued. However, as
Mr Saul pointed out the engineer’s certificate did not cover
durability,
the relevant issue with respect to painting of the steel beams.
[191] The weight of evidence favours the plaintiffs’ claim that the
Council should not have approved the steel in the subfloor
area being painted
with primer only. This did not meet the durability requirements of the Code.
Council inspectors had easy access
to the subfloor area. Indeed, the
inspectors’ records from 2001 show that the subfloor area was inspected.
The fact that
the steel beams only had a primer coat could therefore have been
easily seen.
[192] I am therefore satisfied that the Council was negligent in issuing
the CCC when the steel beams were not adequately painted
and therefore would not
meet the durability requirements of the Code.
[193] Further detailed inspections would, if competently done, have revealed many of the defects identified by Mr Wutzler and Mr Jones which have allowed water entry into the building. As the observable defects accumulated, a competent inspector would have understood there was reason to be concerned about the standard of construction and the weathertightness of the apartments.
[194] The inspectors’ failure to observe the obvious defects and to
require more detailed inspection of the building was negligent.
It led directly
to the certifying of the building as Code compliant when it was not.
Roof
[195] There was significant debate between the witnesses for the plaintiff
and witnesses for the Council about inspections of the
roof and whether a
reasonable inspector could have seen the inadequacies of the roof, particularly
the inadequacies of the roof flashings
that are now known.
[196] I am satisfied that some of the defects on the lower roof could and
should have been seen by the inspectors. Whether they
would or would not have
justified a wider inspection of the roof by themselves can be legitimately
debated. But even if the initial
inspection reasonably missed the defects in
the roof flashings, the other serious inadequacies in the building identified
above should
have made Council inspectors aware of the serious inadequacies of
construction. This in turn should have led to more detailed inspections
of the
rest of the building including the roof flashings.
[197] A reasonably competent inspector considering whether the building was Code compliant would have sought appropriate assurance that the roof and flashings were appropriately installed. This is especially so given the roof and flashings were important to weathertightness and adequate inspection was practically impossible in
2001.
[198] I accept that for the inspectors to require scaffolding to be
installed so they could inspect the roof would be an absolute
last resort.
Their approach should have been to require the owners to satisfy the Council
that the roof and flashings had been installed
to an appropriate standard. The
Council might accept a producer statement from the roofer who had undertaken the
work if from the
Council’s knowledge of the work done by the roofer, he
could be fairly relied upon.
[199] In the alternative, some form of independent inspection of what could be seen without scaffolding (for example, with ladders) was needed. If some form of
additional inspection had been undertaken even without scaffolding, I am
satisfied such an inspection would more likely than not have
revealed reasons to
be concerned about the installation of the roof flashing, at least on the lower
roofs. This, together with the
other building issues, also should have led to a
further comprehensive inspection of the whole roof. This, in turn, would have
revealed a range of inadequacies with the roof flashing.
[200] The other inadequacies with the roof (for example inadequate nailing)
would not have been visible on first inspection. But
again, other defects
warranted a comprehensive examination of the roof which would have revealed
them.
[201] Mr Wutzler identified a number of defects within each of the 13
categories of defects (see at [40]). These were reproduced
in a schedule of
defects which a number of the witnesses used as a basis to comment. In this
judgment I do not assess whether all
these allegations are made out and if so
whether each defect should have been seen by the Council inspectors. I have
taken a different
approach. I have concluded that there were a number of
fundamental defects in the construction of this building which led to
watertightness
problems. These defects were there to be seen by a competent
Council inspector.
[202] If they had been seen a competent inspector would have carried out a
detailed and comprehensive inspection of the building.
More inadequacies in
the building work would have been revealed. A CCC would not have been issued for
the building in that state.
Perhaps as the Council says, some of Mr
Wutzler’s “defects” were either not defects or were not
reasonably discoverable
by a competent inspector. But the vast majority were
not in this category. And many of the defects directly relevant to
watertightness
were easily able to be seen.
[203] I am therefore satisfied that in issuing the CCC the Council inspectors were negligent in their inspection and in turn negligent in certifying that the building had been built according to the Code when that was clearly not the case.
Negligence and the damage caused
[204] In the evidence of Mr Wutzler and Mr Jones, the two remediation
experts, there was significant disagreement about the extent
of the defects in
the building. Mr Wutzler saw many more defects than Mr Jones. But what was in
common was this basic proposition:
the building had been constructed in a way
which allowed water entry. This, in turn, had caused substantial damage to the
building.
The main causes of water entry appeared to be through roof
flashings, window and door flashings and at deck and building
junctions.
[205] I am satisfied the failure to identify the inadequacies of
the bearer connections and the drainage inadequacies
was negligent13
and the Council should not have certified code compliance while these
inadequacies existed, and should not have issued a CCC on 1
June
2001.
[206] In each purchase of each unit by the plaintiffs, the contract was
conditional upon a CCC for the building (or the particular
unit). It is clear
that unless there was a CCC for the particular unit, none of the plaintiffs
would have purchased their unit.
They would not have suffered loss if the
Council had not been negligent in its issue of the CCC. Thus, the
plaintiffs’ loss
arises directly from the actions of the
Council.
Retaining walls
[207] A significant part of the dispute about the proposed repair to the
units is whether the Council should pay for three retaining
walls. The
plaintiffs maintain these walls must be built to ensure code compliance. The
cost of the proposed retaining walls
is over $300,000.
[208] The plaintiffs’ case is that part of the Council’s negligent failure in issuing a CCC was that it failed to identify the need for one retaining wall in the subfloor area and two exterior retaining walls on the boundaries of the building site. The inspection by the Council should have identified the need for these retaining walls. Thus, the CCC should not have been issued because without the retaining walls the
building would not have complied with the Building Act and
Code.
13 At [188].
[209] The Council says that in part these causes of action are time barred
but if not then the plaintiffs have not established the
need for retaining walls
for the building work to comply with the Building Act and Code for the issue of
a CCC.
Limitation
[210] I turn initially to the limitation point. The Council submits that
the causes of action relating to two of the three retaining
walls are time
barred. This claim is based on the proposition that the original statement of
claim filed on 19 April 2011 did not
raise any claim in relation to one of the
external retaining walls and the subfloor retaining wall. Thus, the Council
says, that
specific claims relating to those two walls were first raised in the
April 2013 pleadings. As a result they are beyond the 10 year
limitation period
in s 393(3) of the Building Act 2004.
[211] The statement of claim filed on 19 April 2011 made a claim in
relation to:
5.4 Defects in relation to the subfloor.
5.5 Defects in relation to the exterior (lack of adequate retaining of the
ground).
[212] This claim was expanded upon in the Defects Schedule attached to the
statement of claim. The relevant portion said:
5.5 Defects in relation to the subfloor:
5.5.1 lack of adequate retaining of the ground on the northern side of Unit
1.
[213] In the 25 April 2013 amended statement of claim, the relevant
pleadings were as follows:
5.5 Defects in relation to retaining of ground:
5.5.1 lack of adequate retaining of ground including:
the soil face at the north east side of Unit 1; the soil face at the north west deck of Unit 4; the excavated soil face in the subfloor.
[214] I am satisfied the allegations at para 5.5 of the amended statement
of claim of
25 April 2013 are not new causes of action but are a more precise pleading of
the allegations in the 19 April 2011 pleading. I am
satisfied that the Council
would have known that the plaintiffs in their April 2011 pleadings were claiming
defects in the retaining
walls in the subfloor area of the building as well as
defects by way of lack of retaining walls on the land exterior to the building.
The 2013 pleadings were therefore essentially further and better particulars of
the 2011 pleadings.
[215] The plaintiffs say three retaining walls were required to make the
building code compliant. One in the subfloor area, one
on the north side of
Unit 1 and one on the north western face of a cut beyond Unit 4’s western
deck. The Council accept the
2011 pleading explicitly included the retaining
wall to the north of Unit 1.
[216] The only possible complaint that the 2011 pleadings did not identify
relates to the soil face beside the north west deck of
Unit 4.
[217] As to the subfloor retaining wall, the 2011 statement of claim makes
it clear that the plaintiffs were making claims in relation
to the subfloor area
and that one of those defects was a lack of a retaining wall. Confusingly, it
described the inadequate subfloor
retaining as being in the northern side of
Unit 1 rather than the south western side of Unit 2. However, I am satisfied
the essence
of the claim relating to the retaining of the subfloor area was
identified in 2011. The exact position of the retaining wall was
a detail that
did not go to the essence of the claim.
[218] As to the north western retaining wall, the 2011 pleadings identified lack of retaining of the ground in the exterior as a ground of claim. The Defects Schedule mentioned the northern wall but not the north western wall. However, the reference to the northern wall was somewhat confused as I have noted. It was raised in the context of subfloor defects, but was in fact an exterior defect. These details, however, illustrate that after the 2011 pleadings the Council would have known it faced claims in relation to exterior and subfloor retaining walls. The plaintiffs could be expected to provide the Council with further particulars of where the retaining walls should have been built at a later point. But the failure to mention particular sites in their 2011 pleadings did not mean the mention of a subfloor or exterior
retaining wall in a different location as a defect became a new cause of action. I am therefore satisfied the north west retaining wall was not a new cause of action in the
2013 pleadings.
[219] I am satisfied therefore that the pleadings in relation to all three
retaining walls were contained in the April 2011 pleadings.
In relation to the
issue of the CCC in 1 June 2001, all came within the 10 year limitation
period.
Were the retaining walls required for a CCC?
[220] The next issue is whether the Council was negligent in issuing the
CCC
without requiring three retaining walls to be built to an appropriate
standard.
[221] As the Council identified, to comply with the Code relating to
retaining walls the building had to be:
(a) not likely to be affected by damage from slope collapse in a 20
year return period earthquake at each of the three slope
sites (considered
separately); and
(b) not likely to collapse or be severely damaged in a 450 year return
period earthquake at any of the three sites (considered
separately).
[222] Thus, if the unretained ground did not meet the 20 year
and 450 year earthquake tests, then the building would
not meet the Code
requirements. This required two assessments. First, would the slope
likely collapse in such earthquakes?
Second, if it did, what would be likely
damage in the 20 year and 450 year return earthquakes?
[223] I accept the Council’s submission that the only possible reason to require retaining walls for each of the three slopes is the potential danger from earthquakes. There is no evidence of any danger of slope collapse without earthquakes.
[224] The Council identified the following matters (which I have amended)
as relevant to an assessment of whether the Council was
negligent. I accept
they are helpful. The following questions need to be assessed:
(a) What risk of failure is inherent in the cut slopes?
(b) What is the likely effect of a failure of the cut slope on the building?
(c) Should the risk identified in (a) and (b)
have been identified
on
inspection and if identified result in the refusal of a CCC?
[225] Mr Davidge was the plaintiffs’ geotechnical expert. The Council
did not have any direct evidence from a geotechnical
expert. The Council did
not instruct such an expert until very late in the trial preparation period.
They applied for that expert
to give evidence late at trial. I refused the
application.14 I consider each slope separately.
