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High Court of New Zealand Decisions |
Last Updated: 27 February 2012
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2010-404-7805
NZHC [2012] 277
UNDER THE WEATHERTIGHT HOMES RESOLUTION SERVICES ACT 2006
BETWEEN STEPHEN LESLIE ALDRIDGE, KATHLEEN MARGARET ALDRIDGE AND CA TRUSTEES LIMITED AS TRUSTEES OF THE SL AND KM ALDRIDGE FAMILY TRUST Appellants
AND JOHN WILLIAM BOE, ROBYN JEAN BOE, KAY LYNETTE PEEBLES PERSONALLY AND AS TRUSTEES OF THE JOHN BOE FAMILY TRUST AND THE ROBYN BOE FAMILY TRUST
First Respondents
AND THE HAMILTON CITY COUNCIL Second Respondents
AND MICHAEL SWART Third Respondent
AND KERRY MURPHY Fourth Respondent
Hearing: 14, 15, 16 and 17 June 2011
Counsel: P J Wright for Appellants
P Grimshaw and B Easton for First Respondents D Heaney and C Goode for Second Respondents M Talbot for Third Respondent
P Napier and N Pye for Fourth Respondent
Judgment: 10 January 2012 at 3:00 PM
JUDGMENT OF POTTER J
ALDRIDGE V BOE HC AK CIV-2010-404-7805 10 January 2012
In accordance with r 11.5 High Court Rules
I direct the Registrar to endorse this judgment with a delivery time of 3 p.m. on 10 January 2012.
Solicitors: McDonald Law, Auckland – Stephen@mcdonaldlaw.co.nz Grimshaw &Co,Auckland – paul.grimshaw@grimshaw.co.nz and bryan.easton@grimshaw.co.nz
Heaney & Co, Auckland – crg@heaneyco.com
Keegan Alexander, Auckland – pnapier@keegan.co.nz
Copy to: M Talbot, Auckland – Michael@talbotlaw.co.nz
P J Wright, Auckland – pwright@shortlandchambers.co.nz
Table of Contents
Introduction [1] Parties [4] Factual background [10] Decision of Tribunal [55]
Responsibility of the first respondents, Mr and Mrs Boe [59]
(i) Misrepresentation [60] (ii) Vendor warranty [69] (iii) Tort [76]
Volenti non fit injuria [89]
Lack of causation defence [92]
The appeal and cross appeal [96] Approach on appeal [105] The Aldridges‘ knowledge [107] Volenti non fit injuria (Voluntary assumption of risk)
Issue [110] Submissions [111] Coughlan v Abernethy [123] Discussion [134] Conclusion [137]
Lack of causation defence
Issue [138] Appellants’ submissions [139] Respondents’ submissions [166] Discussion [169] Conclusion [182]
Mr and Mrs Boe : misrepresentation [183]
Submissions [186] Relevant law [190] (a) Meaning of “misrepresentation” [192] (b) Made “by or on behalf of” [197] (c) Made “to him” [198] (d) Inducement [199] Application of the principles – Mrs Boe’s email [202] Mr Murphy’s report [213] Clause 5.2 sale and purchase agreement [223] Conclusion [237]
Mr and Mrs Boe : vendor warranty [238]
Relevant contractual provisions [239]
Apellants’ submissions [242] The Boes’ submissions [250] Principles of contractual interpretation [255] Exclusion clauses [257] Building Act provisions [261] Analysis of a Vendor Warranty in cl 14.2 [266] The exclusion clause 5.3 [276] Conclusion [290]
Was Mrs Boe a head contractor? [292]
Submissions [294] Head contractor authorities [296] Analysis [319] Application of the principles in this case [323] Conclusion [336]
Limitation defence – third respondent [337] Summary of conclusions [351] Costs [356]
Other matters [357]
Introduction
[1] Stephen Aldridge, Kathleen Aldridge and CA Trustees Limited as trustees of the SL and KM Aldridge Family Trust (the Aldridges) appeal against a final determination of the Weathertight Homes Tribunal (the Tribunal) at Auckland, dated
28 October 2010 (the decision).1 The appellants challenge on some 25 grounds of fact and law the decision which dismissed the appellants‘ claim against all the respondents for the cost of repairs to their home, estimated in the statement of claim at $1,100,000 together with general damages of $25,000 and consequential loss of
$35,670.
[2] The first respondents Mr and Mrs Boe (the Boes) appeal against the
Tribunal‘s finding that Mrs Boe was a head contractor.
[3] At the start of the appeal hearing the appellants sought leave to adduce further evidence on the appeal. I declined the application in relation to an affidavit by Shane Douglas Albrecht as to construction costs to date and received de bene esse a further affidavit of Mr Aldridge dated 9 June 2011 relating to events at the auction leading up to execution of the agreement for sale and purchase for the property.2
Parties
Appellants
[4] The Aldridges, who were the claimants before the Tribunal, are the owners of the property at 11 Riverlinks Lane, Hamilton (the property) which was the subject of the claim in the Tribunal. They purchased the property from the Boes in November
2006.
1 Aldridge v Boe [2010] NZWHT Auckland 31.
2 Minute of Potter J dated 15 June 2011.
First Respondents
[5] The Boes are two of the three trustees of the family trusts which previously owned the property and sold it to the Aldridges.
Second Respondent
[6] The Hamilton City Council (the Council) is the relevant territorial authority.
Third Respondent
[7] Michael Swart is the labour-only builder who built the house for Mr and Mrs
Boe (he was the fourth respondent before the Tribunal).
Fourth Respondent
[8] Kerry Murphy is a building surveyor who was engaged by Mr and Mrs Boe
(he was the fifth respondent before the Tribunal).
Other respondents before the Tribunal
[9] The third respondent before the Tribunal, Mr Scott, an architect who drew up plans for the house, and two other parties were removed as respondents from the proceedings in the Tribunal. The sixth respondent, Mr Ken Martin, was declared bankrupt in 2010 and the appellants did not proceed against him before the Tribunal.
Factual background
[10] I summarise the factual background from the comprehensive overview in the decision.
[11] In 1997/1998 the Boes built a large and expensive home at 11 Riverlinks Lane, on a 5,000 square metre site on the banks of the Waikato River in North Hamilton. According to the Boes this was their dream home and they lived in it for
approximately seven years. They then had a change of plan and decided to move to Australia. They had already departed and the house was vacant when the Aldridges purchased it at auction in November 2006. Settlement followed in December 2006.
[12] The building consent for the new dwelling was obtained in two stages from the Hamilton City Council. The consent for stage two was issued in April 1997 after plans had been completed by Mr Scott to the satisfaction of Mr and Mrs Boe.
[13] After two false starts with builders who found the project beyond their expertise, the Boes engaged Mr Swart on a labour-only basis to erect the framing, install the external and internal joinery, and fix the harditex cladding and the internal gib board. There was no written contract for Mr Swart‘s employment. He commenced work in either late December 1996 or early 1997. The Tribunal states that he had some role in co-ordinating the sequential operation of the other trades, but he did not have any supervisory or management control over the other trades engaged by Mrs Boe.3
[14] Mr Swart completed his work on the main part of the dwelling between early
1998 and March 1998 but the main building envelope had been completed by the end of 1997.
[15] While Mr Swart was on site he called for building inspections during construction. The last inspection was a pre-lining inspection in September 1997.
[16] The Tribunal records that the Boes took occupation of their new home sometime between early autumn 1998 and mid-summer 1999.
[17] In early 2000 a Council officer paid a visit to the property having discovered that the final inspection had not been carried out, and to ascertain what stage had been reached with the building work. Consequent upon that visit the Council issued a letter dated 8 February 2000 listing seven items still to be completed. (These items
are not relevant to the claim). The letter concluded:
3 Decision at [12].
Upon satisfactory completion of the project, a Code Compliance Certificate will be issued which is normally a requirement should you ever wish to sell the property, which would also avoid any delays should a proposed purchaser request a land information Memorandum from Council.
We look forward to receiving your advice of completion of building work.
[18] Apparently the seven items received attention but the Boes did not arrange for a final inspection by the Council until 2005 when they decided to relocate to Australia and to sell their home.
[19] A valuation was obtained from Darragh Fergusson & Green dated 6 October
2005. They assessed the current market value of the property as at 22 September
2005 at $2,752,000 including chattels of $160,000.
[20] According to Mrs Boe an offer of $2.9m was received soon after the property was put on the market. When the potential purchaser asked for a copy of the Code Compliance Certificate (CCC) the Boes discovered they did not have one as they had never called for a final inspection by the Council. Mrs Boe therefore arranged for a final inspection in September 2005 but by then the potential purchaser had ―gone cold‖. Mrs Boe said in evidence that the real estate agent advised that the property would be much more difficult to sell and the price achieved would be significantly reduced without a CCC.
[21] When the Council inspected in September 2005 the building inspector confirmed that the seven items identified as outstanding on 8 February 2000 had been completed. However, since construction of the house had been completed several years earlier the Council was not prepared to issue a CCC until an independent report about the cracks to the exterior of the structure was received. This advice was confirmed to Mrs Boe by Mr Saunders, the Council‘s building control manager.
[22] Mrs Boe then instructed Mr Murphy, a registered building surveyor, whom the Boes had engaged on earlier occasions in relation to other property, to take a look at the house to assist her in getting a report to the Council for the issue of a CCC.
