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High Court of New Zealand Decisions |
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
CIV 2004-404-3230
BETWEEN BODY CORPORATE 188529 AND ORS
Plaintiffs
AND NORTH SHORE CITY COUNCIL
First Defendant
AND
ROBERT HENRY GRAHAM BARTON
AND KAY BARTON
Second Defendants
AND R F COUGHLAN & ASSOCIATES
Third Defendant
Hearing: 30 September 2008
Counsel: M Josephson and H K Harkess for Plaintiffs
D
J Heaney and G R Grant for First Defendant
No appearance by or on behalf of Second and Third Defendants
Judgment:
30 September 2008
(ORAL) JUDGMENT (NO. 4) OF HEATH J
Solicitors:
Grimshaw & Co, Auckland
Heaney & Co,
Auckland
George Boggiato, Auckland
Kidd Tattersfield Maclean, Auckland
BODY CORPORATE 188529 AND ORS V NORTH SHORE CITY COUNCIL
AND ORS HC AK CIV 2004-
404-3230 30 September 2008
Introduction
[1] In this proceeding, the Body Corporate, some individual
proprietors and the
assignee of the rights of other individual proprietors seek damages from Mr and
Mrs Barton, the developers of
their unit title complex, known as Sunset Terraces.
Damages sought arise out of losses suffered through water ingress to various
units
and damage to a driveway. The relevant territorial authority, the North Shore City
Council and F R Coughlan & Associates, the
designer of the project, are also sued.
[2] After a hearing extending over 29 sitting days in late 2007, issues of liability
were determined by me, in a reserved judgment given on 30 April 2008. I held that
all plaintiffs were entitled, at least in part,
to recover damages from the developers. I
also held that four of the individual unit owners were entitled to recover losses from
the Council. I dismissed the plaintiffs' claims against the designer. Deliberately, I
did not enter judgment for any party at that
time, so that appeal times could run
together, once remaining issues of quantum, interest and costs had been resolved.
[3] Previously,
I had entered judgment for liability in favour of one of the
individual plaintiffs, Mr Halford, against the developers and made an
order for costs
in his favour. My reasons for doing so were set out in a judgment I gave orally, at
the conclusion of the substantive
hearing on 5 December 2007.
[4] Today, I heard the plaintiffs' application for judgment, on formal proof,
against the developers
and the Council's application for judgment on its contribution
claim, also by formal proof. In my judgment of 30 April 2008, I determined
that
issues of contribution between the Council and the developers should be apportioned
at 85% to the developers and 15% to the
Council respectively: see para [586].
[5] The issues raised on the applications heard today are mainly factual in nature.
For
that reason, I deal with both applications today. I thank counsel for their
assistance, which has enabled judgment to be given
orally.
Plaintiffs' claims against the developers
(a) Background
[6] I held that the developers were liable to the plaintiffs
on the basis that they
had breached a duty to supervise the building project adequately, a duty explained in
Mount Albert Borough
Council v Johnson [1979] 2 NZLR 234 (CA) at 240-241.
Cooke and Somers JJ, with whom Richardson J agreed, said:
In the instant type of case a development company
acquires land, subdivides
it, and has homes built on the lots for sale to members of the general public.
The company's
interest is primarily a business one. For that purpose it has
buildings put up which are intended to house people for many
years and it
makes extensive and abiding changes in the landscape. It is not a case of a
landowner having a house built
for his own occupation initially as to which
we would say nothing except that Lord Wilberforce's two-stage approach to
duties of care in Anns may prove of guidance on questions of non-delegable
duty also. There appears to be no authority
directly in point on the duty of
such a development company. We would hold that it is a duty to see that
proper care
and skill are exercised in the building of the houses and that it
cannot be avoided by delegation to an independent contractor.
(my
emphasis)
[7] I held that the developers failed to meet those standards. At para [478] of my
30 April 2008 judgment,
I said:
[478] It is unnecessary for detailed factual findings to be made. I am
satisfied from the evidence that:
a) Mr and Mrs Barton were responsible for supervising and co-ordinating
construction work on site. In terms of the
duty explained in Mount Albert
Borough Council v Johnson, they are liable to the plaintiffs for losses caused
by their
negligence.
b) Much of the building work on site was carried out to a standard
significantly below what would ordinarily
be inspected. Some of the work
was shoddy (at best) and appalling (at worst). In performing their non-
delegable duty,
Mr and Mrs Barton fell well below the standard of care owed
to individual plaintiffs.
[8] On the plaintiffs' formal proof
claim against the developers, two types of
damages are sought. The first is for economic loss flowing from the developers'
negligence.
The second, claimed only by individual plaintiffs, is for general
damages, arising out of emotional harm and mental stress caused
by the developers'
conduct. I deal also with questions of interest.