Is the north east slope likely to collapse in an
earthquake?
[226] Mr Davidge’s evidence was that the slope at the north east
corner of the property beside Unit 1 was overly steep (at
about 80 to 85 degrees
to the horizontal). It was unstable and should be retained. If it was not
retained there was a likelihood
the slope would collapse in an earthquake and
cause significant damage to the unit and endanger life.
[227] Mr Davidge said he assessed the “Factor of Safety” (FOS)
for slope stability for this slope was about 1.0. He
said that the Code
required a FOS of 1.5. The FOS of 1 was below the safety factor required by the
Code.
[228] Mr Davidge first carried out a risk assessment on the slope using a “Hazard Failure Report” procedure developed by the Wellington Regional Council. He said the risk assessment considered the severity of six key factors and this, in turn, enabled the calculation of slope stability from very low to very high risk. Each of
the three slopes in this case were assessed as being at high risk of
failure. That
14 Body Corporate 90247 v Wellington City Council [2013] NZHC 2962.
assessment was essentially because they were overly steep, relatively high
and composed of exposed soil of uncertain strength.
[229] Given the closeness of this slope to the building the primary
mitigation of this risk, Mr Davidge said, was to construct a
retaining wall. Mr
Davidge conceded in cross-examination that the soils in the banks were of
relatively high strength.
[230] The evidence of the two recent earthquakes in Wellington has, the Council says, established that the building would not be damaged in a 20 year return earthquake from lack of retaining walls. The two earthquakes recently felt in Wellington caused forces approximately equal to a one in 20 year earthquake level to be applied to the site but caused no obvious damage to any of the slopes at
14C Glenmore Street.
[231] The plaintiffs’ case is therefore that the building would be
severely damaged
in an “ultimate” earthquake, that is, a one in 450 year return
earthquake.
[232] The Council disputed Mr Davidge’s evidence that the slope is at
high risk of collapse and that an earthquake-generated
failure would cause
severe damage to Unit 1 in a 450 year return earthquake.
[233] Mr Davidge said his assessment of the slope having a high risk of collapse and causing severe damage is based on his experience as a geotechnical engineer and on the use of the Regional Council Hazard Failure Report analysis. The Council challenged both the usefulness of assessing the vulnerability of particular slopes using this methodology and Mr Davidge’s assessment that the slope had an FOS of
1.0. The Council said without these two measures Mr Davidge’s
experience alone
would not be sufficient to establish the slopes required
retaining.
[234] I agree broadly with the Council’s criticisms of Mr Davidge’s evidence. Mr Davidge said that he understood what essentially was his intuition (as to the need to retain the slope) would not be sufficient in Court to justify his view that the slope was at high risk of collapse, thus his use of the Regional Council analysis. However, I doubt the suitability of the Wellington Regional Council’s measure, applied to a
particular slope, as a proper basis for concluding that the particular slope
requires support.
[235] As Mr Davidge accepted, the key risk analysis factors in the Regional Council assessment are constructed in such a way that if the slope is a cut slope rather than a natural slope, the hazard risk will be assessed as high irrespective of any other factors. Each of the slopes in this case is a cut slope and so, based on this alone, using the Regional Council assessment, the risk of slope collapse in a one in
450 year earthquake is high. As counsel pointed out in cross-examination, the Wellington Regional Council is concerned with land use applications and this risk analysis tool was likely developed to assist planners in assessing such applications. This is quite different than using the analysis as a basis for saying a retaining wall is required for safety. Mr Davidge in response came back time and again to the proposition that any engineer would say a slope needed retaining which was up to
4.7 m in height (as he said the north east slope was) with an 80 to 85 per
cent angle based on his intuition.
[236] There is nothing in the Regional Council report to suggest that this
general risk assessment tool was intended to be applied
to a specific slope to
dictate specific safety and remediation requirements.
[237] Using the Wellington Regional Council hazard assessment tool meant that almost every slope of more than 45 degrees in the Wellington region was at high risk of collapse. Mr Davidge has accepted that there would be large numbers of properties in Wellington with unretained slopes which came within this high risk category using this assessment tool. I am therefore not convinced that where Mr Davidge’s evidence relies upon the Regional Council assessment tool, it can be used to conclude the slope is at such a risk that significant collapse is probable in a
450 year return earthquake.
[238] The other factor taken into account by Mr Davidge is the FOS test. It was common ground that if that test resulted in a figure of 1.0 or less, then that indicated the slope was in imminent danger of collapse. Mr Davidge’s figure was 1.0. A
figure of 1.4 and above was accepted as indicating no retaining wall was
required and the slope was stable.
[239] The FOS figure is based on a range of factors including the height of
the slope and the density of the slope. Mr Symonds is
a geotechnical engineer.
He is the witness the Crown sought leave to call to give evidence. As
mentioned, I refused that application.
However, the thrust of his proposed
evidence was used by counsel for the Council to challenge Mr Davidge’s
evidence.
[240] As to the FOS, it was suggested that to use 4.7 m as the height of the slope was wrong because that was the highest point. Most of the slope was about 4 m high or lower. Further, it was suggested the density of the slope was more likely
20 kilonewtons rather than the 18 kilonewtons assessed by Mr
Davidge.
[241] The difficulty is that whether 18 or 20 kilonewtons is correct or
whether the correct height is 4 m or 4.7 m, cannot be adequately
determined on
the evidence that I have heard. The 18 kilonewton assessment was, as I
understand it, a professional guess by Mr Davidge
and 20 a professional guess by
Mr Symonds (although his “evidence” cannot be taken into
account). Mr Davidge
did not undertake any scientific process which
measured soil density – it was his best “professional” guess.
The alternative figure suggested, 20 kilonewtons was little more than 10 per
cent greater. Given Mr Davidge’s figure was an
estimate based on his
experience it could not be said Mr Davidge’s figure was clearly
correct.
[242] The height of the slope was in a similar category. While the highest
point was 4.7 m, most of the slope was less than this.
There was no clear
evidence as to what figure was the appropriate input to the FOS
formula.
[243] If Mr Davidge’s figures were changed so that an average height of 4 m rather than 4.7 m was used and 20 rather than 18 kilonewtons was used, the FOS figure was 1.4 to 1.5. This is a “safe” figure which indicated retaining of the wall would not be required.
[244] Given the imprecision about both pivotal input figures I am not satisfied I can conclude that the FOS figure is more likely 1.0 rather than 1.4 or 1.5. Essentially Mr Davidge’s evidence came back to the proposition that he believed any slope at an
80 to 85 degree angle and up to 4.7 m high should be retained.
[245] My conclusion is therefore that neither of the methodologies
used by Mr Davidge have been shown to be a reliable
basis on which to assess
slope stability in this case. I do not accept therefore there is evidence to
establish likelihood of slope
collapse in a 450 year earthquake. And in turn, I
am not satisfied the plaintiffs have established that the Council were negligent
in granting a CCC for the building without requiring a retaining wall on the
north east slope.
Likelihood of severe damage or injury
[246] If I am wrong in this conclusion and collapse would be likely in a
450 year return earthquake, the Council say the risk was
not such that there was
likely to be severe damage to the building and/or injury to persons. This
likelihood of damage needed to
be established before retaining could be required
as a prerequisite to the issue of a CCC.
[247] As I have observed, the recent Wellington earthquakes have effectively
answered whether there will likely be damage to the building
in a 20 year return
earthquake. No such damage in fact occurred to the building. Mr Davidge said
that a 450 year return earthquake
“would result in major deep-seated
instability in the existing steep cut profile” of the northern slope and
he considered
in those circumstances there was a risk of damage likely to result
in injury or death to someone in the building. Mr Davidge considered
there was
potential for a “wedge” of slope to collapse into the building and
to “push or punch” through the
bulk of the building.
[248] If the collapse was a more shallow scallop of the bank than Mr Davidge accepted, that would likely involve about five cubic metres of material. In those circumstances, Mr Davidge accepted that such a collapse would be unlikely to endanger the building or threaten the safety of those inside even if some of the material pushed through the cladding.
[249] As to the structural effect on the building of such a five cubic
metre slip, Mr Thompson, the plaintiffs’ engineer,
gave evidence. In his
evidence in chief, Mr Thompson said he considered that in a major earthquake
there was likely to be a large
bank collapse and the foundations of the
building were likely to be undermined, the reinforced concrete walls would
suffer
damage and injury or death to those in the building was a reasonable
possibility. Mr Thompson thought there was a 10 to 20 per
cent chance of the
bank collapsing in such an earthquake and causing such severe damage to the
building. At least at the local area
of the slip, there would be significant
damage to the building. But if the FOS figure was 1.1, then Mr Thompson
accepted there would
be no need for the Council to require a retaining
wall.
[250] On balance I was not convinced that the plaintiffs had established there was a likelihood of severe damage to the building from the slope consequent upon a
450 year return earthquake. Clearly there is a chance of bank collapse but
there is little evidence to say this will involve more
than five cubic metres of
material. A collapse of this size suggests damage to the wooden framing area of
the north face of Unit
1 will occur. But I do not consider the evidence on
balance establishes the likelihood of severe damage to the building or danger
to
occupants.
[251] There is some force in the plaintiffs’ case that the building
inspectors on seeing the slope cut should have asked the
developer for some form
of engineering assurance that there was no requirement for a full retaining
wall. It seems probable they
did not do so. Certainly there is no evidence to
say such reports were ever obtained.
[252] However, the evidence does not convince me on the balance of probabilities that once the reports were obtained, they would have shown the need for retaining walls if the building was to meet Code standard. And so I am not satisfied the plaintiffs have established that a failure to retain the slopes should have resulted in refusal to grant a CCC for the property and that the Council was negligent in granting the CCC without requiring the north east slope to be retained.
North west slope
[253] The second slope that the plaintiffs say should have been retained is
on the north western corner of the building above Unit
4. The slope is some 3 m
from the unit. Mr Davidge’s assessment of this slope was based on the
same assessment as the other
external slope on the north east side of the
building. For the same reasons given with respect to that slope, I reject his
evidence.
[254] Mr Thompson, the plaintiffs’ engineer, said in his first brief
of evidence that he considered that any failure would
be unlikely to affect the
building given the distance between the building and the slope. He thought that
after any failure the
resulting slope was likely to be even more stable.
However, in his supplementary brief Mr Thompson said that he believed that a
cantilevered wall was required to protect the building at this site.
[255] Mr Garrett is a professional engineer with over 50 years
experience in structural engineering. His evidence was
that the bank was
stable and no form of retaining was required.
[256] I accept the possibility that a reasonable inspector would have
obtained an engineer’s report. However, I am not satisfied
the
plaintiffs have established the probability that any such report would have
required a retaining wall at the north western slope.
And so any failure to
obtain the engineer’s reports is more probably than not of no consequence.
The plaintiffs’ claim
relating to the north western retaining wall
therefore fails.
Under floor retaining wall
[257] When the foundations and excavation for the building were completed, a significant bank of clay and soil was left under the building. A retaining wall was in fact built. But the plaintiffs’ case is that this area was inadequately retained. The Council’s failure to adequately inspect this area and require the construction of a Code compliant retaining wall was negligent.
