Body Corporate 323716 v Manson Developments Limited [2016] NZHC 728 (19 April 2016)

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BETWEEN	BODY CORPORATE 323716 A BODY CORPORATE CONSTITUTED TO THE UNIT TITLES ACT 1972 First Plaintiff JAMES GLOVER MASON and MARGARET MARY CONSTANCE MASON and Others Second Plaintiff
AND	MANSON DEVELOPMENTS LIMITED First Defendant ECM DEVELOPMENTS LIMITED Second Defendant AUCKLAND COUNCIL Third Defendant MANSONS TCLM LIMITED Fourth Defendant

Hearing:	19 April 2016
Appearances:	C J Booth and S F Panzic for plaintiffs R P Coltman and S J Connolly for first, second and fourth defendants S C Price and J K Wilson for third defendant
_Judgment:	_{19 April 2016}

This judgment was delivered by me on 19 April 2016 at 4.30 pm, pursuant to Rule 11.5 of the High Court Rules.

[1] This proceeding is a “leaky building” claim in relation to an apartment building known as 7 The Promenade Takapuna Apartments. The proceeding is scheduled to be the subject of a three week trial commencing on 13 June 2016.

[2] It recently became apparent that several interlocutory issues needed to be determined as a matter of urgency before trial. As a result, Faire J held a telephone conference with counsel on 6 April 2016. In a minute issued following that conference, the Judge directed any outstanding applications to be heard today. Leave is required for each of the applications because they have been filed after the setting down date.

(a) An application by the first, second, third and fourth defendants for leave to amend their statements of defence to the fifth amended statement of claim to include a defence based on the Limitation Act

(b) An application by the third defendant (the Council) for orders declaring part of the evidence of Andrew Gray to be inadmissible.

(c) An application by the Council for orders declaring parts of the evidence given by Mr Mark Powell and Mr Roger Twiname to be inadmissible on the ground that it is hearsay.

(d) An application by the first, second and fourth defendants (the Manson interests) for orders under r 9.34 of the High Court Rules permitting them to carry out destructive testing on the building that is the subject of the application.

[4] This application relates to alleged defects in the building that the plaintiffs refer to in their fifth amended statement of claim as defects D and J. The defendants contend that the plaintiffs included these defects for the first time in their fourth and

2013, the expiry date of the ten year “long stop” period prescribed by the Building Act 2004. As a result, the defendants seek leave to amend their statements of defence to include a defence to the claims based on limitation grounds.

[5] There is no dispute regarding the principles to be applied in determining the application. They have been enunciated in cases such as Elders Pastoral v Marr, Body Corporate 172108 v Gundry and Shanton Apparel Ltd v Thornton Hall Manufacturing Ltd.¹In short, the Court is required to be satisfied that the amendment is necessary to determine the real controversy between the parties, and that it will not cause undue delay or prejudice to the other parties to the proceeding.

[6] The Council says it first became aware that defects D and J were not included within previously pleaded defects when they received the plaintiffs’ evidence. In relation to defect D, they had earlier understood that the alleged defect related to the visitor car parking deck. They say the plaintiffs’ evidence in relation to defect D departs from that, and relates to issues that are entirely unrelated to the visitor car parking deck. The Council had earlier pleaded a limitation defence in respect of another defect, defect L. They now wish to take the same step in relation to defects D and J.

[7] The Manson interests do not attempt to explain the delay in filing the application but say the interests of justice require them to be able to rely upon a limitation defence.

[8] The plaintiffs contend that the defendants have been guilty of inordinate and unexplained delay in seeking to advance these defences. They also say that the defences cannot succeed, because earlier versions of the statement of claim alleged

_{that the apartment building contained “defects that include but
are not limited to”}

¹Elders Pastoral v Marr [1987] NZCA 18; (1987) 2 PRNZ 383 (CA) at 385; Body Corporate 172108 v Gundry

[2014] NZHC 954 at [40]; Shanton Apparel Ltd v Thornton Hall Manufacturing Ltd [1989] 3

those particularised in the statement of claim. This permitted the plaintiffs to particularise further defects without introducing new causes of action. The plaintiffs also say that defects D and J are simply particulars of the cause of action based in negligence, and are not causes of action in their own right.