[23] Mr Murphy visited the house on 8 October 2005 and carried out an external inspection. He noted that the house consisted of a number of different cladding systems including concrete masonry, harditex and insulclad and that cracking to the exterior, although very minor, was extensive. He determined he was not in a position to reasonably provide a report to the Council for the obtaining of a CCC. Not having been involved with the building or any inspections during the building of the house, he was not prepared to assess the entire cladding system or its installation.
[24] In response to an email from Mrs Boe dated 13 October 2005 asking how the report for the ―Code of Compliance‖ (sic) was progressing, Mr Murphy sent her an email dated 14 October 2005 in which he said:
I have a real problem with the Code Compliance report at this stage ... What I did find was of concern of potential moisture ingress. There is also extensive movement and cracking of the cladding that is obviously also interacting with moisture, either as cause or more probably as an aggravating factor to an original movement crack. These issues are fundamental to compliance with Building Code and compromise compliance with ss E2 and B2 particularly.
Any maintenance will need to be carried out by a company very well trained and experienced specifically in this type of work. I observe there have been earlier repairs that has seen joints ground out and sealed ...
Needless to say I am very nervous about providing a statement to the weathertightness which is critical to being Code compliant ...
(This email was not disclosed to the appellants until Mr Murphy filed a brief of evidence in the proceedings in the Tribunal).
[25] On 14 October 2005 Mrs Boe wrote to Mr Murphy explaining the Council‘s visits in February 2000 and September 2005 and that because of the length of time that had lapsed since the completion of the house the building inspector now required a report from an independent person in relation to the cracking observed on the exterior of the house, before a ―Code of Compliance‖ (sic) could be issued. She asked Mr Murphy to provide the ―necessary report‖.
[26] Mrs Boe‘s letter to Mr Murphy was slightly inaccurate and sanguine in that it described the inspection by the Council on 8 February 2000 as a ―Final Inspection‖, when in fact it was an inspection carried out pursuant to an audit by the Council of
properties where building consents had been issued but final inspections had not been made.
[27] Mrs Boe also indicated that the seven things detailed in the Council‘s letter of
8 February 2000 were what was required in order for a CCC to be issued when in fact the Council required the seven items to be completed prior to final inspection and had advised that ―upon satisfactory completion of the project‖ a CCC would be issued.
[28] On 5 November 2005 Mr Murphy revisited the house and provided a report to Mr and Mrs Boe headed ―Assessment of Cracks in Harditex Cladding‖. He described the scope of the inspection as being to carry out visual assessment of cracking to the harditex clad dwelling and to prepare a report specifically focusing on the cracks that had appeared and to recommend a repair protocol. He stated that the inspection was to be ―non-invasive in which visual inspection is supported by non-invasive testing for moisture at cracks‖. He stated that testing was not exhaustive and the inspection was not an audit of the building design, cladding system installation or compliance with NZ Building Code. He stated:
The moisture testing tends to suggest that moisture has begun to penetrate the cracks but at this stage is of a level indicative of being in the early stage of penetration which following a winter season suggests relatively low level risk at this stage.
[29] He recommended remedial work to both the hairline cracks and serious/larger cracks above the lounge doors and other less advanced though still significant cracks.
[30] He said that the work must not be allowed to be deferred through another winter season. He concluded:
Given effective and complete repair, carried out in a manner consistent with the manufacturer‘s recommendations, the writer believes the cracking as existing at time of inspection, will be repaired in a permanent manner.
[31] The report was provided to the Council. The report included a disclaimer that it was prepared for use of the addressees only, they being Mr and Mrs Boe. The disclaimer noted that where items were concealed or access was not available Mr
Murphy had used judgment and experience ―... but actual conditions may only be
evident upon opening up the relevant areas‖.
[32] The cracks were not repaired and the house was not repainted until the spring of 2006 by which time the Boes were residing in Australia. Apparently no reason for this delay, which was contrary to the advice of Mr Murphy, was given at the Tribunal hearing.
[33] On 17 March 2006 the Council wrote to Mrs Boe referring to ―... your recent inquiry in regard to your dwelling receiving a Code Compliance Certificate‖. The letter advised that cracks in the cladding systems were required to be repaired in accordance with the manufacturer‘s specifications. Further a Producer Statement was to be provided by the cladding repair contractor confirming repairs had been completed in accordance with the cladding manufacturer‘s recommendations. The Council also stated that due to the age of the dwelling it would require a total repaint
―... as it is believed that at about 6-8 years water is starting to penetrate the paint system‖. Further the cladding was required to meet the durability requirements of the Building Act of 15 years once a CCC is issued. The Council concluded:
Once the above work has been completed provide Council with a clean weathertightness report, and if the report is acceptable to Council, Council will consider if it will issue a Code Compliance Certificate.
[34] Approximately six months later, in September 2006, the Boes instructed Janice Fischer of Lodge Real Estate (Hamilton) Limited to sell their home. The Boes stressed the need to ensure that any potential purchaser fully understood that there was no CCC. They provided to Ms Fischer the following documents to copy to any serious potential purchaser:
(a) Valuation report from Darragh Fergusson & Green dated 6 October
2005.
(b) The Council‘s letter dated 8 February 2000.
(c) Mr Murphy‘s report about cracks in the harditex cladding following his visit on 5 November 2005.
(d) The Council‘s letter dated 17 March 2006.
[35] According to Mrs Boe, Ms Fischer‘s opinion was that $3m was a realistic price for the house if it had a CCC but without a CCC the house would be difficult to sell and the price would be substantially less. Ms Fischer advised that the property be auctioned.
[36] On 13 October 2006 Mrs Boe emailed Mr Murphy stating that an interested
buyer, Mr Aldridge, had received a copy of Mr Murphy‘s report.
[37] On 23 October 2006 Mrs Boe sent an email to Mr Murphy referring to ―buyer resistance‖ because the house did not have a CCC. She mentioned that ―one serious buyer‖ thought there was a possibility that the whole place would need to be reclad to get a CCC ―... and so the price should be reduced by an amount that would pay this i.e. $400 to $500,000!!‖ (The ―one serious buyer‖ was not identified). She told Mr Murphy that Ken Martin had repaired and repainted the house (three coats) and would provide the Producer Statement required for the Council but the Council would still require an independent building expert or certifier to provide a report. She asked Mr Murphy if there was any way he could help them get the CCC ―maybe if we indemnified you‖. Mrs Boe concluded that as the auction was on 15
November they needed to act fast.
[38] Mr Murphy did not respond to this email, apparently because he was not in a position to assist. In a conversation with Mrs Boe about another property owned by the Boes, she asked him to provide a very brief conclusion to his earlier report on cracking in the harditex, but he declined, saying that his report had to be read in its entirety or it could be misconstrued.
[39] Mr and Mrs Aldridge had decided some time previously to purchase a house on the river in Hamilton. They had already bid unsuccessfully at auction on two other riverside properties which sold for $1.8m and $2.5m respectively. Towards the end of October 2006 Mr Aldridge‘s real estate agent introduced him to Ms Fischer. Mr Aldridge mentioned it was very important to them that they make a thorough pre- purchase investigation and carry out proper due diligence on the property. They
obtained a LIM report for the property dated 10 November 2006 which had attached to it the letters from Council dated 8 February 2000 and 17 March 2006. The LIM report also disclosed that the property had no CCC. They took legal advice and were advised by their solicitor that there was no issues with the title to the property.
[40] Mr Aldridge visited the Council twice prior to the auction. He examined all the documents on the property file. It did not contain any plans or copies of any building reports. It did contain the two letters from the Council which were annexed to the LIM report.
[41] Mr Aldridge visited the property. He noted that the painting of the exterior was nearing completion and he spoke to the painter, Mr Ken Martin. He also received from his real estate agent a summary of the work prepared by the painter. Mr Aldridge said he understood this to be the Producer Statement required by the Council. Mr Aldridge gave evidence that he satisfied himself in discussions with the painter that the plastering repairs and painting work had been completed to the manufacturer‘s specifications.
[42] From his real estate agent Mr Aldridge received a copy of the valuation dated
6 October 2005. He also received a letter (undated) from Mrs Boe to Ms Fischer which was headed ―Council – Code of Compliance‖ and included the following statements:
I think the Council should give us a letter stating that all the required building Consents were obtained, the house was built as per the submitted plans, all required engineering certificates and Producer Statements were produced and provided to the Council, all required inspections were carried out by the Council. But the final paper work was never completed and so no Code of Compliance was issued. Now because of the time delay and age of the house the Council will not issue a Code of Compliance.
When the house was completed the Council did a final inspection and then sent a list of minor things that needed to be completed in order to get a Code of Code of Compliance (I think you have a copy of this letter). We did all these things – notified the Council that they had been done, and we believed we had our final sign off. We were not aware that we did not have a Code of Compliance (I did not know that there was a certificate involved until we decided to sell the house and the real estate agent asked for it). I personally came into the Council Office to get the certificate and that‘s when I learned that we did not have the final sign off. BUT then I was told that because of the time lapse the Council would not issue a Code of Compliance because it
could not be back-dated – it would have to have today‘s date on it and under the Code of Compliance law that means the Council have to guarantee the house for the next 15 years. The Council will do that for the first 15 years of a new house but as our house is already 5 years old they would not do it (effectively they would be issuing it to a 5 year old house up until it was 20 years old).