[258] Most of the evidence relating to retaining walls focused on the north
east wall by Unit 1. Mr Thompson, the plaintiffs’
engineer,
considered that the existing ground backfill between the existing retaining
wall and the excavated slope was inadequate.
He considered that a further
quantity of backfill, sufficient to fill the void to a height of 1.5 m above the
existing fill was
required. He considered that at present there was a high risk
of soil failure which was likely to compromise the decks and house
foundations.
[259] Mr Garrett, the engineer called by the Council, suggested
there was an inexpensive solution to the underfloor inadequacies.
He said the
existing retaining wall could be backfilled at a very modest cost and so no new
retaining wall was required. However,
in cross-examination Mr Thompson pointed
out that it was not possible to backfill the existing retaining wall because
this wall had
no support at the top. It was not therefore sufficiently strong
to support further backfill. A new wall would have to be built
before the
necessary backfill could be emplaced.
[260] The evidence relating to the underfloor retaining wall was sparse.
It is not mentioned in Counsel’s final submissions
in any detail.
However, the evidence established the need to protect the foundations and decks
in the event of a collapse of the
underfloor slope. Mr Thompson’s
evidence was that in the event of a significant earthquake, collapse of the wall
was probable.
It seemed to be common ground that further subfloor retaining was
required. I accept Mr Thompson’s evidence that the “cheap”
option suggested by Mr Garrett would not comply with the Code.
[261] The existence of the underfloor slope was easily able to be seen by an inspector going under the units. The inspection records show the inspectors did inspect under the units. In doing so, they should have noticed the slope and at least required an engineer’s report on the stability and safety of the bank. The fact they did not do so was negligent. I am satisfied on the evidence I have heard that an engineer would have required a stronger retaining wall be built with more backfill. The plaintiffs have therefore established this part of their retaining wall claim. There was no challenge to the quantum of this aspect of the retaining wall claim. The cost of this retaining wall is $22,133.
[262] Counsel for the plaintiffs expressed concern that the Council’s
position on the need for retaining walls would
change once the
plaintiffs applied for building consent for the necessary remediation
work. Counsel for the Council
gave an assurance that the Council would
not require any of the three retaining walls in dispute in this case as part of
any building
consent requirement.
Solicitors’ negligence and contributory negligence
[263] The Council alleged that each of the solicitors acting for each of
the plaintiffs when they purchased their units were negligent
because they
failed to appreciate the CCC for consent 71330 related only to limited
building work. Or they were negligent
in failing to investigate the extent
of the coverage of the CCC given its ambiguity. If the solicitors who acted for
the plaintiffs
were aware or should have been aware of the ambiguity of the CCC,
but failed to act on that awareness, then such a failure could
be
negligent. The Council said that the plaintiffs were vicariously liable
for the negligence of their solicitors. In
the alternative, the chain of
causation was broken by the solicitors’ actions.
[264] I have concluded that the solicitors were not negligent and that even
if they recognised the ambiguity no reasonable enquiry
of the Council could have
identified the allegedly limited CCC. If, however, I am wrong in this
conclusion and the solicitors were
negligent, then I will consider whether that
negligence means the plaintiffs are vicariously liable for the acts of their
solicitors
and therefore should contribute to the negligence that gave rise to
their loss and/or whether the chain of causation was broken.
[265] I have also concluded that the CCC issued with respect to Glenmore was for the whole building. And so the solicitors for the owners would not be negligent as the Council alleges in either failing to interpret the CCC as covering limited building work or in failing to make further enquiries. The solicitors correctly assessed the CCC as covering the whole of the building. However, if I am wrong in this then I go on to consider whether the solicitors were negligent as identified, if in fact the CCC was limited as the Council say.
Solicitors’ negligence
[266] Prior to declaring their purchases unconditional, the solicitors for each of the purchasing plaintiffs sought and obtained copies of the CCCs for consents 71330 and
70437. The circumstances under which the Mulgan Family Trust’s
solicitor did so is somewhat different than the other three
purchasers.
However, each of the solicitors were faced with essentially the same enquiry
with respect to the units their clients
were purchasing – did the CCC
cover the whole of the building work with respect to the unit? The evidence
establishes that
on each occasion the solicitor concluded it did. The Council
say this conclusion was negligent or at least further enquiry should
have been
made to identify precisely what the CCC did cover.
[267] I have no reason to doubt that the owners of the units at Glenmore in
2001 and subsequent vendors and purchasers of the units
and their solicitors all
believed that the CCC provided by the Council in 2001 covered all the building
work undertaken at 14C
Glenmore Street. There is no evidence any
vendor or any purchaser or their solicitors suggested that the CCC was
anything
other than comprehensive.
[268] The fact that four unrelated solicitors all interpreted the CCC one
way is relevant evidence in this assessment. But it is
not determinative. All
the solicitors could have been negligent.
[269] Some context is necessary. Each of the solicitors knew the CCC had
been prepared for a new construction, not a renovation.
In building
renovation, it is particularly important to identify exactly what work has been
done and what part of that work is
covered by the CCC. Here, a new property
had been built and the expectation would be for a whole of building CCC. But a
solicitor
would need to be alive to the possibility it did not cover all the
building work.
[270] The Council says that the plain words of the CCC show its limited reach. At the very least there is ambiguity. The conditions of the CCC for 71330 state:
This certificate relates only to building consent 71330. Nothing in the
certificate states or implies that the following building
work at the same
address complies with the Building Code:
SR number: 15997 – New Dwelling (please note this consent has been
lapsed and is considered cancelled. Building consent
71330 was issued for the
completion of the apartment).
[271] The Council emphasised that the words that nothing in the certificate
states or implies that the building work completed under
the original consent
complies with the Building Code should have brought the problems with the
certificate to the solicitor’s
attention.
[272] The difficulty with that submission is that again it depends upon the
interpretation of the CCC. I have already concluded the
CCC meant: although the
original consent has lapsed and the CCC does not relate to that consent, there
is a new consent for the whole
building which did relate to the building work.
On that interpretation of the CCC there was nothing for the solicitors to
further
investigate.
[273] And further, under “Project Description” the certificate
says:
Plumbing and building to complete consent of units 1–4 for CCC related
to notice to rectify under SR 69193.
[274] Now that there is a detailed understanding of
Glenmore’s construction history, the Council’s and the
developer’s involvement and the inspection process, it is possible to see
an ambiguity in the conditions of the certificate
and thereby its reach. The
wording of the certificate could mean that it covers all the building work to
the completion of the building
or only the very limited building work undertaken
relating to plumbing and handrails, being the final work to
“complete”
the construction of the units in 2001.
[275] The “Project Description” includes a reference to the NTR. Crucially, it also states the project is to “complete consents” for Units 1 to 4 at Glenmore Street so a CCC can be issued. This implies that once the work is done there will be full (complete) building consents for the building. What follows is therefore a CCC for the completed building.
[276] And so a solicitor considering the CCC has:
(a) a CCC which is for all the building work in 71330. The CCC states
that although the original consent has lapsed, a building
consent had been
issued for the completion of the unit;
(b) the Project Description in the CCC is to complete consent on the
units for a CCC. It refers to the NTR;
(c) the NTR tells the enquirer the building is complete but the
building consent has lapsed so a retrospective consent is required;
(d) the building consent in 71330 is to “complete consent” for
the units
for a CCC. It also refers to the NTR.
[277] I am satisfied that a reasonable lawyer, by reading all the relevant
documents, would be entitled to interpret the CCC as
saying that the original
CCC for the building had lapsed and was cancelled, but that a new consent had
been issued to complete the
units and that a CCC was being issued to all the
four units.
[278] Neither the CCC nor any LIM suggest that the CCC is for a very small
part of the building work (modest plumbing and some handrails)
and that the vast
majority of the building has no CCC as the Council claims. That fact would
obviously be vital information for
any prospective purchaser and for the owner
of each unit. This would be especially important in a new build.
[279] Each of the important documents (the CCC, the building consent and
the NTR) mention a new consent for the completion of the
building so that a CCC
could be issued. A search of the Council file would have revealed an interim
CCC which had no conditions
attached. The Council files reveal that the
building had a consent for a substantial part of the building work and a
retrospective
consent would be available for the work done to complete the
building.
[280] And so in summary: the documentation relating to the CCC pointed to a new consent for the completion of the building on which the CCC would be issued and
implying the whole construction would be covered; the interim CCC had no
restriction in its terms; there was no statement in any Council
document, CCC,
LIM or otherwise that explicitly said the CCC issued for a new building only
covered a tiny fraction of its building
work.
[281] Given these facts, I am satisfied that the plaintiffs’
solicitors were not negligent in their interpretation
of the CCC nor
in failing to identify what the Council say was an ambiguity in the CCC and
investigating further.
Plaintiffs’ liability for contributory negligence of
solicitors
[282] If I am wrong in my assessment of the solicitors’ negligence,
and assuming that each of the solicitors acting for the
purchasers was
negligent, the Council claims that the plaintiffs are vicariously liable for the
actions of their solicitors. Thus
the Council says, in terms of s 3(1) of
the Contributory Negligence Act 1947, the damage the plaintiffs have suffered
is
partly the result of their own fault. The Council submits that in the
circumstances the plaintiffs’ contribution to the fault
of its own loss
(through their solicitors’ actions) is substantial and a 70 to 90 per cent
contribution would be appropriate.
[283] Conventionally a litigant is not vicariously liable for an
independent
contractor’s negligence.15
[284] Solicitors are typically independent contractors. Whether a plaintiff
is contributorily negligent arising from their own solicitor’s
negligence
is ordinarily determined by the “both ways” or
“identification” rule.16
[285] The both ways rule can, in this case, be expressed as follows. The solicitors’
negligence can only be attributed to a purchasing plaintiff if that plaintiff
(sued in tort as a defendant) would be liable to another
for its
solicitor’s negligence.
15 Exceptions are typically where there are foreseeable damages or non delegable duties: Cashfield House Ltd v David & Heather Sinclair Ltd [1995] 1 NZLR 452 (HC) at 461; Stephen Todd (ed) The Law of Torts in New Zealand (6th ed, Brookers, Wellington, 2013) at [22.5.01].
16 O’Hagan v Body Corporate 189855 [2010] NZCA 65, [2010] 3 NZLR 486 [Byron Avenue] at
[186].
[286] It is difficult to think of any credible circumstance where
any of the Glenmore purchasers could be liable to
another for the negligence
of the purchaser’s solicitor. And so prima facie the Glenmore purchasers
would not be vicariously
liable for the acts of their solicitors. Therefore, no
contribution could be required from them to any damages award against the
defendants arising from their solicitors’ negligence.
[287] There are, however, exceptions to the “both ways” rule.
And the Council says this case comes within those exceptions.
The exceptions
to the rule were discussed by the Court of Appeal in the Byron Avenue
decision.17
[288] In Byron Avenue one of the plaintiffs, Mrs Kim, did not
request a LIM before she bought a unit in a defective building. She instructed
a solicitor
but the solicitor negligently failed to advise her to obtain a LIM.