[9] I accept there has been delay in bringing the present applications because, had the defendants examined the fourth amended statement of claim when it was filed on 2 April 2014, they would immediately have seen that the focus of the claim relating to the basement of the car park had changed. The first three iterations of the plaintiffs’ statement of claim contained pleadings alleging that the defects to the building included “Defective Neuchatel topping to the visitor car park area” and “Leaks in visitor parking deck result in water ingress to the basement”. The fourth and fifth versions altered this approach. Thereafter, the statements of claim alleged that the defects included “Junctions between Neuchatel topping to the visitor car park area and adjacent structures not formed in a weathertight manner” and “Lack of adequate waterproofing and/or drainage to car park/basement structure resulting in water ingress to the basement”. Meetings of experts held in October 2014 also resulted in joint statements being signed expressly referring to the new approach.

[10] I therefore do not accept that the Council only became aware of the alteration of approach when it received the plaintiffs’ evidence. The Manson interests have not sought to explain the delay at all. I consider that the defendants have therefore been guilty of unexplained delay in bringing the application.

[11] In this context, however, the interests of justice are paramount. Although delay by the applicant will always be a relevant factor, it is unlikely without more to justify the Court refusing leave where that is otherwise in the interests of justice. Delay is more likely to assume significance in cases where it produces prejudice for other parties to the proceeding.

[12] Overall, I consider the interests of justice favour the application being granted. I consider it is at least arguable that the amendment of the fourth statement of claim resulted in the plaintiffs introducing two new claims after the expiry of the

long stop period. Defect D is particularly significant because the plaintiffs are claiming damages of approximately $660,000 in respect of it. Defect J is of lesser significance, because it results in a claim for damages of approximately $9,000.

[13] I also have reservations about the plaintiffs’ argument based on the use of the words “defects that include but are not limited to”. If correct, a plaintiff in a weathertightness case could routinely obtain immunity from limitation defences by using such words in a statement of claim. The issue as to whether or not defects D and J are merely particulars of the plaintiffs’ overall claim based on negligence is one best determined at trial.

[14] The addition of a limitation defence will result in counsel being required to prepare additional legal argument in relation to defect D but this will not add greatly, if at all, to the duration and expense of the trial. Furthermore, apart from this added cost the plaintiffs cannot realistically suggest they would be prejudiced by the proposed amendment.

[15] Given the amount claimed, I consider the interests of justice require the defendants to be given an opportunity to advance a limitation defence in respect of defect D. The position is different in relation to defect J because of the low amount of the claim. The defendants should be required to bear the consequences of their failure to identify earlier the shift in the plaintiffs’ position in relation to that defect.

[16] I therefore grant leave to file the applications. The applications are granted in relation to Defect D but not in respect of Defect J. I direct that amended statements of defence incorporating the limitation defences in relation to defect D are to be filed and served no later than 27 April 2016.

The application by the third defendant for an order declaring parts of the evidence of Andrew Gray inadmissible on the basis that he is not qualified to give that evidence

[17] This issue arises because the plaintiffs have served a brief of evidence by Mr Andrew Gray in which Mr Gray provides his opinion regarding the steps that a prudent Council inspector would have taken during the construction of the

apartments. The Council contends that Mr Gray is not qualified to make these assertions. It also says the evidence will not be substantially helpful to the trial Judge, because Mr Gray does not provide an adequate factual basis for the conclusions he has reached. It therefore submits that the Court should rule the evidence inadmissible at this point.

[18] Mr Gray has provided details of his work history. This shows that he was a self-employed builder working in the field of residential construction for approximately 25 years from 1981 to 2006. He then worked from 2006 to 2008 as a Territorial Building Inspections Officer employed by the North Shore City Council. His role during this period was to process consent applications for remedial work to be carried out on homes affected by weathertightness issues. He also inspected and monitored leaky building remediation work.

[19] From 2008 to 2009 Mr Gray was employed as a building surveyor specialising in leaky building investigation and repair work. Mr Gray then worked as an assessor for the Weathertight Services Group within the Department of Building and Housing. He subsequently established a number of companies that operated as building consultants.