(emphasis added)
[43] Although this letter is undated it was clearly sent to Ms Fischer by Mrs Boe prior to the auction. Mr Aldridge received a copy of it. He approached an officer at the Council to discuss the letter, particularly the part which said the Council would not issue a CCC as it could not be back-dated and that Council would effectively have to guarantee the house until it was 20 years old. The officer told Mr Aldridge that any decision about the CCC would be made by Mr Saunders. Mr Aldridge said he tried to contact Mr Saunders but was not successful as he was apparently on annual leave.
[44] Mr Aldridge learned that Mr Murphy had prepared a report and eventually received a copy of Mr Murphy‘s report. On 14 November 2006 Mr Aldridge telephoned Mr Murphy about his report. Mr Murphy made a diary note of the conversation. The date and time of the conversation are recorded as 14 November
2006 at 5 p.m. Mr Murphy acknowledged that information was recorded on the note by his personal assistant the following day, but it seems to be common ground that the conversation took place on 14 November 2006, the day before the auction. Mr Murphy said to Mr Aldridge that he did not do a code compliance report for the same reason as the Council would not issue a CCC, namely that the house was nearly ten years old which would extend the period of liability. In relation to Mr Ken Martin‘s work on the property, Mr Murphy said he had no reason to believe anything other than that the repairs to the cracks would have been well done.
[45] Mr Murphy‘s diary note records that he told Mr Aldridge ―plaster systems using harditex are disproportionately highly represented in leaks‖. He said the most important thing would be to be very proactive on maintenance and that ―if you don‘t want that level of involvement with the house, then perhaps a plaster house is not for you‖.
[46] On the night prior to the auction, 14 November 2006, the Aldridges through Janice Fischer, negotiated with the Boes for certain furniture to be included in the purchase price, and for $10,000 to be retained by their solicitor until they made sure the spa and ensuite worked, if the Aldridges became the successful bidders at the auction. The Boes agreed to the spa condition and to include certain items in the purchase price, but not all those requested by the Aldridges.
[47] Mr Aldridge attended the auction. At the start of the auction the auctioneer announced that the house did not have a CCC, that the vendors would not be getting one and that the vendors made no representations about the state of the house. The Aldridges became the successful bidders at the auction at the price of $2.35m after a further negotiation which resulted in the Boes agreeing to the inclusion of all the chattels the Aldridges had asked for in the approach made the previous night. Those chattels were listed in appendix A attached to the agreement. Appendix A recorded the agreement for the withholding of $10,000 pending the spa being shown to be in working order, and that the settlement date was 15 December 2006, a month earlier than specified in the conditions of sale on which the property was offered. The change in settlement date was also recorded in clause 3 of the agreement, initialled by Mr Aldridge.
[48] The way in which the additional chattels listed in Appendix A came to be included in the purchase price is described in the further affidavit of Mr Aldridge dated 9 June 2011 which I received de bene esse on the first day of the appeal hearing. Mr Aldridge‘s evidence on this point is consistent with paragraph 78 of Mrs Boe‘s brief of evidence when she says that Mr Aldridge had insisted that all the items of furniture and the ride-on mower listed on the fax the previous night be included in the price and they agreed because they were financially stretched. I admit Mr Aldridge‘s affidavit of 9 June 2011 as further evidence on appeal. It essentially confirms evidence that was before the Tribunal.
[49] There are a number of provisions of the particulars and conditions of sale which are relevant to these proceedings and which I consider later in the judgment. At this stage it is worth noting clauses 23 and 24 which are consistent with the advice given by the auctioneer:
23. THE purchaser acknowledges that they are aware that there is no final Local Body Code of Compliance Certificate issued in respect of this property.
24. THE purchaser acknowledges that the property does not have a Hamilton City Code of Compliance and the vendor will not be obtaining one.
[50] The Aldridges took possession of the property following settlement in
December 2006.
[51] On 7 March 2007 Mr Aldridge met with Mr Saunders of the Hamilton City
Council.
[52] The Aldridges obtained a report from Joyce Group Limited in October 2007
entitled ―Building Envelope Report‖. The report described the brief as:
Re: To inspect and give a written report on the following;
*visual inspection of the site
*non-invasive testing of moisture levels
*visual inspection of the exterior cladding.
It did not satisfy the Council.
[53] The Council referred the matter to the Department of Building and Housing (DBH). The DBH appointed Alexander & Co to examine and report on the exterior cladding at the property. They completed a report as at 21 February 2008 following a visual inspection, invasive moisture testing and cutting small holes through the exterior cladding to establish construction methods at various points of the dwelling structure. They identified several areas of non-compliance with the Building Code and with the cladding manufacturers‘ requirements. A final determination from the DBH was issued on 29 May 2008 identifying that the house did not comply with the Building Code under clause B2 ―Durability‖, Clause E2 ―External moisture‖ and
―other appropriate provisions of the building code‖. Consequently the Council issued a Notice to Fix under ss 164 and 165 of the Building Act 2004, on 13 June
2008. The notice advised that a CCC could not be issued for the project until the work described in the Notice had been completed.
[54] The Aldridges subsequently lodged a claim with the Weathertight Homes Resolution Service which was accepted on 7 July 2008. The hearing before the Tribunal occupied four days between 17 and 20 August 2010 with closing submissions being presented on 10 September 2010. The decision was issued by the adjudicator, Mr KD Kilgour, on 28 October 2010.
Decision of the Tribunal
[55] After setting out the factual background essentially as summarised above, the
Tribunal identified the salient issues requiring determination as: (a) The defects occurring to the dwelling;
(b) The quantum of the claimants‘ loss;
(c) The responsibilities, if any, of the respondents in relation to that loss;
and
(d) The responsibility, if any, of the claimants for their own loss.
[56] As to defects, the Tribunal recorded the agreement of the experts that the following defects were the material causes of moisture ingress:4
a) Cladding:
Inadequate cladding to ground clearances
Bottom edge of Harditex cladding not protected as
required by Harditex manufacturer. I accept the expert evidence on this
defect
notwithstanding the evidence that Mr Buckman, the plasterer, had pre-sealed the
Harditex cladding after it was delivered to
the building site and before Mr
Swart installed it
Bottom edge of Harditex cladding not overlapping
plaster block work.
b) Window edge: the return surfaces of reveal had no drip edge even though the building consent and the James Hardie literature required one.
4 At [42] and [46].
c) Lack of horizontal control joints: a breach of the manufacturer‘s
literature and the building consent
d) Flat tops to balcony balustrades: breach of the building consent and
the manufacturer‘s literature
e) Inadequate clearance to the deck surface: it is noted tha6t during his visit to the remedial site, Mr Hursthouse saw four of the five decks unclad and observed no damage from this defect.
[57] The Tribunal noted that there was no substantial dispute as to the key causes of the damage and that these causes had resulted in moisture ingress and timber decay. The Tribunal concluded that the repair work necessary to remediate the defects to the home was that it be fully reclad.
[58] The Tribunal dealt briefly with quantum and determined the quantum of loss in a sum approaching $800,000.5
Responsibility of the first respondents, Mr and Mrs Boe
[59] The Tribunal noted that the causes of action against the Boes were in both contract based on pre-contractual misrepresentation and breach of the agreement for sale and purchase, and in tort in terms of their duty as developers, builders and/or head contractors. The Tribunal referred to the Boes‘ pleadings that each of these causes of action failed based on the defences of volenti non fit injuria (voluntary acceptance of risk) and causation (that the respondents did not cause the claimants‘ loss).6 These defences were also relevant to the determination of the other respondents‘ responsibilities, and the Tribunal considered them after determining the specific causes of action against the Boes.
(i) Misrepresentation
[60] The Tribunal referred to the claimants‘ allegation that the misrepresentations were contained in two documents, the email from Mrs Boe to Ms Fischer in October
2006 and Mr Murphy‘s report in November 2005. The Aldridges alleged that these
5 At [48]-[53]. By agreement of counsel as recorded in my (amended) minute of 15 June 2011, issues of quantum to the extent they remain relevant, are to be sent back to the Tribunal for determination. It is therefore unnecessary to consider further matters of quantum.
6 At [97].
documents amounted to representations by the Boes that the house complied with the building consent and the Building Code and the house did not suffer from weathertight issues.
[61] The Tribunal referred to s 6 of the Contractual Remedies Act 1979 and said that in order for the claimants to prove their claim for misrepresentation they needed to establish that:
(a) There has been a false or erroneous statement of fact;
(b) The misrepresentation was made by or on behalf of the Boes;
(c) The misrepresentation induced the claimants to enter into the contract to purchase; and
(d) The claimants have suffered loss as a result of relying on that misrepresentation.
[62] It identified that the first matter to consider was whether or not the Boes had said that a problem with leaks or weathertightness did not exist and whether, if indeed said, those statements were true or untrue when they were made.
[63] It then considered the first of the two documents in question, the email from
Mrs Boe to Ms Fischer. The relevant passages are set out above.7
[64] The Tribunal said it is well established that there is prima facie no misrepresentation if one party makes it clear that he or she is merely expressing his or her opinion or belief on the matter or that he or she is passing on information received, or a statement made by a third party, and not adopting it as his own. An expression of opinion is not a representation of fact and in the absence of fraud its
falsity does not afford relief.8
7 See at [42] above.
8 Bissett v Wilkinson [1927] AC 177.
[65] It determined that the statements made in Mrs Boe‘s email to Ms Fischer could only properly be understood as Mrs Boe‘s opinion or understanding of what the Council had informed her. Accordingly the Tribunal held that the contents of Mrs Boe‘s email to Ms Fischer did not amount to a misrepresentation under s 6 of the Contractual Remedies Act.