The Court held unanimously that while the “both ways”
rule
applied, Mrs Kim was contributorily negligent by identification with the
negligence of her solicitor.
[289] Arnold J and William Young P took much the same view on the
matter. William Young P’s reasoning turned on a policy
exception to the
“both ways” rule. He considered that to follow the both ways rule in
the circumstances would produce
an arbitrary result. The local authority would
be worse off simply because it was the solicitor and not the purchaser who
failed
to obtain a LIM. He considered that it was no answer to say that the
Council could seek a contribution from the solicitor
because privilege
would make that impractical.
[290] Arnold J stressed that in this transaction the solicitor was
essentially the client’s agent. And in those circumstances
it was
reasonable as a matter of policy that the client should be responsible for the
solicitor’s default. The client, in
turn, could therefore seek recovery
of the loss from the solicitor.
[291] Baragwanath J took a rather different approach. He considered that
the LIM
procedure had been introduced by Parliament to protect purchasers.
Purchasers
17 Byron Avenue, above n 15.
therefore had an obligation to obtain a LIM to protect themselves.
Accordingly, Mrs Kim could not protect herself by delegating
the responsibility
to her solicitor.
[292] Baragwanath J’s approach is therefore based on the proposition
that the purchaser owes the Council a non delegable duty
to obtain a LIM report.
The fact that she delegated that responsibility to her solicitor did not absolve
her from responsibility.
[293] I now apply those principles to this case. I consider that
interpreting the content of a CCC is in a different category
than the obligation
to obtain a LIM. Here the solicitors obtained a copy of the CCC. The negligence
was alleged to be a failure
of interpretation of the CCC and/or a failure to
enquire further after seeing an ambiguous CCC. While obtaining a CCC
could be seen as the equivalent of obtaining a LIM (and both are designed
to provide consumer protection), the interpretative
task could not be seen as
typically that of a purchaser. Interpretation of such a “technical”
document as a CCC or carrying
out research as to the scope of a CCC is lawyerly
work.
[294] Here, I am satisfied the solicitors were performing an independent
and expert function in interpreting a CCC. The solicitors
were not, in contrast
with obtaining a LIM or indeed merely obtaining a CCC, performing an
agent’s function.
[295] On this assessment the plaintiffs would not be vicariously liable
were they sued for the tort of their solicitors. They should
not therefore be
vicariously liable on a contributory negligence basis as claimed
here.
[296] I am therefore satisfied that in the circumstances of this case, the
plaintiffs are not identified with their solicitors’
negligence, and
that their solicitors’ conduct cannot amount to contributory negligence
on the part of the plaintiffs.
Private building inspectors’ negligence
[297] The Council also maintains that the two private building
inspectors’ reports in
2009 and 2010 for the second and fifth plaintiffs, in anticipation of their
purchase of
Units 1 and 4, were negligently completed. The Council says the inspectors’
negligence meant the second and fifth plaintiffs were vicariously liable for
their own loss.
[298] I have identified the relevant tests for vicarious liability in the
section in this judgment relating to solicitors’
negligence and
contributory negligence and I adopt that approach here.18
[299] The first question therefore is whether the Council have proved that
the inspectors were negligent in their inspections of
the units and consequently
in the reporting to their clients, the second and fifth plaintiffs.
[300] I am satisfied that both inspections were negligently carried out.
The reports identified the general condition of the units
as good to average.
They said some maintenance needed to be completed on the properties. In
particular some rotting boards would
need to be replaced. There was no concern
expressed in either report that the building might have weathertightness issues
or have
any inadequacies other than some outstanding maintenance.
[301] The property inspection report for Unit 1 was completed in February
2010. The report noted the building was generally sound
but with some
maintenance issues to attend to. The report notes that with respect to the
windows “all obvious weather proofing
measures have been taken”.
The priority repairs listed are all relatively minor maintenance
issues.
[302] The property inspection report for Unit 4 was
undertaken on
23 October 2009. The property received grades of “average” to
“generally good”
and “good”. There were no areas that were described as
poor.
[303] Non-invasive moisture tests were said to have returned acceptable levels. In particular the roof and windows were said to be in generally good condition. The report noted some rot in the weatherboards by one of the decks. Replacement of the
weatherboards was suggested. The report did not suggest any
investigation of the
18 At [278]–[292].
cause of the rot or remark on the obviously defective construction of the
deck in relation to the weatherboards.
[304] I have concluded that Council inspectors should have picked
up many obvious weathertightness problems with the building
in 2001. It is
reasonable to assume eight to nine years later, with the significant
advancements made in industry awareness of
leaky building problems, a private
building inspection firm should have picked up many of the weathertightness
problems in their
inspection.
[305] I acknowledge Council inspectors and privately commissioned building
inspectors have quite different functions. Council
building inspectors
inspect a building on multiple occasions for many hours throughout its
construction. They are able to see
each part of the building as it is built.
Council inspectors will therefore be very familiar with the building by the time
they
consider whether to issue a CCC. The Council inspector’s purpose is
to ensure compliance with the Code and Act and ensure the
building is
constructed in accordance with the building consent.
[306] Pre-purchase privately commissioned inspectors have a different role.
They generally inspect the property after it has been
built. The inspection
will only be for a few hours, typically on one day. Their brief is relatively
narrow, essentially to identify:
any significant defects; any gradual
deterioration of the property; any significant maintenance required; and any
potential problems
with the building that would be relevant to a purchaser and
which might require further investigation. They charge a limited fee,
typically
around $400 in 2009/2010.
[307] New Zealand Standard NZS 4306/2005, Residential Property
Inspections, sets out the scope of the standard for residential
property
inspections.
[308] It identifies the following areas relevant to this case where inspections of a building should be undertaken: pile to bearer connections; dampness and moisture damage to timber framed houses; flashings and clearances particularly relating to decks; roof underlay and support; and ground clearance of timber framing.
[309] In addition, Appendix A to NZS 4306 identified a number of
weathertightness risk factors of relevance to this property that
should have
been considered, inspected and reported on by the inspectors. If proper
attention had been paid to NZS 4306 then defects
in the building would
inevitably have been discovered and reported on in 2009 and 2010 by the
inspectors.
[310] This building had observable defects in 2009/10. Some defects were
noted by the private inspectors, for example, rotting
weatherboards and the
connection between the weatherboards and the decking. The private
inspectors’ reports suggested replacement
of a weatherboard that was
rotten. But there was no recognition by either inspector of the possibility of
a more deep seated weathertightness
problem arising from the cause of the
rotting weatherboard. This was an important failure. A competent inspection
would have recognised
there were serious defects in the building which raised
serious watertightness problems.
[311] Acknowledging the differences between Council inspectors and
private building inspectors, there were a number of defects
which I have
concluded should have been seen by the Council inspectors and which private
building inspectors should have identified
and at least given cause for further
investigation.
[312] I have previously identified these defects.19 They
include inadequate window flashings, the deck/cladding problems, the monolithic
cladding joints, and subfloor defects.
[313] I am satisfied therefore that the two inspections undertaken on Unit 1 and Unit 4 were done so negligently. The inspectors should have identified a number of defects in the building which should have given rise to serious concern about the building’s weathertightness requiring further investigation. Failure to do so was negligent and resulted in negligent reporting to their clients, the second and fifth
plaintiffs.
19 At [169]-[199].
[314] The second question is therefore whether the plaintiff owners of Unit
1 and Unit 4 are vicariously liable for their
inspectors’
negligence and therefore are required to contribute to the loss they say they
have suffered by the negligence
of the Council.
[315] I apply the same test from the Byron Avenue case as I have
with respect to the allegation of solicitors’ negligence, vicarious
liability and contributory negligence.
[316] I am satisfied that the plaintiffs are not vicariously liable for the
negligence of their two building inspectors. First,
it cannot be said that
undertaking a building inspection is a non delegable duty of the plaintiffs and
that the inspectors are simply
acting as the plaintiffs’ agents in this
case. Building inspection is a specialised skill which the typical purchaser
could
not be expected to personally carry out.
[317] Thus, in terms of Baragwanath J’s analysis in Byron
Avenue, no exception has been identified to the conventional position as to
the application of the vicarious liability rule. Thus, the
plaintiffs would
not, under the approach of Baragwanath J, be vicariously liable for the building
inspectors fault.
[318] As to William Young P and Arnold J’s analysis, there is nothing
to suggest that for policy reasons the burden of negligent
pre-purchase
inspection should fall on the house purchaser. As William Young P said in
Byron Avenue:20
I would, at least usually, take a different view where the person from whom
the purchaser sought advice was a builder or architect
(or like person) whose
advice was directed to the soundness of the building. Such an adviser will
hardly ever be an agent of the
purchaser and there would thus usually be no
scope for attribution based on the application of the both ways
rule.
[319] I am therefore satisfied that the “both ways” rule applies. There are no applicable policy exceptions and the building inspectors’ negligence cannot be attributed to the plaintiffs. The plaintiffs therefore are not contributorily negligent because they are not vicariously liable for the negligent actions of their building
inspectors.
20 Byron Avenue, above n 17, at [147].
Causation
[320] The Council submits that the negligent actions of the solicitors
and/or the building inspectors caused a break in the chain
of causation such
that the Council is no longer the cause of any loss by the Glenmore plaintiffs.
I consider, first, the causation
issue with respect to the actions of the
plaintiffs’ solicitors. This assumes solicitor negligence (although I
have concluded
the solicitors were not negligent).
[321] In Sunset Terraces the Supreme Court affirmed that an intervening cause may remove all causal potency from the original negligence and become the real cause of the damage.21 Where it does so then the chain of causation may be broken. The intervening cause can arise from the conduct of a third party or can arise from the conduct of the plaintiff itself. In Sunset Terraces the Supreme Court accepted that a prospective purchaser who failed to request a LIM (assuming the LIM would
probably have disclosed the defects) was likely to be negligent and that such
a negligent failure could amount to a new and independent
cause of the loss and
therefore break the chain of causation.
[322] In assessing whether there has been a break in the chain of
causation, the first step is to assess whether the solicitors’
negligence is one of the causes of the plaintiffs’ loss. This
requires a “but for” test: would the plaintiff
have suffered the
loss without the solicitors’ wrongdoing? If not, then the
solicitors’ conduct was a cause of the
loss.
[323] The correct counterfactual in such a circumstance requires an
assumption that the solicitors are engaged by the plaintiff
and that they
perform with reasonable care. The question then is if the solicitors had taken
reasonable care, would the plaintiff
have purchased the property or negotiated a
discount and therefore would they have suffered any diminution in
value?
[324] Here, if the solicitors had acted with reasonable care (assuming negligence by the solicitors), then they would have ascertained that the CCC did not cover all of the
building work at Glenmore. The plaintiffs then may well not have
purchased the
property or may have
negotiated a discount to reflect the lowered value. They would hardly have
proceeded to purchase their unit
on the same basis as their original
contract.