[20] Mr Gray says that in his capacity as a building surveyor he has considerable experience in conducting the on-site investigation of residential buildings and apartment buildings that suffer from building defect problems. He has given expert evidence on several occasions before the Weathertight Homes Tribunal and the High Court.

[21] The Council contends that this experience does not qualify Mr Gray as an expert to give evidence on the issue of what a prudent Council officer ought to have done in relation to the construction of the plaintiffs’ apartment building. It points out that Mr Gray was working as a builder at the time the plaintiffs’ building was constructed, and he cannot provide expert opinion regarding a field of expertise in

which he was not engaged at that time. The third defendant relies in this context upon the observations of Duffy J in Scandle v Far North District Council, where Her Honour observed that an expert witness in this field should have “direct experience” during the relevant time period.²

[22] I do not consider that Mr Gray’s claim to relevant expertise can be dismissed at this stage given his extensive experience in the building industry, both as a builder and as a building surveyor and assessor. I consider that the issue needs to be determined at trial when the trial Judge will be in a far better position to consider it having regard to all of the evidence, including cross-examination of Mr Gray.

[23] I do not place great reliance for present purposes on the observations made by Duffy J in Scandle, because they were made following a defended trial. Furthermore, Duffy J did not reject the evidence of the witness in question outright. Rather, she determined that she should give “little weight” to it.³That is a very different proposition to ruling the evidence inadmissible.

[24] Similarly, I do not accept that the Court should rule at this point on whether Mr Gray’s evidence is substantially helpful. The third defendant contends that Mr Gray has not provided an adequate rationale for the opinions he has expressed. That, too, is an issue to be determined by the trial Judge who will have heard all of the evidence.

[25] I understand why the Council filed this application. Rule 9.11 of the High Court Rules prescribes the procedure to be followed when there is a challenge to the admissibility of a brief of evidence. I consider, however, that the issues that the Council raises in respect of Mr Gray’s brief are properly matters to be determined at

[26] I therefore decline to grant the Council leave to file the application for an

The application by the Council for an order declaring aspects of the evidence of Mr Mark Powell and Mr Roger Twiname to be inadmissible on the ground that it constitutes inadmissible hearsay evidence

31 Various building material samples were removed during investigations and sent to several specialist laboratories for analysis. Results are detailed in the following reports:

(d) Grayson Wagnor Co Ltd – balcony and podium waterproofing analysis – see Matthew Keesing’s brief of evidence

12 I have relied on the following tests and reports by others to back up my assessments:

a. Review of paint protection to the basement steel structure (Defect E) by Richard Muirhead of Zone Architectural Products Ltd., who specialise in the application of fire resistant intumescent paint systems. Following a meeting on site and testing of local areas of steel elements with a blow torch, Richard provided a brief email report stating “In summary it is our opinion that the columns and beams in the basement area have not been coated with an intumescent paint” (see Appendix

b. Site investigations and report by Opus International Consultants Ltd with respect to Defect 1, verifying probable location of reinforcing and anchor bolts in the concrete wall to which the glass balustrades are attached (Appendix 2)

[29] The Council contends that the documents referred to by each witness should be ruled inadmissible at this point because they are hearsay statements in terms of s 4

of the Evidence Act 2006 (the Act), and cannot satisfy the criteria for admission under s 18(1) of the Act.

[30] Section 4 of the Act provides that a hearsay statement is a statement made by a person other than a witness where the statement is offered in evidence to prove the truth of its contents. Section 18 provides that hearsay statements will be inadmissible unless:

(a) the circumstances relating to the statement provide reasonable assurance that the statement is reliable; and

(ii) the Judge considers that undue expense or delay would be caused if the maker of the statement were required to be a witness.

[31] In the present case four of the documents were prepared by persons who the Council believes will not be called as witnesses at trial. Two of the documents were prepared by Mr Keesing and Mr Nicholas Powell, both of whom are to give evidence for the plaintiffs. This means that those documents do not fall within the definition of hearsay statements. Counsel for the third defendant will be able to cross-examine Messrs Keesing and Powell regarding the conclusions they have reached in their reports.