[66] The Tribunal turned secondly to the report prepared by Mr Murphy which the claimants alleged represented that the house complied with the building consent and the Building Code and was weathertight. It held that Mr Murphy‘s report did not contain any such representations and could not be construed as representing what the claimants attributed to the report. It said that the following matters referred to in the report clearly suggested otherwise:
ASSESSMENT OF CRACKS IN HARDITEX CLADDING Report on:
Assessment of cracks in Harditex cladding ...
2.0 Reason for Visit and Scope of Inspection.
2.1 To carry out visual assessment of cracking to the Harditex clad dwelling.
2.2 To prepare a report specifically focussing on the cracks that have appeared ...
2.3 ...
2.4 The inspection is not an audit of the building, design, cladding system installation or compliance with the NZ Building Code.
2.5 Internal inspection or testing was not carried out.
2.6 No destructive or invasive investigation or testing was carried out.
Disclaimer
This report has been prepared for the addressee‘s use only, in terms of
instructions to us ...
7.0 Conclusion
7.1 The existing cracks at time of writing are ...
Limits to Accountability:
The comments are limited to that which is available to visual inspection.
Concealed items ... are not confirmed by this report ...
[67] The Tribunal determined that the report did not amount to a misrepresentation under s 6 of the the Contractual Remedies Act.
[68] It also concluded that there was no reliance by the claimants on the contents of Mrs Boe‘s email or Mr Murphy‘s report, essentially because of the inquiries Mr Aldridge made directly with the Council to seek verification of the information provided in Mrs Boe‘s email.
(ii) Vendor warranty
[69] The Tribunal identified that the focus of this claim was the vendor warranty contained in cl 14.2 of the agreement for sale and purchase for the property which provided:
The Vendor warrants and undertakes that:
....
14.2 Where the Vendor has done or caused or permitted to be done on the property any works for which a permit or building consent was required by law:
(a) The required permit or consent was obtained; and
(b) The works were completed in compliance with that permit or consent; and
[70] The Tribunal noted the claimants‘ contention that cl 14.2 amounted to a warranty from the Boes that the house was built in accordance with the Building Code. The Tribunal accepted that ―on a strict reading of cl 14.2 it is clear that as vendors the Boes have failed to meet their obligations contained therein given the defects in the construction‖. The Tribunal said, however, that to make a determination solely on the words of cl 14.2 would ignore the reality of the agreement‘s constitution and the intentions of the parties to the agreement.
[71] The Tribunal then referred to the fact that the claimants knew the house did not have a CCC when they entered into the agreement. Further, they knew the
Council had concerns about the cladding on the house and that it required a clean weathertightness report before considering whether a CCC could be issued.
[72] Secondly, they knew that a clean weathertightness report was not prepared
prior to the purchase; Mr Murphy‘s report could not be construed as such.
[73] Thirdly, the Boes specifically recorded in the agreement that they would not be obtaining a CCC.
[74] Finally, cl 5.3 of the agreement specifically provided an acknowledgment by the purchaser:
5.3 That neither the vendor, the vendor‘s agent nor the auctioneer shall be liable in any manner whatsoever in respect of the condition of the property, and in particular but not in limitation in respect of the condition or structural soundness of the buildings ...
[75] The Tribunal said that cl 5.3 ―clearly prohibits the claimants from seeking recovery for any loss or damage in respect of the condition or structural soundness of the dwelling‖. The Tribunal said that cl 5.3 was ―wholly inconsistent with the wording of cl 14.2‖ but rejected, in all the circumstances of this case, that the exclusion clause should be ignored and unqualified effect given to the other clause. The Tribunal held:9
Based on all the evidence relating to the construction of the contract, I determine that it is fair and reasonable in the specific circumstances of the present case to conclude that the claimants and the Boes intended to enter into the agreement for sale and purchase of a dwelling that had no CCC and therefore with no guarantee or warranty as to the condition of the building. As a result, the claim that the Boes breached clause 14.2 of the Agreement must fail.
(iii) Tort
[76] The Tribunal then considered the claim in tort against the Boes, that the Boes breached their duty of care as developers and/or head contractors.
9 At [76].
[77] It referred to relevant authorities in relation to the claim that Mrs Boe was a developer and identified the two essential considerations: firstly, the party must have direct involvement or control in the building process, and secondly, the party is in the business of constructing dwellings for other people for profit.
[78] It referred to the following factors derived from the evidence as relevant in
considering Mrs Boe‘s role in the construction process:
(a) Mrs Boe has experience with previous building projects for houses and motels;
(b) The Boes purchased the land at Riverlinks Lane in order to build a house on that land;
(c) Mrs Boe arranged for plans to be drawn up for the contemplated house;
(d) Mrs Boe forwarded Mr Scott extensive specifications for the home she wanted him to design;
(e) Mrs Boe was involved in obtaining the necessary building and resource consents from the Council in order to begin construction work;
(f) Mrs Boe engaged the various contractors to undertake the construction work on a labour-only basis;
(g) All invoices were provided directly to and paid by Mrs Boe;
(h) The Boes sourced and purchased the building materials themselves;
and
(i) The Boes occupied the home themselves for seven years.
[79] The Tribunal summarised the evidence on this issue as follows:10
... Mrs Boe owned the property in her capacity as a trustee and was in control of the consent, design, construction, approval and ultimately the marketing process. She was the person who decided on and engaged the tradespeople involved in the construction. She was responsible for the implementation and completion of the construction process and had the power to make all important decisions. Even though Mrs Boe was unable to recall how much it cost to purchase the land and build the home, I accept that she was conscious of the costs in having the home constructed.
[80] The Tribunal found that Mrs Boe was the party ―sitting at the centre of, and directing the project‖. The Tribunal said that ―being cost-conscious will often mean
10 At [85].
that an owner will engage trades on a labour-only basis thereby requiring the owner to undertake control of administrative matters relating to the project‖. But by doing so it does not mean that a person should automatically be categorised as a developer. This was particularly so when, as in the case of the Boes, they were not in the trade of building residential properties and the evidence established that the dwelling was intended as their dream family home.
[81] The Tribunal said:11
Mrs Boe was merely organising the building of a house in which she and her family would live.
[82] The Tribunal concluded that the evidence did not establish that Mrs Boe was a developer and accordingly she did not owe the claimants a non-delegable duty of care. (This finding is not challenged on appeal).
[83] It went on to conclude: ―... the evidence outlined above clearly indicates that Mrs Boe‘s role in the project was akin to that of a head contractor‖.12 The Tribunal referred to the judgment in Gardiner v Howley13 where former owners were held liable as head contractors. The Tribunal said in that case it was the fact that the former owners had assumed and taken control over the various tradesmen that attracted liability.
[84] It considered the evidence that Mrs Boe engaged each of the trades, paid the contractors‘ invoices, controlled the design for the dwelling and processed the resource and building consents. She had the power to make all important decisions and as there was no overall contracted site supervisor, the building project was in effect run and controlled by Mrs Boe. The Tribunal said that the evidence also suggested that it would have been Mrs Boe‘s decision not to engage a site supervisor
for the project.
11 At [86].
12 At [88].
13 Gardiner v Howley HC Auckland HC117/92, 17 May 1994; (1995) ANZ ConvR 521.
[85] On the basis of that evidence, the Tribunal found that Mrs Boe was the head contractor and owed the claimants a duty of care associated with that role. (This finding is appealed).
[86] The Tribunal then turned to whether Mrs Boe breached her duty of care as head contractor. It referred to Mrs Boe‘s evidence that she was entitled to assume that the tradespeople engaged would carry out their work competently and in accordance with the necessary building requirements. The Tribunal found:14
Moreover, there is insufficient evidence suggesting that the trades specifically relied on Mrs Boe to control, supervise or monitor the work in terms of compliance with the necessary building requirements, in any event. Nor was there any evidence that such tradesmen were expecting to rely on Mrs Boe in that capacity, and the Tribunal infers that any such expectation would be unrealistic in any event due to Mrs Boe‘s lack of relevant building expertise and the fact that she was employed full time in their motel business. There is no evidence that any decision that Mrs Boe made or any sequencing issues for which she would have some responsibility would have led to or caused any of the building defects which are set down in para [46] above.
[87] For those reasons the Tribunal found that Mrs Boe did not breach the duty of care she owed as a head contractor.
[88] The Tribunal said that because of the findings made in relation to the Boes‘ responsibility there was no need to consider the defences of volenti non fit injuria or lack of causation in relation to the claims against them. But as those defences were advanced by the other respondents as well, the Tribunal then turned to consider those defences.
Volenti non fit injuria (voluntary acceptance of risk)
[89] The Tribunal noted that all respondents contended that the claimants‘ claims failed due to the defence of volenti non fit injuria. The basis for this submission was that the claimants voluntarily assumed the full extent of the risk of buying a house
with no CCC, with known weathertight defects, and that the claimants:
14 At [95].
... entered into the purchase with their eyes wide open in knowing about the risks posed by the defects relating to the home, but yet chose to proceed with the transaction in any event.15
[90] The Tribunal referred to the two types of cases of volenti recognised in
James v Wellington City Council:16
It is well recognised that a defence of volenti may arise in one or other of two ways. In the more simple type of case the defendant relies solely on the action of the plaintiff in voluntarily encountering an existing risk of which the plaintiff is fully aware. The second type of case involves some form of transaction or dealing between the parties before the risk is actually encountered by one of them ... [I]n this type of case the defence of volenti could be founded either on express agreement or on a term implied in a contract or on the somewhat wider concept of a transaction.