[325] Accordingly, applying the “but for” test the plaintiffs
would not have suffered loss without the solicitors’
wrongdoing. The
solicitors’ negligence therefore in those circumstances, is one of the
causes of Glenmore’s loss.
[326] Thus, the negligence of the Council and the solicitors are both
causes in fact of the plaintiffs’ loss. But is the
subsequent negligence
by the solicitors such that it breaks the chain of causation between the
Council’s negligence and the
loss suffered by the plaintiffs? If it does
then it would become the sole cause of the plaintiffs’ loss in
law.
[327] This is determined by an assessment as to whether or not the
plaintiffs’ actual loss was within the scope of the risk
created by the
Council’s conduct. If it was then the solicitors’ negligence would
not have broken the chain of causation.
If it was not then the
solicitors’ negligence would have done so.
[328] The plaintiffs say that the Court of Appeal’s approach to
determining whether the intervening act of a third party amounts
to a break in
the chain of causation set out in Sherwin Chan & Walshe Ltd (in Liq) v
Jones is the correct approach here.22
[329] There the Court said:
[36] In Bank of New Zealand v New Zealand Guardian Trust Co Ltd,
this Court approved a composite test for determining liability in performing
professional services. Two corresponding elements are
relevant: one is
identification of the scope of the duty; the other is identification of the risk
against which the professional
had a duty to protect the client. In adopting
this approach, the Court was influenced by South Australia
Asset Management Corp v York Montague Ltd. The House of Lords there drew a
distinction within the causation inquiry between an assumption of a positive
duty to advise on
a course of action and a lesser duty to inform. In the former
case the professional is responsible for all the foreseeable consequences
of his
or her negligence; in the latter the professional is responsible only for the
consequences attributable to the wrongful information.
22 Sherwin Chan & Walshe Ltd (in Liq) v Jones [2012] NZCA 474, [2013] 1 NZLR 166.
[37] In policy terms this approach is designed to ensure that the wrongdoer is not liable for losses arising from an independent cause in circumstances where the breach of duty simply creates or allows an opportunity for loss. This is sometimes referred to as the “but for” or distant nexus test, postulating liability for an event which would not have happened without the originating negligence. It is not normally a sufficient basis for fixing liability in contract. However, labels can mislead. The principle is not absolute in an area where the ultimate inquiry is shaped by the particular facts. So, where the professional assumes an affirmative duty to advise on the appropriate course of action, rather than simply to inform, a modified “but for” test may be appropriate, buttressed by a requirement that the negligence has a real influence on the cause of loss.
(footnotes omitted)
[330] The issue of a CCC is a function of the Council’s inspection role. The Council inspects the building which has a (building) consent during the currency of the building work. At completion it issues a CCC if it is satisfied that its inspections confirm a code compliant building. The Council owes a duty of care in both the inspection role and in its role in issuing a CCC to subsequent purchasers of buildings. The scope of that duty as far as inspection is concerned was described by
the Supreme Court in Sunset Terraces in this
way:23
... homeowners are entitled to place general reliance on councils to inspect
residential premises with appropriate skill and care.
[331] However, the Supreme Court pointed out:24
What loss the homeowner may be able to claim on account of the breach may be
influenced by the absence of a CCC and whether the owner
should have been aware
of that fact. The point may go to causation or it may go to contributory
negligence.
[332] Thus, in some circumstances if a home owner has failed to ascertain
whether a building has a CCC then the Council may not
be required to cover that
risk. That principle may apply equally to a situation where there is a failure
to ascertain what, if any,
part of the building has a CCC.
[333] The fundamental question is whether a negligent inquiry into a CCC by a
purchaser’s solicitors is within the scope of risk that falls on the
Council as part of its duty of care.
23 Sunset Terraces, above n 20, at [61].
24 At [61].
[334] Local authorities have been responsible for the oversight of building work in New Zealand for decades.25 The Building Act and other legislation gives a council significant control over building work in their territorial area. With this control comes a corresponding duty. That duty has been expressed as an obligation to properly control building work, to use reasonable care to inspect the building, to ensure compliance and to take reasonable care that a building is indeed code
compliant when a CCC is issued.
[335] And so it is the local authority which is ultimately responsible for
ensuring that houses are properly built. Houses will
typically pass through
various hands over the years and each purchaser is entitled to assume that where
a CCC is issued, their interests
as purchasers and occupiers have been
protected by the Council with respect to the building work covered by the
CCC.
[336] I now apply that analysis to the facts of this case. Here, the Wellington City Council would have been well aware that where it failed to provide accurate information to a purchaser through its inspections and the CCC, then it was likely to be liable for the loss resulting from the purchase of a defective building. Issuing LIMs and CCCs, in slightly different ways, provides opportunities for the Council to tell potential purchasers of the standard of the building work measured by its compliance with the Code. For example, if a purchaser does not get a LIM they do not give the Council a chance to right its wrongdoing and to “absolve themselves
from any earlier negligence on their part”.26
[337] Here, the allegation of negligence is that the solicitors failed to
either pick up on an ambiguity in the Council’s
CCC or failed to
investigate the ambiguity in the CCC.
[338] The presence or absence of a CCC for building work (here, the construction of a building) is a way of telling potential purchasers that the building either is or is
not up to appropriate standard.
25 See Mount Albert Borough Council v Johnson [1979] 2 NZLR 234 (CA).
26 Sunset Terraces, above n 20, at [81].
[339] The Council knew there were uncertainties about the building
consent process, the inspection process and accordingly
the CCC process. It
knew and understood the importance of CCCs for both the vendor and
purchaser in any property transaction.
But the Council’s ambiguous CCC
(assuming for this purpose it was ambiguous) did not make it clear to a
prospective purchaser
the exact extent of the building work covered by the
certification. This, as the Council would have understood, went to the heart
of its certification obligation – identifying the scope of the building
work that the Council was certifying had been built
in accordance with the
Code.
[340] The Council is responsible for that ambiguity. In those
circumstances I am satisfied the provision of the CCC and
the
information relating to the original building consent in the CCC27
was not sufficient for the Council to absolve itself of its earlier
negligent inspections. A solicitor negligently inspecting an
ambiguous CCC is
within the scope of the risk created by the Council’s
negligence.
[341] I am satisfied therefore that the plaintiffs’ solicitors’
negligence did not break the chain of causation.
Building maintenance
[342] The Council’s case was that inadequate maintenance over the
life of the building had contributed to the damage
to the building and
therefore the loss suffered. Thus, the plaintiffs had contributed to their
loss and this contributory
negligence should be taken into account in assessing
damages.
[343] I note that this issue was not included in the Council’s final written submissions. Prior to April 2010 the individual property owners looked after the maintenance of their own units. In April 2010 the owners had their first body corporate meeting. A maintenance programme was set in place and some maintenance commenced. I note the private inspection reports with respect to Units
1 and 4 said the units were in average to good condition but with some
maintenance
required.
27 See above at [134] and [140].
[344] I accept Mr Wutzler’s evidence that even if there was a basis
to claim some maintenance of the building had been delayed
or neglected, there
was nothing to suggest that any such delay or any lack of maintenance was
causative of any damage to the building.
Mr Jones, the relevant witness for
the Council did not give any evidence which specifically contradicted this
evidence, nor did
he identify any particular inadequate maintenance which might
have actually contributed to the loss or damage here.
[345] I therefore reject the Council’s claim relating to this aspect
of contributory negligence.
[346] The other complaint by the Council was that the plaintiffs should have exhausted their remedies against the solicitors and/or the private building inspectors before suing the Council. I accept the plaintiffs’ case that there is no rule of law which requires them to sue either the solicitors or the inspectors prior to suing the
Council.28
[347] The Council could have joined either or both the solicitors and the
inspectors as joint tortfeasers. It did not do so.
[348] Finally, the Council claimed that with respect to the later purchases
of the units the solicitors and/or the purchasers were
negligent in failing to
obtain a LIM report at the time of purchase. However, there is no evidence that
there was anything in any
LIM report which would have alerted the purchasers to
the problems. I reject this claim.
Summary so far
[349] I will now summarise my conclusions so far in this judgment. I am
satisfied that:
(a) the Council owed the purchasers a duty of care with
respect to the inspection of the building and the issue of the CCC;
(b) the CCC issued for 14C Glenmore Street related to the whole of the
completed building;
(c) the proceedings relating to the CCC include the inspections on
which the CCC is based and are not time barred;
(d) each of the plaintiffs relied upon the CCC in purchasing his or her
unit;
(e) the inspections on which the CCCs were based and the CCC itself
were negligently undertaken and issued respectively;
(f) the solicitors acting for the plaintiffs were not negligent
relating to their advice with respect to the CCC but if they
were, the
plaintiffs were not vicariously liable for their solicitors’
negligence;
(g) the private building inspectors were negligent in their inspections
of the building but the plaintiffs were not vicariously
liable for the
actions of their building inspectors;
(h) the chain of causation was not broken by either the actions of the
solicitors or the private building inspectors;
(i) the Council therefore as a result of their negligent actions are
liable
for the plaintiffs’ loss;
(j) the plaintiffs are not contributorily negligent. And so the next section of this judgment considers what damages are appropriate.
Measure of damages
[350] The plaintiffs claim that the appropriate measure of damages in this
case is the cost of repair of the units on a like-for-like
basis. The repair
would ensure that the units are weathertight and appropriate retaining walls are
built to protect the property
such that it would obtain a CCC from the
Council.
[351] There is some agreement between the parties as to the remediation
cost of these units with discrete areas of dispute.
In addition,
there are issues of post-remediation stigma and betterment which might affect
the question of the quantum of
the plaintiffs’ claim.
[352] However, the Council submits that repair is not the proper
measure of damages in this case. They say that diminution
in value is the
appropriate measure: the current value of the property less its value as known
in its defective state.
[353] In Warren & Mahoney v Dynes the proceedings involved an
action in contract against an architect and in tort against an engineer.29
The Court of Appeal concluded that where the cause of action involved
damage to real property, the default measure of damages, whether
the cause of
action was in contract or tort, was the cost of rectification of the
defects.30
[354] In the recent case of Johnson v Auckland Council the Council
had negligently inspected and issued a CCC for a leaky home.31
The Court affirmed that the approach in Warren & Mahoney v
Dynes applied:32
... in these types of cases the measure of loss will be “the cost of
repairs, if it is reasonable to repair, or the depreciation
in the market value
if it is not”. As Professor Atkin notes in The Law of Torts in New
Zealand, a “more flexible, pragmatic” approach is adopted and
courts “will award the cost of reinstatement where the plaintiff
intends
to restore and occupy the property and it is reasonable to do so”. This
Court in Warren & Mahoney v Dynes referred to a “prima
facie”, but not inflexible, rule” that the main concern should be to
“ascertain the amount
required to rectify the defects”. That was a
contract case although the Court indicated that in the circumstances of that
case there was no difference in the measure of damages. We emphasise,
as
29 Warren & Mahoney v Dynes CA49/88, 26 October 1988.
30 At 22.
31 Johnson v Auckland Council [2013] NZCA 662.
32 At [110].
the authorities here and overseas relied on by Ms Thodey posit, that the
assessment is a factual one and it is necessary to do fairness
between the
parties. (footnotes omitted)
[355] The prima facie position for the assessment of damages for
negligent inspection and issuing of a CCC is therefore
repair costs. However,
that rule is not inflexible and it is necessary to do fairness between the
parties.