[9] All remaining issues of costs are to be heard tomorrow
so that counsel for the
designer can be heard. A separate judgment will be given on issues of costs to
resolve outstanding aspects
of the case.
(b) Claims for economic loss
[10] Economic loss suffered by plaintiffs in cases such as this are recoverable:
see
Invercargill City Council v Hamlin [1994] 3 NZLR 513 (CA) at 522 and [1996] 1
NZLR 513 (PC) at 526.
[11] As to the time at
which economic loss occurs, Lord Lloyd of Berwick,
delivering the advice of the Privy Council in Hamlin, said, at 526:
...
In other words, the cause of action accrues when the cracks become so
bad, or the defects so obvious, that any reasonable
homeowner would call in
an expert. Since the defects would then be obvious to a potential buyer, or
his expert, that
marks the moment when the market value of the building is
depreciated, and therefore the moment when the economic loss occurs.
Their
Lordships do not think it is possible to define the moment more accurately.
The measure of the loss will then
be the cost of repairs, if it is reasonable to
repair, or the depreciation in the market value if it is not: see Ruxley
Electronics and Constructions Ltd v Forsyth [1995] UKHL 8; [1995] 3 WLR 118.
[12] Evidence was led at trial on the defects that were caused through negligent
construction of the dwellings and, therefore,
also by the failure of the developers to
supervise the construction work adequately. Some quantum evidence was also led,
though that
has been supplemented by more focussed testimony for the purposes of
today's hearing.
[13] All of the experts who gave evidence
at the hearing last year, agreed that the
following defects in the construction work, carried out at the direction and under the
supervision of the developers, existed:
a) The inter-tenancy wing walls and parapet walls were not waterproofed
in accordance with the Harditex technical information. The lack of a
waterproofing membrane allowed water
entry into the timber framing,
causing cracking, swelling and rotting of the timber.
b) The failure to
apply either Butynol or an adequate liquid applied
membrane substitute to the decks combined with the absence of a
drip
edge to the decks.
c) Gaps at the ends of the joinery head flashings.
d) Installation
of Harditex cladding without the required clearances to
exterior ground levels, pavement levels and concrete floor
slabs.
e) The use of wing walls and inter-tenancy walls framed in untreated
timber and clad with Harditex
to retain ground.
f) Lack of waterproofing to concrete block retaining walls.
g) Back filling of retaining
walls with clay and rubbish.
h) Inadequately waterproofed junctions between, first, the timber framed
and concrete masonry wall and, second, the left hand side of the
garage doors where the Harditex joins the block work.
i) A bow to the timber garage door lintels.
[14] I accepted evidence from Mr Grigg, an expert witness called by
the plaintiffs,
as to defects in the driveway and also held that they were caused by negligent
construction work, over which the
developers failed to exercise proper oversight.
[15] The primary causes of water ingress were defects in the inter-tenancy wing
walls and parapet walls through not being waterproofed adequately and the failure to
apply either Butynol or an adequate liquid applied
membrane substitute to the decks,
combined with the absence of a drip edge to the decks. Save for the losses suffered
by the Body
Corporate, in respect of the driveway, I find that all claimed economic
losses flow from those two causes.
[16] It is unnecessary
for present purposes for me to go into the claims for
economic loss in detail. It is desirable, however, that I refer briefly to
one legal
aspect of the damages claim which I left unresolved in my judgment of 30 April
2008.
[17] The issue I left open was
whether the costs of targeted repairs undertaken by
some of the plaintiffs were losses flowing from failed mitigation or non-claimable
losses because they arose from a break in the chain of causation. I discussed the
difference between the concepts of mitigation and
intervening acts (at paras [239]-
[247]) and determined that the issue could not be resolved on the evidence then
before me (at paras
[588]-[594]).
[18] In my view, it was a question of fact and degree whether targeted repair work
had been carried out on expert
advice as a reasonable means of preventing further
financial loss. If the targeted repairs could be characterised in that way I took
the
view that it ought to be regarded as failed mitigation on the basis of Johnson v
Watson [2003] 1 NZLR 626 (CA) at [19]. As Tipping J, delivering the judgment of
the Court of Appeal, said:
[19] Here negligence in carrying
out the prevention work, be it act or
omission, if established, is a concurrent cause of the damage which it failed
to prevent. Its purpose was to prevent such damage and it would be
unrealistic to take the view that it was not a substantial
and material cause of
that damage. In such circumstances as these it is not the law that because the
further damage
could not have occurred without (but for) the originally
faulty workmanship, such workmanship must be regarded as the sole
cause
of that damage. A concurrent cause, such as the ineffective prevention work,
is in a sense the opposite of
a novus actus interveniens. It is in reality a novus
actus causans, or in other words a new default which runs with the earlier
default so as to cause, or at least materially contribute to, the further damage
which it was its purpose to prevent.