[32] The four documents prepared by persons who are not scheduled to give evidence at trial are hearsay statements because Mr Gray and Mr Twiname have relied on the conclusions contained in those reports in reaching their own conclusions. This means that the plaintiffs are offering the statements in evidence to prove the truth of their contents.

[33] I do not propose to decide this issue because again I consider it needs to be determined at trial. The most I can do is remind the plaintiffs that, unless they can reach some form of accommodation with the defendants, the admissibility of their evidence is governed by the provisions of the Evidence Act 2006. If the plaintiffs wish to rely upon the truth of statements made in a document, they must call the

author of the document to produce it at trial or they must follow the route to admissibility prescribed by s 18 of the Act.

The application for an order permitting the first, second and fourth defendants to carry out testing on the apartment building

[35] One of the issues at trial will be whether the plaintiffs are required to replace the whole of a large tiled area in order to remedy existing defects. This is estimated to cost approximately $660,000. The Manson interests will contend that a far more conservative remedy can fix the problem. This involves removing the tiles and making them weathertight using a grouting and waterproofing process. The defendants wish to test this process prior to trial so that the Court can have confidence in the solution they propose. They seek to do so by obtaining the Court’s permission to remove a small number of tiles at an identified site and then replace them using their grouting and waterproofing process. They will then test the watertightness of the newly re-tiled area by soaking it with water a few days later.

[36] The plaintiffs oppose the proposed testing essentially because they say the Manson interests will not be able to succeed with this defence at trial. This is because the proposed remedial works will not meet the durability requirements imposed by section B2 of the Building Code. This requires such works to last for a minimum period of 15 years. The plaintiffs say that, as a consequence, the defendants would never be able to obtain a building consent for their proposed works. They also say that the defendants have been guilty of undue delay in bringing the application, and that it is likely to impact on a mediation that the parties have arranged on 10 May 2016.

(1) The court may, for the purpose of enabling the proper determination of any matter in question in a proceeding, make orders, on terms, for—

(d) the measuring, weighing, or photographing of any property: (e) the conduct of an experiment on or with any property:

(2) An order may authorise a person to enter any land or do anything else for the purpose of getting access to the property.

(3) In this rule, property includes any land and any document or other chattel, whether in the control of a party or not.

[38] I am satisfied that the defendants should have the opportunity that they seek notwithstanding the fact that the application has been made relatively close to trial. This aspect of the plaintiffs’ claim is significant, and the defendants need to be able to offer alternative forms of remedy if they are suitable. Furthermore, I do not consider that the application should be refused merely because the plaintiffs and their experts believe that the defendants will not be able to obtain a building consent for the remedial work. That will be an issue for trial.

[39] The proposed testing process is limited in nature and is unlikely to inconvenience the plaintiffs. The defendants have also undertaken to make good any damage they might cause. Furthermore, the plaintiffs cannot be prejudiced by the testing process because they have already determined the basis upon which they will say the proposed remedial work is unrealistic.

[40] I accept, however, that the results of the testing process will need to be made available well in advance of the mediation scheduled for 10 May 2016.

[41] I therefore grant leave to file the application, and I grant the application as sought. It will be for the parties to work out the logistics of the testing process. I direct, however, that it is to be completed no later than 27 April 2016. The plaintiffs shall be entitled to have an observer present during the testing process. The report by the person who carries out the test must be provided to the plaintiffs no later than

[42] Should any issue arise regarding any aspect of the testing process and its aftermath, both parties have leave to ask the Registrar to arrange a telephone conference with me on 24 hours notice so that the issue can be resolved.

[43] I direct that the Manson interests are to serve any briefs of evidence arising out of the testing process no later than 13 May 2016. The plaintiffs shall be entitled to file briefs of evidence (or supplementary briefs of evidence) in relation to issues contained in the defendants’ briefs no later than 27 May 2016.

[44] My initial impression is that both parties have succeeded to some extent and that costs in relation to the applications should lie where they fall. If any of the parties take a different view, succinct memoranda should be filed setting out the orders sought. I will then give directions for the filing of memoranda in response

High Court of New Zealand Decisions

Body Corporate 323716 v Manson Developments Limited [2016] NZHC 728 (19 April 2016)