[356] In conducting a factual assessment of the appropriate measure of
damages, I have considered factors militating for and against
repair costs as
the measure of damage. In favour of repair costs is the fact that the owners
intend to restore and occupy the property.33 In favour of
diminution of value are the following:
(a) it is possible for people to continue to live in the property in its
unrepaired state for some time;34
(b) there are no particularly unique features of the
property;35
(c) repairs have not already begun.36
[357] More importantly, there is considerable uncertainty about the exact
extent of the damage to the property from weathertightness
issues. In Warren
& Mahoney v Dynes the fact that remedial costs were unknown or highly
speculative led the Court to favour diminution of value as the measure of
damages.37
[358] In this case there are substantial differences between the expert witnesses for the plaintiffs and defendant on the exact extent of the damage to the building. This extends to disputes about the extent to which water affected the framing timber, the extent of the damaged floors, and the extent to which the internal framing and linings must be replaced. No doubt both experts have conscientiously done their best to estimate total damage. But the only way to discover the exact extent of the damage
to the building is to remove the weatherboards. This will reveal the
full extent of the
33 At [110].
34 At [113].
35 At [113].
36 At [112].
37 Warren & Mahoney v Dynes, above n 28, at 23-24.
damage to the framing and probably enable an assessment of any internal
damage. That will not occur until the repairs are actually
under way.
It underlines the substantial uncertainty in assessing damages when the exact
extent of the damage is not known.
And in this case it illustrates that a cost
of repairs assessment is on the facts the less reasonable option.
[359] For the reasons given therefore I am satisfied that the proper
measure of damages here is diminution of value.
Loss based on diminution of value
[360] I turn now to the dispute about what the diminution of value is in
this case. The fundamental assessment is agreed. The loss
is the value of the
property as if unaffected by the issues that meant it did not comply with the
Code, less its value with its known
problems.
[361] I approach this section of the judgment in the following manner.
First, I assess what the diminution in value of the property
is. Second, if I
am wrong that diminution of value is the proper basis for assessment of damages
and repair costs are appropriate,
then I assess the competing claims arising
from a damages award based on cost of repair. There are disputes about which
items should
be repaired as well as disputes about the existence of
post-remediation stigma (affecting value of the building) and betterment (also
relevant to building value after remediation).
[362] Mr Myers, a registered valuer, gave evidence for the defendants. He
said that the current unaffected value of the four units
was $2,057,000 and that
the affected value was $1,156,000. The plaintiffs’ collective loss
therefore was $901,000.
[363] Mr Myers’ evidence was that there was sufficient evidence of sales of properties with known weathertightness issues on which to make an assessment of the affected value of 14C Glenmore Street. He said that “my research indicates a discount on the unaffected market value of between 30 and 60 per cent and usually significantly above land value” for a building affected by weathertightness issues.
[364] Thus, the thrust of Mr Myers’ evidence was that
properties affected by weathertightness were selling at prices
well above
their land value. This assessment was based on what was described as sales of
leaky homes that are unremediated. Fourteen
properties were listed by Mr
Myers.
[365] The average sale price for these 14 leaky properties was $336,000.
This was an average of a 45 per cent reduction from the
properties’
average rateable value. The average price is 56 per cent higher than the average
land value (based on its rating
value). The Council says therefore that there
is a significant premium for these properties over and above land value only.
Mr
Myers said that younger people who were perhaps prepared to live in a
building while repairing it were amongst those prepared to
buy such
buildings.
[366] Mr Myers valued the land only at 14C Glenmore Street as worth $456,000 assuming four units could be rebuilt upon it. If five units could be built it was worth
$509,300.
[367] Mr Truebridge, a valuer, gave evidence for the plaintiffs. He took a
different view. He considered that the current unaffected
value is $2,094,000.
This valuation is close to Mr Myers’ valuation, well within an acceptable
variation. He considered that
the value of the units in their current known
state was $300,000, being the land value only.
[368] I turn therefore to the valuation evidence of Mr Myers that
the current affected value of the units is $1.156 million.
I did not find the
evidence to justify this conclusion convincing.
[369] First, each of the leaky homes in Mr Myers’ sample of 14 properties was a standalone home, save one. It seems reasonable to conclude that the repair of a standalone property is likely to be more straightforward than a multi-unit property. The owner of the standalone property need only please him or herself.
[370] The sale price comparisons in Mr Myers’ evidence are made with
rateable value, not actual unaffected value. What is
not known is the value of
the property if unaffected by weathertightness issues. The percentage variations
from rateable value to
sale price are therefore based not on the value of the
property but on the value allocated for the purpose of rate collection. It
is
difficult to know what the difference in value might be and how this might
affect the percentages. But this unknown creates
serious concerns about the
reliability of this data.
[371] Thirdly, Mr Myers did not know the extent of the weathertightness
issues in each property. It may be that the properties
involved had minor
weathertightness problems. It may be they had significant weathertightness
problems or it may be they had a
mix. It is not known what the mix is nor how
this may be related to particular percentage variations.
[372] Finally, it was not entirely clear what market there might be for the
purchase of this block of units as opposed to the single
dwellings in all but
one of the 14 properties. Much of the repair of this building will be
interrelated. And so the purchase
of individual units of Glenmore seems
unlikely. The risk upon the purchaser of a single unit would be
substantial.
The purchaser would be reliant upon cooperation with the other
owners of the units. For example, one owner may wish to repair, the
other three
owners may wish to demolish. Some of the damage may be to common areas such as
party walls where unit owners will have
to agree. Multiple owners will have to
agree on the quality of the repairs and any “improvement” to the
building. These
factors would all likely severely limit the market for units in
such a building. Such a purchaser is hardly likely to be a first
home buyer
looking for a bargain as Mr Myers claimed.
[373] In the circumstances I do not think that the valuation evidence
provided by
Mr Myers to support his claim of a value of $1.156 million was
reliable.
[374] What then are the units worth in their current state? Given the extensive damage and the obvious problems with a multi unit dwelling, I consider it is highly unlikely that in its present state the building itself has real value.
[375] Although expert witnesses gave evidence about their view as to the
extent of the damage, the full extent cannot be known until
the weatherboard
cladding is removed and the building inspected. What is clear is that there is
extensive damage to this building
and that any repair costs will be very large.
Assuming the repair costs will be less than the demolish and rebuilt costs,
given
these uncertainties, would be something of a gamble.
[376] In those circumstances it seems to me the most accurate current value
is the land value alone. Mr Truebridge says the value
of the land is $300,000.
Mr Myers somewhere between $450,000 and $510,000.
[377] The difference primarily is about realisation and use of the
property. Mr Myers takes the view that either four or
five units could be built
on the property. Four units as of right, five units requiring local authority
consent. Mr Myers says the
value of the land should be based on a five unit
development but with a reduction in value to reflect the “risk” that
a five unit development might not be approved.
[378] Mr Truebridge’s evidence is that Mr Myers has wrongly assessed
the value based on the realisation of the land. That
should not be done unless
and until that value is realised by building the units on that land. Once new
units have been built on
the land the land value will then reflect the existence
of those units. Thus, once the units are built the value of the land will
be
reflected in the existence of the units. Each piece of land with a unit built on
it will reflect that fact in its value. But
until the units are built the land
should be valued as a whole.
[379] No doubt anyone wishing to purchase this land will take into account
its potential. While the value of the land should not
assume a value as if the
units had been built, the land value should reflect the potential to build at
least four and possibly five
units.
[380] There remains uncertainty about the capacity to build five units. It seems probable local authority consent is required. Whether it will be given remains uncertain. The current approval is for four units. In those circumstances, it seems to
me the most accurate value of the land today should be based on the
existing arrangements of four units with some allowance
for the possibility of
five units.
[381] Mr Truebridge’s $300,000 did not seem to me to
sufficiently reflect the significant potential of this land,
the construction
of at least four and possibly five substantial units. On the other hand it
seemed to me Mr Myers’ valuation
assumed the realisation of the land, as
if four or five units had been built. Balancing these factors I consider a
figure closer
to Mr Myers assessment is more accurate. I assess the land value
at $420,000.
[382] As I indicated there is little difference between Mr Myers and Mr
Truebridge as to the current unaffected value of the property.
In fairness to
all parties I propose to set a middle point in that value at $2,075,500. The
loss based on diminution of value is
$1,655,500. At the conclusion of this
judgment I will identify the full damages payable arising from diminution of
value.
Repair measure of damages
[383] If I am wrong in my conclusion that loss of value is the correct
measure of damages and repair is more appropriate,
then there are the
following disputes between the parties:
(a) betterment;
(b) post-remediation stigma; and
(c) the cost of discrete repair issues.
[384] The total claimed by the plaintiffs based on repairs and
consequential damages is $2,165,958.60.
Betterment
[385] I accept that the property after repair will be in a better condition than it is today (excluding the weathertightness issues). The evidence is that there has been
only a modest amount of maintenance done on the property since it was built
more than 17 years ago. For example, the building’s
exterior is due to be
repainted.
[386] The Council’s case is that after remediation the
building will be in significantly better condition than
it is now
(excluding weathertightness issues). This improved condition will mean the
value of the building has increased. This
“betterment” component
of any damages award would be a windfall gain to the owners and so the award of
damages should
be reduced to reflect this increase in value.
[387] Mr Myers considered that, based on a market analysis, each of the units would have a lift in value from their current (excluding watertightness issues) value
as follows:
$ Remediated value
$ Unaffected value
$ Difference
Unit 1 $586,000 $559,000 $27,000
Unit 2 $535,000 $515,000 $20,000
Unit 3 $548,000 $525,000 $23,000
Unit 4 $600,000 $570,000 $30,000
TOTAL CLAIMED BETTERMENT $100,000
[388] Mr Truebridge did not agree there would be any betterment. He
approached the issue, as I understood it, on the basis
that there would be
a “like-for-like” remediation and so there would be no
betterment.
[389] In a literal sense this is not a “like-for-like”
remediation. The same weatherboards will be installed. But they
will be
freshly painted weatherboards as opposed to weatherboards exposed to the
elements 17 years. Similarly with all items requiring
replacement. On a
like-for-like repair, a property can be significantly improved. In this case,
after remediation the building
will inevitably be significantly improved from
its current condition (excluding weathertightness issues).
[390] The only cogent market valuation evidence was from Mr Myers. He said the evidence showed that properties in better condition will obtain higher prices than
those in poor condition. There was no evidence to support any proposition
that such an approach does not apply to weathertight homes.
[391] I accept therefore that the proper approach to valuation and
betterment is to value the property post-remediation on the basis
of its
remediated state but without any leaky home/s overlay and compare this with the
value of the units in their current condition
but also without any leaky home
overlay. The difference in values will reflect what is in this case the
improved condition of the
building. This improvement in value will need to be
accounted for in the assessment of damages based on repair. I have no reason
to
doubt the accuracy of Mr Myers figures in this regard. The total figure for
betterment is therefore $100,000.