[19] On the evidence now before me, I am satisfied that the relevant successful
plaintiffs undertook remedial targeted repairs
on the basis of expert advice which, in
the circumstances prevailing at the time, was reasonable. I am also satisfied that a
complete
re-clad of each of those dwellings is necessary to redress the economic loss
suffered.
[20] I make it clear that those are findings
of particular fact on the evidence before
me in this case. I am not suggesting there is any general rule that can be applied in
determining
on which side of the line between failed mitigation and intervening acts
that a particular case may fall.
[21] I rely, in addition
to evidence given at the substantive hearing, on evidence
from Dr Wakeling, a micro-deterioration consultant and expert in timber
decay, who
has deposed, on the basis of his analysis of relevant information, that a full re-
cladding of the relevant dwellings
is the only way in which to ensure they are
repaired properly. I rely also on evidence from a quantity surveyor, Mr Maddren, as
to
the estimate of current costs of re-cladding the relevant units.
[22] Repair costs of the units, with the addition of wasted
targeted repair costs,
form the basis for damages arising from economic loss suffered by each of the
individual plaintiffs, save
for Mr Devlin and the Turner sisters. In the case of
Mr Devlin, I ruled in my judgment of 30 April 2008, that his losses were limited
to
$40,000, for reasons set out in para [304]. The Turner sisters incurred a cost, which
was properly payable by the Body Corporate,
but which the parties agree should
properly be included within their own losses, given the nature of the payments made.
[23]
The Body Corporate's losses are limited to claims made in respect of
common property. On the findings made in my 30 April 2008 judgment,
the losses
relate to repair of extensive cracking to the concrete pavement driveway, due (on the
evidence of Mr Grigg that I accepted)
to a lack of adequate reinforcement and/or
base preparation. I accept evidence of Mr Gordon that the current price of repairing
the
driveway is $439,560.
[24] The remaining claim for economic loss is brought by Blue Sky Holdings Ltd,
as assignee of the rights
of other individual owners. The background to the Blue Sky
claim is set out in my 30 April 2008 judgment at paras [336]-[343] and
the reason
for holding the developers liable to it at para [484].
[25] Blue Sky is now in liquidation. The liquidator consents
to the proceeding
continuing to resolve outstanding issues. The leases it entered into with individual
proprietors have been cancelled.
It seeks damages only for what it has actually paid
as a contribution towards repair costs. I am satisfied that Blue Sky is entitled
to
judgment against the developers on that limited basis.
[26] I set out later the amounts for which judgment will be entered
against the
developers, based on these findings.
(c) Claims for general damages
[27] Claims for general damages are made by all of the individual
plaintiffs
against the developers. Each individual plaintiff claims $25,000 as distress damages.
I have determined this particular
aspect of the case based on submissions from
counsel for the plaintiffs. I emphasise, however, that the issue has not been argued,
as the developers have not participated in the hearing. For that reason, the awards I
am about to make should not be regarded as
a precedent for quantum in cases of this
type. Nor should it be regarded as authority for the view that each householder is
entitled
to a separate award of distress damages, as a matter of course.
[28] In Mouat v Clark Boyce [1992] 2 NZLR 559 (CA), the circumstances in
which general damages for distress might be awarded were considered. In that case,
Mrs Mouat's claim was
based, in part, on tortious negligence and breach of fiduciary
duty respectively. While earlier findings of liability were subsequently
reversed on
appeal (see Clark Boyce v Mouat [1993] 3 NZLR 641 (PC)), I regard myself as
bound to follow the earlier pronouncements on the distress damages issue.
[29] The leading judgment
in the Court of Appeal on the general damages point
was that of Cooke P. At 568, the President said:
... In my opinion, when
the plaintiff has a cause of action for negligence,
damages for distress, vexation, inconvenience and the like are recoverable
in
both tort and contract, at least if reasonably foreseeable consequences of the
breach of duty.
[30] Richardson
and Gault JJ agreed with those general observations. All three
Judges declined to disturb an award of $25,000, made in favour of
Mrs Mouat by the
trial Judge, even though Cooke P described it as "on the high side".
[31] While expressly stating that non-interference
with an award of that
proportion was "not to be seen as a precedent", the President accepted that
Mrs Mouat had suffered great stress
through being confronted by the threat of losing
her home, with the consequence that her enjoyment of life had been "most seriously
impaired": Mouat at 569; see also Richardson J at 574 and Gault J at 575.
[32] At its most basic level, the acquisition by an
individual of a home can be seen
as the purchase of a safe haven in which the purchaser will live. In those
circumstances,
I am satisfied, without needing to embark upon a review of the law in
this area, that each of the claimants are eligible for an award
of general damages.
Each suffered fears that they would not be able to meet the costs of repairs and that
they might lose their home.
Each suffered significant impairment of their quality of
life, particularly while repairs were being undertaken.