[91] The Tribunal continued:
[100] Based on the facts of the present claim, it is clear that the claim has the potential to fall within both types of volenti cases enunciated in James v Wellington City Council. However the real issue for the Tribunal to consider is whether the claimants voluntarily accepted the risk of the loss which they are now experiencing. It is important to note however that it is not sufficient if a respondent can prove that the claimant was aware of the risk at the time of the damage. Instead the volenti defence is primarily based on whether a respondent can establish that the claimant fully appreciated the danger. Accordingly as the test is a subjective one, the volenti defence is known to be especially hard to establish.
[101] The evidence to be considered by the Tribunal in relation to this defence includes the following:
(a) Mr Aldridge knew that the home did not have a CCC prior to purchase;
(b) Mr Aldridge had seen the Council‘s letter of 17 March 2006 stating that about six to eight years of water was starting to penetrate the paint system, that the cladding was required to meet the durability requirements of the Building Act of 15 years once a CCC is issued, and that a weathertightness report was required in order for the Council to consider whether to issue a CCC;
(c) Mr Aldridge had a copy of Mr Murphy‘s report identifying issues of extensive cracking, evidence of external water effects being found, and moisture tests suggesting that moisture had begun to penetrate the cracks;
15 At [98].
16 James v Wellington City Council [1972] NZLR 1978 at 982.
(d) Mr Aldridge knew that the repair work recommended by Mr Murphy to be done promptly was not carried out until another winter had passed;
(e) Mr Aldridge knew that Mr Saunders from the Council was the person with ultimate authority to decide on the issue of a CCC and yet Mr Aldridge went ahead with the purchase without communicating with Mr Saunders;
(f) In the absence of legal advice, Mr Aldridge negotiated a purchase agreement after the auction without any conditions for a CCC or a weathertight report;17
(g) Mr Aldridge knew that the Boes were making no warranties about the condition or structural soundness of the house;
(h) Mr Aldridge knew at the time of purchase that he was buying the home at a significant discount from the late 2005 valuation he had obtained; and
(i) Mr Aldridge admitted that he was aware of the leaky home publicity and yet purchased an expensive and monolithically-clad house in late 2006 without his own independent expert investigations/inspections.
[102] Mr Aldridge admitted under cross-examination that he was a ―fairly commercially savvy‖ businessman and therefore had considerable experience that enabled him to make judgment calls. With that considerable business experience however, Mr Aldridge himself elected to proceed with the purchase without consulting the other trustees and certainly without consultation with his conveyancing lawyer or Mr Saunders. The result was that Mr Aldridge signed the Agreement for Sale and Purchase on behalf of the Trust which included the following terms:
5. The purchaser acknowledges:
5.1 That the Purchaser has inspected the property and buys it
sol el y i n rel i ance on t he Purchaser ’s ow n j udgment ;
5.2 That the Purchaser does not rely on any representation of the vendor, the vendor‘s agent or the auctioneer or the auctioneer‘s agent as to any matter whatever obtaining to the property ...;
5.3 That neit her t he vendor, t he vendor ’s agent nor t he auctioneer shall be liable in any manner whatsoever in respect of the condition of the property and in particular but not in limitation in respect of condition or structural soundness of the buildings ...
17 The evidence is that the sale and purchase agreement was executed at rather than after the auction, but after Mr Aldridge had further negotiations with the Boes about chattels to be included in the sale. The negotiations did not relate to compliance or weathertightness issues.
23. The Purchaser acknowledges that they are aware that there is no final Local Body Code of Compliance Certificate issued in respect of this property.
24. The Purchaser acknowledges that the property does not have a Hamilton City Code of Compliance and the vendor will not be obtaining one (Emphasis added)
[103] In evidence Mr Aldridge proffered his interpretations of the circumstances that led up to the purchase of the dwelling. Firstly, Mr Aldridge stated that the obtaining of a CCC was solely a matter of working through the Council‘s bureaucracy. However no evidence was adduced as to how he came to that conclusion other than believing that the Boes had simply become frustrated in fighting such bureaucracy and had given up. Secondly, Mr Aldridge initially stated that he thought Mr Murphy‘s report was a weathertight report. However under cross-examination, Mr Aldridge admitted that a proper reading of the report could never be construed as such. Thirdly, Mr Aldridge himself admitted that in regards to his decision to purchase the subject dwelling , ―he took a punt which didn‘t pay off‖. This indicates that Mr Aldridge not only had an awareness of the risk of purchasing the home without a CCC but also knew of the uncertainty as to whether one would be forthcoming, as indicated in the Council‘s letter dated 17 March
2006. Finally, Mr Aldridge considered he had undertaken an
adequate ―due diligence‖. But by contrast, he also admitted that he
was prepared to undertake whatever was necessary to obtain the
CCC.
[104] Based on a subjective assessment of all the evidence as a whole, the Tribunal finds that the respondents have established that Mr Aldridge had full knowledge of the nature and extent of the risk he ran in purchasing a home that had no CCC and potential weathertight defects. From his own conscious volition Mr Aldridge chose to incur, and did in fact incur, the risk of his own mischance.
[105] As a result of the volenti defence being established in this case, the Tribunal finds that the acts and/or omissions of the respondents did not cause the claimants‘ loss. Accordingly the claimants fail in their claims against all the respondents to this proceeding.
Lack of causation defence
[92] The Tribunal turned to consider the issue of causation in case the finding that the defence of volenti had been established, was wrong. The Tribunal identified that the issue for determination was whether the respondents caused the loss which the claimants had in fact suffered, or whether the loss was caused by the claimants themselves. The Tribunal summarised the submission of all respondents under this head of defence:
... the claimants‘ loss was not caused by any act or omission of the respondents, but instead by the claimants themselves due to their knowledge that the house was ―blighted‖. Therefore by taking a calculated risk that the house needed to be repaired in order to obtain a CCC, and realising that the risk has not paid off Mr Grimshaw submits that the claimants cannot now place responsibility on the respondents for their bad bargain.18
[93] The Tribunal referred to the recent decision in Scandle v Far North District
Council for the legal principles relating to causation: 19
Whether or not an action or omission has caused damage entails a two stage inquiry: see ACC v Ambros [2007] NZCA 304, [2008] 1 NZLR 340. First, there is a factual inquiry into whether the defendant‘s conduct caused the loss. This involves the application of the ―but for‖ or causa sine qua non test. The purpose of this test is to determine if the loss would have arisen even without the defendant‘s conduct. If so, the defendant‘s conduct cannot be said to have caused the loss: See Ambros at [25].
The second stage of the inquiry looks to see if there is causation in a legal sense; if there is, legal liability for the loss will follow. This involves two steps. First, the appropriate scope of liability for the conduct is assessed; and secondly, there is an investigation into the proximity between the cause and the loss.
...
The second step can be viewed as either the final stage of the causation inquiry, or as a separate inquiry into remoteness of damage. It is then that the court comes to assess the issue of proximity, by looking at whether the conduct constituting a factual cause is a substantial and material cause of the loss. It is not enough that the conduct merely creates the opportunity or occasion for the loss to occur; only if the conduct was a substantial and material cause is legal causation established.
[94] The Tribunal then said:
[108] ... As these case authorities show, the courts have consistently held that builders, whether as head-contractors or labour-only contractors of domestic dwellings, owe the owners and subsequent owners of those dwellings a duty of care and are thereby held responsible for the costs for the necessary repairs as their defective work has caused the loss suffered by the claimants. The difficulty in applying that reasoning to the present case is that in such case authorities the claimants did not realise they were purchasing a non-Code compliant dwelling until after the transaction was complete, whereas in the present case the evidence establishes that this was not the case for the claimants.
18 Decision at [106].
19 Scandle v Far North District Council HC Whangarei CIV 2008-488-203, 30 July 2010 at [37].
[109] The Tribunal notes that the roles undertaken by the Council and Mr Murphy as parties to these proceedings are not related to the actual construction work. Nevertheless based on the evidence discussed earlier that the claimants knew that the Council required a report on the dwelling‘s cladding in order to consider whether the dwelling complied with the Building Code, they knew that it was never obtained, and they knew that Mr Murphy‘s report identified weathertightness issues that was occurring to the house at the time the claimants purchased it, a determination that these respondents still ought to be held responsible for the claimants‘ bad judgment would be unjust.
[110] Without a full assessment of the responsibilities of the other respondents to this proceeding, in relation to the principles set out in Scandle above, the material and substantial cause of the claimants‘ loss in this case was the claimants‘ decision to buy a dwelling with known weathertight concerns. The most that can be said of the respondents‘ alleged breaches is that, at best, they created an opportunity for the occurrence of the claimants‘ losses. ... the Tribunal accepts that the claimants‘ decision to proceed with the purchase of the dwelling operated as a novus actus interveniens breaking any causal chain which the respondents may have created.