Post-remediation stigma
[392] The evidence for the plaintiffs through Mr Truebridge is that even
after a leaky home has been fully remediated, there is
a post-remediation stigma
associated with that property that is likely to reduce its value by (in this
case) 7.5 per cent on resale.
The plaintiffs say they should be compensated for
this loss which resulted ultimately from the Council’s negligence in
issuing
the CCC. This submission is dependent upon a conclusion that damages
should be assessed on the basis of the cost of remediation.
Mr Myers says that
there is no post-remediation stigma and that the market is now sufficiently
sophisticated to understand a comprehensive
building remediation will give
reassurance to a buyer without any residual “stigma”
associated with the property.
[393] Mr Truebridge’s claim of post-remediation stigma is based on his experience and contact with home buyers, research undertaken and published in 2003 and on what he says is an analysis of market evidence and “supporting case law”. He says that his valuation firm has completed “a relatively extensive survey of sale prices achieved with post-remediated apartment buildings and those with pre-remediated apartment buildings where the estimated cost to rectify is known”. The result of this survey, he says, supports the proposition that there is post-remediation stigma and gives guidance as to the reduction in value.
[394] Mr Truebridge claims further support can be obtained from a
Massey University study. The 2003 Massey study was completed
by a
master’s student at the University. The definition of stigma used in the
study was “a residual loss in value even
after remediation as a result of
increased risks of uncertainty regarding future events”. The paper was
based on a survey
of valuers, real estate agents and building consultants in
response to the question “is there a residual loss in value from
leaky
home stigma?” Only 35 percent of those surveyed answered the survey. Of
the respondents 95 per cent considered there
would be a loss of
value.
[395] Those surveyed said the properties most likely to be affected were
homes with monolithic cladding. The expected residual
loss of value varied
between five and 15 per cent.
[396] I did not find the Massey University study of particular value in
assessing whether this building is likely to be affected
by post-remediation
stigma. Those who responded to the survey were not purchasers of remediated
houses. The information obtained
was therefore second or third hand (or more)
or was simply an expression of opinion by those surveyed.
[397] As a particular example of post-remediation stigma, Mr Truebridge
identified a property at 93A Kelburn Parade. The property
was previously clad
in monolithic cladding. It was then reclad in weatherboards after remediation
of weathertightness problems.
[398] The units at 93A Kelburn Parade, Mr Truebridge said, were sold at a price below equivalent properties that had no watertightness issues. The only explanation was that the Kelburn Parade units had been leaky homes before remediation. The lower equivalent price they fetched could only be explained, he said, as a stigma associated with being a leaky home even after remediation. Mr Truebridge considered a fair and appropriate figure to apply to the Glenmore units was a
7.5 per cent reduction in value after remediation.
[399] Mr Myers rejected this approach. He said that sale price analysis
of the
Kelburn property could not be relied upon and that there might be a number of
factors why a remediated building had achieved a lower sale price than other
similar properties. He said the analysis undertaken
by Mr Truebridge could not
eliminate a variety of reasons for price differentials.
[400] As to the remediated value of the building, Mr Myers said that there
would not be any post-remediation stigma associated with
the property because it
had been a leaky building.
[401] Post-remediation stigma is an inherently difficult issue to analyse.
There are a large range of factors which influence the
price of real property.
However, the leaky home problem in New Zealand is now extensive. There is wide
knowledge of the problem.
This knowledge is something of a double edged sword.
Buyers are likely to be aware and understandably concerned about any building
that has had watertightness problems. Have all the problems been identified and
fixed? Has the remediation been extensive or has
the minimum necessary been
done? On the other hand with knowledge comes the capacity to check the work
done and seek reassurances
as to extent and quality.
[402] I am satisfied that there is a basis for saying that some
post-remediation stigma exists. It is perhaps best illustrated
in this way.
If there were two similar properties for sale, one that had been remediated, the
other not a leaky building, then
if they were a similar price the
purchaser would almost certainly purchase the property that had never been
the subject
of weathertightness problems. In such a situation to achieve a
sale, the owner of the post-remediated property would need to lower
their
price.
[403] Here, there will be extensive remediation of Glenmore. And so there is a reasonable level of assurance that there are unlikely to be further difficulties with weathertightness. However, the concern will likely remain. Are there further undisclosed or unknown defects which will be costly to repair? There is no reason to suppose, however, that post-remediation stigma is uniform. Here, the extensive remediation required (identified and categorised by an experienced remediator) is likely to give some assurance to prospective purchasers that a thorough check of the
building has been undertaken. In those circumstances, I consider a
post-remediation stigma figure of five per cent will adequately
compensate the
plaintiffs for their loss.
Discrete valuation issues
[404] The plaintiffs’ and the Council’s quantity surveyors
agree on substantial parts of the remediation cost. The disputed
topics
are:
(a) the extent of the replacement of the floor and ceilings, floor joists and
internal framing;
(b) remediation and design costs; (c) the carpet/vinyl;
(d) the drapes; (e) the roof;
(f) investigation costs; and
(g) steel beams.
(a) Replacement of the internal framing and consequential
replacement
[405] Mr Wutzler’s evidence is that 100 per cent of the timber
framing on the perimeter of the building needs to
be replaced. This in turn
will, he says, necessitate the replacement of 600 to 700 mm of floors
and ceilings (measured
from the intersection of the framing timber and
floors/ceilings) around each level of each unit as well as all internal linings
(wall and ceiling).
[406] Mr Jones’ view is that approximately 50 per cent of the external framing timber will need to be replaced. Other than around the three bay windows, he estimates that little of the flooring and few of the internal wall linings will need to be replaced. He accepts that it is not possible to be 100 per cent certain about the
internal damage but says that any remediation to internal framing and linings
can easily be covered by the contingency amount allowed
for in the repair
estimate.
[407] Mr Wutzler accepted that it is unlikely that 100 per cent of the
timber framing is rotten or seriously affected. However,
he says once 50 per
cent or more of the timber in the external framing walls is seriously affected,
it is more cost effective to
replace 100 per cent of the external framing. He
accepts that it is most likely that somewhere between 65 and 75 per cent
of the external framing including the boundary joists are water
affected.
[408] Mr Wutzler accepts that he does not know for certain that there is
other extensive internal damage. He believes, based on
his experience, that
there is likely to be significant other internal damage not able to be currently
seen.
[409] The cost difference between Mr Wutzler’s estimate of 100
per cent and Mr Jones’ estimate of 50 per cent
replacement of the
external framing and boundary joists is $11,000 but it is the consequential cost
of Mr Wutzler’s planned
remediation that involves significant extra cost.
It is impossible to know the exact extent of damage to the external framing
although
the testing undertaken by Mr Jones and Mr Wutzler does show extensive
damage. But it does not show 100 per cent damage to external
framing or
boundary joists.
[410] It is clear that some of the boundary joists have suffered decay and
will need to be replaced and where a boundary joist is
affected by water the
whole of the joist will need to be replaced.
[411] However, given the relatively small monetary difference, I am
satisfied that the prudent thing to do here is to allow for
100 per cent
replacement of boundary joists and external timber framing. That does not mean,
however, that 100 per cent of the internal
linings and other costs need be
incurred.
[412] I accept that where the floor joists intercept with water damaged boundary joists, care will need to be taken to examine the floor joists for damage. It seems a reasonable possibility that some of the floor joists will need to be replaced and where
replacement of floor joists is required consequential replacement of some
flooring and some internal lining is likely.
[413] But I reject the claim by Mr Wutzler that a 100 per cent replacement
of internal linings will inevitably be required.
The additional costs
based on Mr Wutzler’s assessment of total replacement are: (apart from
the frame replacement at
$11,500) 100 per cent plasterboard replacement
– $23,863; perimeter floor replacement – $40,556; remedial work
to internal walls – $71,017; total $135,436. The costings of Mr
Wutzler’s 100 per cent replacement and Mr Jones’
reliance upon the
contingency fee for any internal damage are each at the opposite end of the cost
spectrum.
[414] Some costs seem likely to be incurred. It seems probable that there
will be some floor joist and other internal damage which
will require
remediation. Any costs incurred will be well less than the 100 per cent
sought. However, whatever figure is settled
upon for the replacement of the
internal lining and walls it is a “best guess”. No one knows the
exact extent of the
damage beyond a reasonable estimate of the external timber
frame.
[415] The best estimate of external framing and boundary joist damage is
between
50 percent and 75 percent. This is based on a wide range of factors from invasive moisture testing to the removal of weatherboards to view the framing and boundary joists. There is (for understandable reasons) no equivalent evidence in relation to damage to flooring or floor joists or other internal structures. It seems most likely that as a result of external framing and boundary joist damage some modest percentage of floor and ceiling joists (with other building items) may be damaged. Given the uncertainty about such damage I consider an allowance of 25 per cent of the additional cost estimated by Mr Wutzler adequately compensates the plaintiffs for the consequential remediation of the floor joists and other internal structures. This sum is therefore 25 per cent of $135,436 or $33,859. If there proves to be greater damage this could be met from the contingency sum.
(b) Remediation and design costs
[416] The plaintiffs have sought remediation design and contract
supervision fees of $148,000 for the remediation of the building.
This is
divided equally between the design aspect and supervision – $74,000 for
each. This is approximately 14 per cent of
the total remediation cost. The
Council accepts the supervision cost of $74,000 is reasonable but disputes the
$74,000 design cost.
The Council says it has a fixed price quote from an
experienced remediation architect for $11,500 for the remediation
design
cost. The architect has been given a scope of works for the building and the
relevant building consent plans to inform his
quote.
[417] The plaintiffs’ case is that seven per cent of the
total repair costs for remediation design is a reasonable
figure and one
which is commonly used. They say remediation design is a specialist subject.
The architect who has given the quote
is not a remediation expert and so
his quote cannot be relied upon. The best approach is to take the lowest
reasonable
cost of design from someone adequately informed to do the
job.
[418] The plaintiffs have not satisfied me the Council’s
architect’s qualifications (academic and practical) are such
that he is
not qualified to undertake this work. Obviously an architect has formal
professional qualifications in building design.
The particular architect here
had, to Mr Myers’ knowledge, designed other remediation
projects.
[419] Given these facts I am satisfied the lowest cost for the design work competently done is $11,500, subject to one caveat. There is some uncertainty that the architect has been fully informed of the extent of the remediation and therefore the design work required. I add a modest sum of $3,500 to the $11,500 quote to allow for this possibility. I therefore allow $15,000 as a fair and appropriate design fee. The plaintiffs’ estimate of remediation cost should therefore be reduced by
$59,000 ($74,000 less $15,000).
(c) The carpet/vinyl
[420] The plaintiffs’ case is that 100 per cent of the carpet in all
four units should be replaced at a cost of $35,000.
That is so because they say
the carpets throughout the units are water damaged from water entry into the
apartments.