[33] The quantum
of such an award is difficult to assess. It turns on the individual
circumstances of those involved.
[34] The Turner sisters
lived in substandard conditions throughout their time in
Unit G. They lacked the money to embark upon the costs of targeted repairs.
They
were, I acknowledge, caused significant distress by the dampness of the building and
their inability to meet costs of repairs.
I find that they are each entitled to general
damages in the sum of $25,000.
[35] Mr and Mrs Parkinson lived in the property
while targeted repairs were
carried out. Mr Parkinson gave evidence of the stress under which they laboured,
both as a result of
the lack of weathertightness of the dwelling and concern about
future financial pressures. Mr and Mrs Parkinson have moved to England
in the
meantime and Mr Parkinson gave his evidence by video-link from that location,
demonstrating that he retained a good deal of
anxiety in respect of the outcome of
this proceeding. I award each of them $25,000.
[36] Mr Halford did not live in the unit
during the time of the targeted repairs but
was required to spend his own savings on repairing the unit with no real guarantee
that those costs would be repaired and his unit salvaged. I award Mr Halford
$25,000 general damages.
[37] Mr Devlin lived
in the units in difficult and stressful personal circumstances
while weathertightness issues were discovered but moved out later.
His
circumstance is such that an award of $25,000 should be made to him also.
[38] Mr and Mrs Sangha moved
to Australia in order to make more money in
order to meet the costs of repairs. They lived in the unit with their young child
during
targeted repairs. I award each of them $25,000.
[39] Although the Court of Appeal described Mrs Mouat's award of distress
damages
of $25,000 as "on the high side", in my view the mental distress suffered by
each of the individual plaintiffs in this case puts
them into much the same category
as Mrs Mouat. I also consider that an award of $25,000 in 2008 dollars is less, in
real terms, than
a similar award made by the trial Judge in September 1991, in
Mouat.
(d) Summary of claims against developers
[40] In respect
of the plaintiffs claims against the developers I enter judgment in
favour of the following individual plaintiffs against the developers:
a) Mr and Mrs
Sangha: $192,933.11
b) Mr Devlin: $65,000
c) Michelle and Lisa Turner: $170,021.24
d)
Mr and Mrs Parkinson: $217,709.43
e) Mr Halford: $170,983.18
f) Blue Sky: $527,683.74
[41] I
award interest at applicable rates under the Judicature Act 1908 on each of
the amounts for which judgment has been entered. Interest
shall run from the date
on which the proceeding was issued to today's date. Thereafter, post-judgment
interest provisions of the
High Court Rules will apply. I record that the rate was
7.5% per annum up to 1 July 2008, and thereafter, 8.4% per annum.
[42]
I leave the plaintiffs' counsel to calculate interest and for the Registrar to
confirm the calculation on submission of an order
for sealing.
[43] Judgment is entered in favour of the Body Corporate against the developers
in the sum of $439,560, plus interest
since the date of issue of the proceeding to
today's date, at the rate of 7.5% to 1 July 2008 and at 8.4% thereafter.
Claim against
designer
[44] While the designer is not represented today, Mr Josephson accepts that the
plaintiffs cannot contest the entry
of judgment in favour of the designer against them.
Judgment is entered in favour of the designer against the plaintiffs. Issues
of costs
will be resolved tomorrow.
The Council's contribution claim
[45] I turn now to the Council's contribution claim against
the developers and to
remaining issues involving the Council, save for costs.
[46] The Council has settled with the plaintiffs
who succeeded against it. To
effect settlement, I am asked to enter judgment in favour of the successful plaintiffs
in the sum of
$485,000.
[47] Judgment is entered by consent in the sum of $485,000 in favour of the
Turner sisters, Mr and Mrs Parkinson, Mr
Halford and Mr Devlin collectively, on the
agreed basis between the plaintiffs and the Council that the plaintiffs will resolve
issues
of distribution as among themselves. The consent from the Council is given
on the basis that it reflects an agreed quantum but Mr
Heaney has asked me
expressly to record that, while the Council consents to judgment, it does not accept
that it was liable for
the losses. As I understand it, that is intended to preserve the
Council's appeal rights.
[48] The Council is entitled to a
contribution from the developers equating to 85%
of the amount for which judgment will be entered against it. I enter judgment on
the
Council's cross-claim in its favour against the developers in the sum of $412,250,
plus interest at relevant Judicature Act rates
from commencement of these
proceedings to today's date. Post-judgment interest issues will be resolved by the
relevant High Court
Rules.
[49] I enter judgment in favour of the Council against Mr and Mrs Sangha, the
Body Corporate and Blue Sky, on their respective
claims.
Costs
[50] All issues of costs will be addressed in a judgment I shall give after
tomorrow's hearing.
___________________________
P R Heath J
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