[95] The Tribunal held that the losses which the claimants claimed were not within the scope of the risk created by the respondents‘ conduct, and that the claimants voluntarily and knowingly acquired a home that had ―weathertightness defects‖, no CCC and none guaranteed to be forthcoming. The Tribunal concluded that it would be wrong in law and principle to impose liability on the respondents. It dismissed the Aldridges‘ overall claim.
The appeal and cross appeal
[96] The appellants appeal against the decision on a number of grounds. They say that various factual findings of the Tribunal and the decision as to quantum were erroneous.
[97] As to the Boes, they say the decision of the Tribunal was erroneous as follows:20
9. That the statements made by Mrs Boe in her email to Mrs Fisher21 in October 2006 as given to the appellants were an opinion and not a (mis)representation.
20 Numbering refers to paragraphs in the Notice of Appeal.
21 This is clearly intended to be a reference to Ms Janice Fischer of Lodge Real Estate.
10. That Mrs Boes‘ email of October 2006 together with Mr Murphy‘s report both as given to the appellants, were not representations that the house complied with the Building Consent and/or the Building Code and that the house did not suffer from any weathertightness issues (and therefore, by virtue of the defects, misrepresentations).
11. That the Aldridges did not rely on those misrepresentations and/or that they would need to have relied solely on the misrepresentations, and the reasons for that finding.
12. As to the vendor warranty that the Boes gave no warranty and/or would have no liability pursuant to the warranty in the Agreement for Sale and Purchase and the reasons for that including as a matter of construction of the agreement.
13. That Mrs Boe did not breach her duty of care as a head contractor and as to the reasons for that finding.
[98] As to the liability of the second, third and fourth respondents that the
Tribunal erred by failing to articulate findings as to their liability.
[99] As to the defence of voluntary acceptance of risk that the decision of the
Tribunal was erroneous in finding that:
15. The Aldridges‘ voluntarily and knowingly accepted the risk of the
defects thereby giving rise to the defences including that:
(a) they knew of the existence of the weathertightness defect;
and/or
(b) they knew of the risks posed by the weathertightness defects and/or
(c) they voluntarily accepted the risk of the loss arising from the weathertightness defects and/or
(d) they otherwise had sufficient knowledge of the weathertightness defects and/or risk of and relating to the defects so as to give rise to the defence.
...
16. The evidence relied on to support its conclusion that the defence applied.
17. The appellants voluntarily and knowingly acquired a home that had weathertightness defects.
18. The acts and/or omissions of the respondents did not cause the appellants loss.
[100] As to causation that the Tribunal was erroneous in finding and/or relying on findings that:
19. The appellants knowingly purchased a home that had weathertightness defects.
20. The appellants‘ losses were not within the scope of risk created by the respondents‘ conduct.
21. The material and substantial cause of the appellants‘ loss was their decision to buy a dwelling with known weathertightness concerns (rather than the actions and/or omissions of the respondents).
22. Mr Murphy‘s report identified weathertightness issues occurring to
the house at the time of the purchase.
23. The appellants knew that they were purchasing a non-code compliant dwelling.
24. The appellant purchased knowing of the risk that it needed to be repaired to obtain a code compliance certificate and thereby entered into a bad bargain.
25. The appellants‘ decision to purchase the property therefore operated
as a novus actus interveniens.
[101] The Boes have cross appealed against the finding that Mrs Boe was a head contractor. They say there was insufficient evidence that Mrs Boe controlled, supervised or monitored any building work and that the finding is contradictory to the adjudicator‘s conclusions that Mrs Boe was entitled to assume the tradespeople engaged would carry out their work competently, and that the tradespeople did not rely on her to control, supervisor or monitor their work.
[102] At the hearing of the appeal, with the agreement of counsel, the following process was adopted. I heard submissions by all parties on the defences of volenti non fit injuria and causation. I then heard submissions from counsel for the Boes and the Aldridges on the issues of misrepresentation and breach of warranty and in relation to the cross appeal of the Boes. Finally, I heard submissions from counsel for the third defendant, Mr Swart, and the Aldridges on limitation issues.
[103] There was general agreement, recorded in my minute of 15 June 2011, that matters which had not been the subject of findings or determination by the Tribunal should, to the extent they remain in issue following this judgment, be sent back to
the Tribunal for determination. These matters include liability of the respondents and any of them, contributory negligence, the availability of limitation defences and quantum. (Although the Tribunal made an assessment of quantum it was not determinative given the findings against the appellants on liability).
[104] In this judgment I propose to follow the order in which submissions were presented at the hearing. I shall deal with the defences of volenti and lack of causation, the claims in contract against the Boes, the cross appeal against the finding that Mrs Boe was a head contractor, the appeal against the finding that Mrs Boe did not breach her duty of care as head contractor, and finally the submissions about limitation defences by the third respondent.
Approach on appeal
[105] Section 93 of the Weathertight Homes Resolution Services Act 2006 provides a right of appeal from the Tribunal. Section 95 sets out the powers appeal courts have in determining an appeal. Subsection (1) states:
95 Determination of appeal
(1) In its determination of any appeal, the court may do any 1 or more of the following things:
(a) confirm, modify, or reverse the determination or any part of it:
(b) exercise any of the powers that could have been exercised by the tribunal in relation to the claim to which the appeal relates.
[106] It is well established that the approach relating to general appeals in Austin, Nichols & Co Inc v Stiching Lodestar22 applies to appeals under s 93 — see, for example, Burns v Argon Construction Limited,23 Boyd v McGregor,24 and Chee v Stareast Investment Limited.25 The principles that can be derived from Austin,
Nichols can be summarised as follows:26
22 Austin, Nichols & Co Inc v Stiching Lodestar [2008] 2 NZLR 141 (SC).
23 Burns v Argon Construction Limited HC Auckland CIV-2008-404-7316, 18 May 2009.
24 Boyd v McGregor HC Auckland CIV 2009-404-404-5332, 17 February 2010.
25 Chee v Stareast Investment Limited HC Auckland CIV-2009-404-5255, 1 April 2010.
26 See Chee v Stareast Investment Limited at [31].
a) The appellant bears an onus of satisfying the appeal court that it should differ from the decision under appeal.
b) It is only if the appellate court considers that the appealed decision is wrong that it is justified in interfering with it.
c) The appeal court has the responsibility of arriving at its own assessment on the merits of the case.
d) No deference is required beyond the customary caution appropriate when seeing the witnesses provides an advantage because, for example, credibility is important.
e) The appellate Judge is entitled to use the reasons of the first instance decision maker to assist him or her in reaching his or her own conclusions, but the weight the Judge places on them is a matter for the Court.
The Aldridges’ knowledge
[107] The knowledge of the Aldridges (which was gained primarily by Mr Aldridge) when they entered into the contract to purchase the property following their successful bid at auction on 15 November 2006 is highly relevant and important in considering and determining several of the issues on appeal. I therefore set out below the evidence relating to their knowledge. I will then refer to this summary in other parts of the judgment.
What the Aldridges knew
[108] The Aldridges knew:
(a) The house did not have a CCC and that none would be obtained or issued prior to purchase;
(b) The Council had concerns set out in its letter of 17 March 2006 that about six to eight years of water was starting to penetrate the paint system, that the cladding was required to meet the durability requirements of the Building Act of 15 years once a CCC was issued, and that a weathertightness report was required before the Council would consider whether a CCC could be issued;
(c) No weathertightness report had been obtained;
(d) Mr Murphy‘s report of November 2005 referred to moisture testing tending to suggest that moisture had begun to penetrate the cracks and that repairs were needed to prevent further water ingress. (Mr Aldridge had discussed this report with Mr Murphy by telephone);
(e) The repair work recommended by Mr Murphy to be done promptly was not carried out until another winter had passed;
(f) The LIM report obtained from the Council attached the Council‘s letters dated 8 February 2007 (referring to seven items requiring attention which had been done) and 17 March 2006 (referred to at (b));
(g) A summary of work had been prepared and provided by the painter;
(h) The valuation report from Darragh Fergusson & Green dated 6
October 2005 assessed the market value as $2.752m and stated that the dwelling appeared to be ―basically sound‖ having been maintained to a high standard, but noted that no structural survey had been undertaken. The report specifically stated that it was assessed on the basis that the property complied with all local authority requirements and should not be regarded as a structural survey of the building;
(i) The contents of Mrs Boe‘s email to Ms Fischer in about October
2006. The email did not refer to weathertightness issues. It explained Mrs Boe‘s understanding of why the CCC had not been issued. It stated Mrs Boe‘s opinion that the Council should give a letter stating that all the building consents were obtained and that the house was built as per the submitted plans;
(j) No letter from the Council, as anticipated by Mrs Boe in her letter, had been obtained;
(k) The Boes as vendors were making no representations about the condition or structural soundness of the house.
(l) Of the leaky homes publicity, as he acknowledged in evidence;
What the Aldridges did not know
[109] The Aldridges did not know:
(a) The nature and extent of the latent defects that would ultimately result in weathertightness problems costing in the vicinity of $900,000 to repair. These were identified in the February 2008 report of Alexander & Co completed on instructions from the DBH. They are set out in the decision, and are not in dispute.27
(b) The cost or estimated cost of repairs;
(c) The house did not comply with the Building Code (although they knew it did not have a CCC and there was certain requirements of the Council before a CCC could issue, including a weathertightness report).
(d) The earlier email from Mr Murphy to Mrs Boe dated 14 October 2005 in which he stated he was ―very nervous about providing a statement as to the weathertightness which is critical to being Code compliant‖,
and that he had concern of potential moisture ingress.