[421] The main evidence of actual damage given directly in evidence is to
an area around the bay windows in Unit 1. There is no
other direct evidence of
carpet damage although there is a vague reference by Mr Wutzler to other carpet
damage in the units. There
is no precise identification of where this other
damage is situated, why Mr Wutzler thinks it relates to the weathertightness of
the building, and what the “damage” consists of. None of the unit
owners said they observed any carpet damage.
[422] The carpet in the units is about 12 or 13 years old and therefore
near the end of its useful life. There is some evidence
that at least one of
the owners thought the carpet was near the end of its life. Mr and Mrs McColl
were going to replace the carpet
for resale purposes before the discovery of
watertightness issues.
[423] I found it difficult to be clear about the exact extent of the
claimed damage to the carpet in these four units. I accept
the Council’s
case that only three rooms in Unit 1 seemed to have affected carpet. There was
very little other evidence as
to damage to the carpet other than Mr
Wutzler’s evidence that he had lifted the carpet in some areas in each
unit to find damage.
[424] Certainly there is likely to be damage in the bay window area. The
only photograph of carpet damage came from this area.
[425] I accept therefore that there was damage to carpet in Unit 1 and that
there were patches of damage to carpet in other
units but full carpet
replacement throughout all units is not necessary, nor justified.
[426] A global figure is appropriate. I make an allowance of $4,000 for the need to replace the carpet in the three rooms which abut the bay windows and for other carpet damage in Unit 1. I make an allowance of $1,000 to each of the other unit
owners for carpet replacement in their units. The total allowed is therefore
$7,000. The Council accepted that all carpets would
need to be lifted and stored
during the remedial work. This was a cost of $6,769 which is, in
addition to the carpet
replacement cost (of $7,000) payable by the
Council.
[427] Mr Wutzler also said that all vinyl should be replaced in the
bathrooms. But there is no evidence to justify this. In particular,
there is
no evidence to establish that vinyl was damaged necessitating full replacement
nor evidence that any damage was caused from
weathertightness
problems.
[428] No allowance is made for vinyl replacement.
(d) The drapes
[429] The plaintiffs seek the cost of 100 per cent replacement of all
drapes in all units. Each of the fact witnesses gave evidence
of mould in
drapes in each of their units. This evidence did not identify exactly what
drapes in what rooms were affected. These
units are in a damp area. There are
a number of springs in the area. They have modest sunshine. It is difficult to
identify whether
the damage to the curtains is because these are damp and
shaded units or whether the mould is primarily from watertightness
problems. Most likely a combination of factors has caused the damage. I allow
a figure of 40 per cent of the total cost of full
drape replacement. That is 40
per cent of $24,000 or $9,600 spread equally amongst the four units.
(e) The roof
[430] The plaintiffs’ case is that to remedy the roof defects, in particular the flashing problems, requires the installation of a new roof. The Council disagrees. It says that the roof and roof flashing can be repaired. The difference between repair and a new roof is $8,500. The new roof is more expensive. There is nothing to suggest that the repair and replacement of the existing roof as opposed to a new roof will not “cure” the watertightness problems of the roof. In those circumstances, the Council are entitled to insist on the least costly option. The appropriate claim figure
is for the repair of the roof and flashing. The plaintiffs’ claim for
roofing is therefore
reduced by $8,425.00.
(f) Investigation cost
[431] The plaintiffs claim $244,035.89 for the investigation of weathertightness and other issues at 14C Glenmore Street. These costs are in addition to the expert fees the plaintiffs seek if they are entitled to costs in these proceedings. The significant majority of the costs are fees charged by Helfen Ltd, the remediation experts who employ Mr Wutzler. These are effectively the fees to investigate the building at
14C Glenmore Street and assess the problems with the building, its
remediation and the cost of the remediation.
[432] Mr Jones’ evidence is that from his experience in inspecting
and reporting on
275 dwellings and 15 multi unit developments he would not have expected costs
of more than $70–$80,000 for this work.
Mr Jones stressed that
this was not a particularly large multi unit development given there were
only four units.
[433] The plaintiffs have provided a detailed breakdown of how the
$244,000 figure was made up. It includes, apart from the Helfen
work, a
builder, an expert on the requirements for fire protection, a structural
engineer, quantity surveyor, a valuation expert,
an expert on building consent
processes, a building surveyor, the cost of scaffolding, a wood decay scientist
and a consulting engineer.
Many of the above have been consulted more than once
and have several accounts. Multiple consultations were, the plaintiffs say,
necessary because the settlement conference was adjourned, part considered,
because the Council sought additional information from
the plaintiffs about
their claims.
[434] Each of the experts consulted performed an appropriate investigative
task or were paid for carrying out particular work relevant
to an investigation
(for example, the builder and the scaffolders).
[435] I have no reason to doubt Mr Jones’ evidence that he
considers the
investigative work could have been done for less. However, there is no evidence to
say that the particular investigations were not necessary or took longer than
required or were charged at an hourly rate that was
excessive.
[436] Further, Mr Jones was not intimately involved in the initial
investigative work. It can be difficult therefore to accurately
assess what was
required from the outside. Mr Jones’ evidence did not convince me that
any of the investigative work charged
was unnecessary or charged at an unfairly
high rate.
[437] In those circumstances I have no reason to doubt that the costs
incurred were properly incurred in the investigation of this
building. I
therefore allow the full amount claimed of $244,035.89.
(g) Steel beam repair
[438] The remedial cost of $16,448 was not the subject of specific
challenge. I therefore approve that as a legitimate cost
arising from
the negligence of the Council.
Peer review
[439] There is a possibility, that before the Council will approve
the building consent application for the remediation
of the units, it may
require the plaintiffs to subject the remediation design to peer review. Should
that be the case then the cost
of the peer review would have to be met by the
plaintiffs. In the event that the Council does require a peer review, then the
parties
agree the Council will pay the plaintiffs $10,000 to reflect the best
estimate of the costs of that review.
Damages
[440] At para [345] I summarised my findings as to liability. I then concluded that the appropriate measure of damages was based on diminution of value. At para [378] I concluded the loss based on diminution of value of the property done was $1,655,500. In addition to that sum the plaintiffs are entitled to the following sums as damages:
(a) Consultants’ fees and costs – $244,035.89 (at [433]); (b) real estate agents’ fee on sale – $12,000.00;
(c) legal fees on sale – $4,000.00; (d) special damages – $8,682.27.
A total of $1,924,218.16.
[441] I do not enter judgment for that figure. I invite counsel to
file further submissions on the accuracy of this calculation
should that be
necessary. In reaching this figure I have not attempted to allocate the damages
for individual units. I deal with
the general damages claim by the third
plaintiff separately.
[442] With reference to the plaintiffs’ quantum schedule, I make no
allowance for item 12 (legal fees for neighbourhood consent
agreements) nor for
the disbursements claim. The latter can be part of any costs claim made by the
plaintiffs.
[443] As to the damages based on remediation, I set out below a summary of
my relevant conclusions relating to remediation. This
assessment assumes the
correct measure of damages is remediation. The parties will, with the benefit
of this judgment, need to
calculate the damages payable arising from the
remediation-based damages claim. Counsel for the plaintiffs and the first
defendant
advise that they calculate the damages payable arising from the
remediation-based damages claim, based on the findings in this judgment,
to be
$1,496,699.39 (including the $25,000 general damages award). As I have noted
some of the damages claim has been agreed upon
between the parties. This
summary therefore deals solely with areas of dispute.
[444] The disputed remediation costs are summarised as follows:
(a) retaining walls allowance, only under floor wall – $22,133.00; (b) Wellington City Council fees for the remediation – $10,435.00;
(c) construction insurance payable for remediation – $12,000.00; (d) lost rental during the construction period – $88,100.00;
(e) consultants’ costs payable of $244,035.89 (at [433]);
(f) post-remediation stigma. The plaintiffs claimed $157,000.00. I
have allowed five per cent of $2,075,500.00 being $103,775.00
(at
[399]);
(g) betterment allowance – $100,000.00 (at [387]);
(h) allowance for remediation of joists and other internal structures
(in addition to the contingency allowances) – $33,859.00
(at
[411]);
(i) carpet allowance (replacement, lifting and storage) – $13,769.00
(at
[422]);
(j) no allowance for replacement of vinyl; (k) drapes – $9,600.00 (at [425]);
(l) roof. The allowance sought by the plaintiffs for the repair of
the roof by way of full replacement is reduced by the sum
of $8,425.00 to
reflect my conclusion at [426];
(m) remediation design and supervision. The plaintiffs claim
$148,000.00 for the supervision and design costs. I allow $89,000
(at
[415]);
(n) steel beam repair – $16,448.00 (at [437]).
General damages
[445] Apart from the McColls, the third plaintiffs, the other three units were owned by companies. The plaintiffs accept that none of the plaintiff companies can make a claim for general damages.
[446] Mr and Mrs McColl personally own and live in Unit 2. When they
shifted into that unit, they had intended to occupy it only
until they had the
opportunity to recarpet and refurbish it and sell it. Their intention was then
to use those funds for a retirement
home and capital. The current condition of
their unit has not allowed them to progress their lives toward retirement
because the
unit is a “leaky home”.
[447] This situation has had very serious consequences for the McColls.
Both have serious health problems. Mrs McColl has had
difficulty in walking up
and down the many stairs in the unit. Mr McColl has suffered from bronchial
difficulties probably, in part,
contributed to by the dampness of the unit.
Both have been under significant stress since they discovered this was a leaky
building.
[448] I am satisfied that a general damages award is appropriate
for Mr and
Mrs McColl and I award the sum of $25,000.00 in total
jointly.
Daytona Developments
[449] Finally, one of the defendants is Daytona Developments Limited, the
construction company of the development at Glenmore Street.
This judgment makes
it clear that the construction of the building by Daytona was negligent. Most
of the numerous defects of the
building are identified in this judgment. These
defects were caused by the negligence of Daytona. The plaintiffs should have a
damages award against Daytona (for what it is worth given the company is in
liquidation) for the same quantum as their claim against
the Council. Once that
amount is settled I will formally enter judgment also against the second
defendants.
Summary
[450] At [345] I summarised my conclusions as to liability. I concluded the Council was liable for the plaintiffs’ loss and that the plaintiffs did not by their negligence contribute to the loss. In the second part of the judgment I have concluded that the appropriate measure of damages is based on the diminution of value of the property. I have calculated this (together with other allowable losses) at
$1,924,218.16. If I am wrong about this measure of damages then I have made
findings on which the parties can calculate the remediation damages amount.
I have allowed Mr and Mrs McColl a total of $25,000 general
damages.
Costs
[451] Should the plaintiffs seek costs and if the parties are unable to agree on quantum, the plaintiffs should file a memorandum within 21 days and the defendants
to respond within a further 21
days.
Ronald Young J
Solicitors:
Parker & Associates, Barristers & Solicitors, Wellington
Heaney & Partners, Solicitors, Auckland
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URL: http://www.nzlii.org/nz/cases/NZHC/2014/295.html