27 See [56] above.
Volenti non fit injuria (voluntary assumption of risk)
Issue
[110] Was the Tribunal wrong in its determination that the Aldridges had full knowledge of the nature and extent of the risk and from their own conscious volition chose to incur, and did incur, the risk of their own mischance?
Submissions
[111] The essential submissions of all respondents on the affirmative defences of volenti, lack of causation, and also contributory negligence (which was not determined by the Tribunal), are straightforward. It is convenient to summarise them at the outset. The respondents say:
(a) The Tribunal was not wrong in the findings made on these issues and there are no grounds on which this Court should intervene on appeal.
(b) The factual matters identified by the Tribunal on the basis of the evidence28 provide support for the Tribunal‘s conclusion that the respondents are not liable to the Aldridges for the loss they claim under any and all affirmative defences. These factual findings were available on the evidence before the Tribunal.
(c) The Tribunal adopted and applied the correct legal principles.
[112] For the appellant, Mr Wright identified that the causes of action arise from latent defects which have emerged since purchase and caused the appellants‘ loss, being the cost of repairs or diminution in value of the house.
[113] He submits that for the volenti defence to succeed it must be established that the appellant had actual, subjective knowledge of the specific dangers that have
materialised to cause the loss.
28 Decision at [101] and [102] – see [91] above.
[114] Mr Wright says that while the Tribunal held that Mr Aldridge had full knowledge of the nature and extent of the risk he ran in purchasing a home that had no CCC and potential weathertight defects, Mr Aldridge did not have knowledge of the actual defects giving rise to the loss. The latent defects had not been identified. They were not identified until invasive testing was carried out after settlement pursuant to the requirements of the DBH. He noted that the latent defects, as found by the Tribunal,29 are not in dispute. (They are set out above).30
[115] Mr Wright emphasises that no-one involved in these proceedings claims to have known of these defects at the time of purchase. They meant that $900,000 approximately must be expended to make the house watertight. Mr Aldridge did not have knowledge of the nature and extent of the defects nor the extent of the loss arising from the defects. Knowledge that there was no CCC is not knowledge of the actual defects that caused the loss claimed. The appellants are not claiming for loss resulting from the absence of a CCC. Their claim is for the cost of repairs and consequential loss.
[116] He accepts that Mr Aldridge ―took a punt‖ as far as getting a CCC was concerned, but he says there was nothing to provide Mr Aldridge with subjective knowledge of the defects that have subsequently been found by the Tribunal to exist.
[117] Mr Wright referred to a number of authorities which have considered the volenti defence including James v Wellington City,31 Heard v New Zealand Forest Products Ltd32 and Morrison v Union Steam Ship Co of New Zealand Limited.33
[118] In James Richmond J said:34
It has of course been frequently said that in order to succeed in the defence of volenti a defendant must show that the plaintiff, with full knowledge of the nature and extent of the risk he ran, freely and voluntarily impliedly agreed to incur it.
29 Decision at [42] and [46].
30 See [56] above.
31 James v Wellington City [1972] NZLR 9978 (CA).
32 Heard v New Zealand Forest Products Ltd [1960] NZLR 329 (CA).
33 Morrison v Union Steam Ship Co of New Zealand Ltd [1964] NZLR 468 (CA).
34 At 983.
[119] In Heard Cleary J delivering the judgment of himself and North J said:35
A plaintiff ... can never be held to have been volens unless it is first shown that he had full knowledge of the nature and extent of the risk he ran, and then with that full knowledge, in fact incurred it ... As Bowen LJ aptly pointed out in Thomas v Quartermaine (1887) 18 QBD 685: ―Carelessness is not the same thing as intelligent choice‖ ... It is the latter with which we are concerned ... there must be evidence from which it may be inferred that the plaintiff, fully informed of the risk, agreed to take it.
[120] Further:36
We do not doubt that in some cases it may be possible to infer an agreement to run the risk once it is clearly established that a plaintiff has full knowledge and appreciation of the risk, but this in our opinion clearly is not the kind of case where such an inference could be drawn ... [the plaintiff] was never in a position where he could exercise a deliberative judgment whether he should proceed or retire.
[121] In Morrison the Court of Appeal considered whether the volenti defence could apply in a situation where the negligent acts on the part of the defendant were in the future (as distinct from the situation in this case). McCarthy J delivering the judgment of the Court said:37
... if the act relied upon to establish consent proceeds in negligence, the plaintiff is unlikely to have acquired full knowledge of the extent as well as the nature of the risk which he will run, to enable the doctrine of volenti to apply.
[122] Turner J cited from Professor Glanville Williams in Joint Torts and
Contributory Negligence:38
... to constitute the defence of voluntary assumption of risk in the strict sense of that expression there must be some sort of intercourse or communication between plaintiff and defendant from which it can reasonably be inferred that the plaintiff has given an assurance to the defendant that he waives any right of action that he may have in respect of the conduct of the defendant.
35 At 357.
36 At 359.
37 At 482.
38 At 478 citing from Professor Glanville Williams Joint Torts and Contributory Negligence at 308.
Coughlan v Abernethy
[123] The appellants rely significantly on the recent case of Coughlan v Abernethy.39 The Abernethys agreed to buy a house in July 2003. The purchase was conditional on a satisfactory building report being obtained from a specified provider (Mr Beazley). The report was obtained and identified certain defects. The report writer estimated that the cost of repairs would be approximately $10,000. The Abernethys then negotiated a reduction in the purchase price of $3,000. Settlement followed in September 2003. The recommended repairs were subsequently carried out.
[124] In October 2003 a new problem with the house was identified and a claim was lodged with the Weathertight Homes Resolution Service. An assessor carried out two investigations of the property. The first report estimated further repairs of approximately $10,600 above the amount already spent by the Abernethys. A second report in June 2007 estimated the cost of remediation at approximately $115,500.
[125] In March 2009 the Abernethys filed a statement of claim with the Tribunal seeking damages for negligence against the architect, project manager, developer and local authority in the sum of $334,846 including approximately $201,500 for repair costs.
[126] It appears that the defence of volenti was not argued before the Tribunal but on appeal by the architect and the project manager against the decision of the Tribunal holding them jointly and severally liable to pay the Abernethys damages of
$60,310, White J considered the defence. He observed that the conduct of Messrs Coughlan and Humphrey would be actionable apart from the Abernethys alleged knowledge and acceptance of the risk on receipt of the pre-purchase reports.40 He noted that Messrs Coughlan and Humphrey contended that the Abernethys‘
contributory negligence should have been assessed at near 100 per cent to reflect
39 Coughlan v Abernethy HC Auckland CIV-2009-004-2374, 20 October 2010.
40 At [41].
their voluntary assumption of risk. He identified the issue to be whether the
Abernethys assumed the risk. He said:41
[42] It is well-established that a person will not have voluntarily assumed a risk unless it is shown that he or she had full knowledge of the nature and extent of the risk and, with that full knowledge, in fact incurred it: Heard v New Zealand Forest Products Ltd. Unlike contributory negligence, which is determined objectively, voluntary assumption of risk is determined subjectively: The Law of Torts in New Zealand. The onus of proof is on the party alleging voluntary assumption of risk by the other party to establish the allegation: James v Wellington City.
[43] In the present case the question therefore is whether Messrs Coughlan and Humphrey established that the Abernethys in fact had full knowledge of the nature and extent of their ―leaky home‖ problems, which ultimately led to their claim for repairs totalling $201,568.06, from the pre- purchase reports they obtained from Mr Beazley in 2003.
(citations omitted)
[127] White J then examined Mr Beazley‘s two reports and found they did not suggest that the Abernethys would have been made fully aware of the nature and extent of their ―leaky home‖ problems before they purchased the property. He held:42
[46] While Mr Beazley‘s second report did identify a number of the water ingress problems which ultimately made the property a ―leaky home‖, it did not identify them all. Nor did it alert the Abernethys to the full nature and extent of the risk they were running in purchasing the property. Mr Beazley did not identify the lack of subfloor vents. Though he recommended an inspection of the subfloor, it cannot be said that the Abernethys possessed full knowledge of this risk. Mr Beazley reported that the windows had been installed incorrectly, but the Tribunal found that some had not been. Mr Beazley did not identify the absence of vertical control joints.
[47] Most significantly, the Abernethys were left with the clear impression that the problems identified by Mr Beazley would be able to be overcome with repairs estimated to cost around $10,000. ...
[128] He concluded:43
[49] For these reasons I am not satisfied that Messrs Coughlan and Humphrey have discharged the onus of proof of establishing that the Abernethys had full knowledge of the nature and extent of their ―leaky home‖ problems before they purchased the property in September 2003.
41 At [42]-[43].
42 At [46]-[47].
43 At [49]-[50].
[50] Accordingly, I find that the Abernethys‘ knowledge at the time of purchase does not alter any duty of care that Messrs Coughlan and Humphrey owed to them as prospective purchasers, and that this duty of care is not negated by the defence of voluntary assumption of risk. ...
[129] The appellants observe that the Abernethys clearly had some indication of
―leaky home‖ problems, but no detailed knowledge of the specific defects and the extent of the risk and loss resulting, as eventually emerged. Mr Wright submits that the same can be said in this case, but the Aldridges had even less knowledge of potential leaky home problems than the Abernethys. He submits that the Tribunal failed to carry out the factual inquiry as to whether the Aldridges had the requisite subjective factual knowledge of the full extent of the defects and cost to repair and risk entailed, before the doctrine of volenti could apply. He noted that absence of the CCC is not of itself notice of the existence of defects sufficient to attract the application of the doctrine of voluntary acceptance of risk. It was only when the Council issued a Notice to Fix, following the report obtained by the DBH after full invasive testing of the property, that the latent defects, as identified by the Tribunal in the decision, were made known to the Aldridges.
[130] Mr Wright submits that the loss to the appellants was not caused by the absence of the CCC, which Mr Aldridge knew about and accepted. That was not the danger which materialised. The danger that materialised was discovery of the latent defects as identified by the Tribunal. He submits that the volenti defence requires the defendants to prove that the Aldridges had full subjective knowledge of the nature and extent of the danger and that with that full knowledge they took the risk. That was the approach taken by White J in Coughlan v Abernethy and, counsel submits, it is the correct approach. A potential risk of weathertightness defects and the absence of a CCC is not sufficient. For the defence to succeed, Mr Aldridge would need to have had full knowledge of the defects and knowledge of the harm or loss.
[131] The respondents submit that in Coughlan, White J erroneously measured the appellants‘ appreciation of the nature and extent of the harm that was risked, rather than the risk of that harm occurring. It is submitted that in finding that because the Abernethys were not fully aware of the nature and extent of the water ingress problems the defence did not apply, the Court erred. In its approach the Court
measured the extent of the danger that had already occurred, rather than analysing the risk of the danger occurring. Counsel contend that acceptance of the risk that something will happen necessarily implies that it has not yet happened, or at least is not yet known to have happened. The occurrence of and extent of the harm is not something that can be known at the time that the risk is measured.
[132] Mr Napier referred to a statement in The Law of Torts in New Zealand in reference to the volenti non fit injuria defence:44
The consent is not to the harm itself but to the risk of harm being inflicted by
negligence ...
[133] He accordingly submits that for the volenti defence to operate, knowledge of the full nature of the danger/risk is all that is necessary, not full knowledge of the harm that came to pass. To approach the issue as White J appears to have done, means that the doctrine is applied to voluntary assumption of loss, not voluntary assumption of risk. He contends that acceptance of risk necessarily relates to something that has not happened or is not known to have happened. If the loss or harm is known then the plaintiff is in a position to assess the loss or harm, not the risk of loss or harm being inflicted by negligence.
Discussion
[134] The proposition put by Mr Wright, as I understand it, is that knowledge of the risk and the extent of the risk must include knowledge of the harm (cost to repair), that will flow from the negligence. I do not accept that proposition. Nor do I consider that the approach taken by White J in Coughlan v Abernethy supports that proposition. White J analysed on the facts of that case, that the Abernethys did not have full knowledge of the risk they were said to assume, because Mr Beazley‘s report failed to identify critical defects which eventually resulted in their home leaking in a way and to an extent they could not have known at the time they purchased on the basis of the information provided in Mr Beazley‘s report. In identifying that in his report Mr Beazley estimated repair costs to be around $10,000,
White J was simply considering an aspect of the knowledge possessed by the
44 The Law of Torts in New Zealand (5th ed), Stephen Todd, at para 21.4.01.
Abernethys in determining the nature and extent of the risk they agreed to assume. I do not interpret the Judge‘s reasoning as requiring knowledge of the ultimate damage or loss as a component of the measure of risk. That would not be logical when the damage has not occurred, or is not known to have occurred.
[135] However, in this case, the Aldridges, like the Abernethys, were not aware of the nature and extent of the defects in the house which would ultimately result in weathertightness problems costing in the vicinity of $900,000 to repair. No-one knew about the latent defects as identified by the Tribunal. Until invasive testing was carried out by Alexander & Co on the instructions of the DBH and the defects were identified in their February 2008 report, these defects were unknown. It follows that the Aldridges could not have known the nature and extent of the risk of water ingress problems when they purchased the property. It was not sufficient for the volenti defence that they knew that there was no CCC and there were potential, unidentified, weathertight issues.
[136] Stephen Todd relevantly continues in the section of his text dealing with assumption of risk from which the quotation referred to by Mr Napier is taken.45
In order for a person to be held to have assumed a risk of harm it must be shown-
(i) that he or she was fully aware of the factual circumstances and of the danger to which they gave rise, and
(ii) that he or she freely and voluntarily decided to incur the danger. These are stringent conditions. The consequence is that in few cases does
the defence succeed.
(emphasis added)
Conclusion
[137] The stringent conditions are not met in this case. For the reasons given I conclude that the Tribunal erred when it found the respondents had established that on a subjective assessment of all of the evidence, Mr Aldridge had full knowledge of
the nature and extent of the risk he assumed and chose to incur the risk of his own
45 See at [132] above.
mischance. I conclude that the volenti defence cannot succeed in the circumstances of this case.
Lack of causation defence
Issue
[138] Was the Tribunal wrong in its determination that the Aldridges‘ decision to purchase the property operated as a novus actus interveniens breaking any causal chain with the respondents?
Appellants’ submissions
[139] Mr Wright referred to the adoption by the Tribunal of the legal principles in Scandle v Far North District Council & Ors.46 He submits that while the principles are correctly set out in Scandle, in applying the principles to the facts in this case, the adjudicator was ―distracted‖ by Scandle when he concluded:47
Without a full assessment of the responsibilities of the other respondents to this proceeding, in relation to the principles set out in Scandle above, the material and substantial cause of the claimants‘ loss in this case was the claimants‘ decision to buy a dwelling with known weathertight concerns. The most that can be said of the respondents‘ alleged breaches is that, at best, they created an opportunity for the occurrence of the claimants‘ losses ... the Tribunal accepts that the claimants‘ decision to proceed with the purchase of the dwelling operated as a novus actus interveniens breaking any causal chain which the respondents may have created.
[140] Mr Wright defined the issue as: Whether in fact Mr Aldridge‘s knowledge of the condition of the house at the time of purchase was such that his decision to proceed, given that knowledge, should be regarded as the sole cause (in the legal sense) of the appellants‘ loss?
[141] Counsel referred to the findings of the adjudicator that the Aldridges knew the Council needed a weathertightness report to consider whether the dwelling
46 Scandle v Far North District Council & Ors HC Whangarei CIV-2008-488-000203, 30 July
2010 – see at [93] above.
47 Decision at [110].
complied with the Building Code; it had not been obtained; and Mr Murphy‘s report identified weathertightness issues occurring to the house at the time the claimants purchased it. And to the conclusion that ―a determination that these respondents still ought to be held responsible for the claimants‘ bad judgment would be unjust‖.48
[142] He submits the focus on the Aldridges‘ knowledge by the Tribunal was not directed to the right kind of knowledge and that the Tribunal‘s conclusion about the knowledge they had was not supported by the evidence.
[143] Mr Wright noted that in Scandle the intervening cause as against the Council was the action of one or other of the defendants and a non-party. The case did not involve the issue of the plaintiffs‘ knowledge being the intervening cause. He submits that Scandle is therefore distinguishable on its facts.49
[144] He submits the focus has to be on the judgments in the Sunset and Byron cases culminating in the Supreme Court judgment in North Shore City Council v Body Corporate 188529 (Sunset Terraces), North Shore City Council v Body Corporate 18955 (Byron Avenue)50 (Sunset (SC)). That decision involved appeals from the decisions of Heath J in Sunset51 (Sunset (HC)) and Venning J in Byron52
(Byron (HC)).
48 Decision at [109] – see at [94] above.
49 The facts in Scandle were: Mr Scandle, the property owner, sued the Council for breach of statutory duty and negligence. He also sued the previous owners, the Mullane Trust, in contract and in tort (as developer) and Michael Mullane, the builder, in negligence. The Council had issued a building consent. The building work was found by the Council to be non-compliant with the consent. The owners submitted revised architects‘ plans. In 2001 a second building consent was issued on the basis of these revised plans. The Mullane Trust advised they would
be employing an independent certifier. The building constructed by Mr Mullane was unsound
and not in accordance with the plans approved by Council. Nevertheless a CCC was issued in
2002 by the independent building certifier, Nationwide. Subsequently the Council issued a notice under s 124 of the BuIlding Act and prohibited occupation of the house as unsafe.
Duffy J held that Mr Mullane, the builder, was the primary cause of the loss together with Nationwide; that the Council by issuing the original consent and amended consent provided the opportunity for the loss but did not cause the loss – citing Tipping J in Price Waterhouse v Kwan
& Ors [2000] 3 NZLR 39 (CA). She held that the later conduct of Mr Mullane and Nationwide were intervening acts (novus actus interveniens) which severed any link between the Council‘s default and the damage that occurred. Accordingly, the Council was not liable for breach of statutory duty or in negligence.
50 North Shore City Council v Body Corporate 188529 (Sunset Terraces), North Shore City Council v Body Corporate 18955 (Byron Avenue) [2010] NZSC 158; [2011] ANZ ConvR 11-003. (Sunset SC)).
51 Body Corporate 188529 v North Shore District Council [2008] 3 NZLR 479 (Sunset (HC)).
52 Body Corporate 18955 v North Shore City Council HC Auckland CIV-2004-404-5561, 25 July
2008 (Byron (HC)).
[145] After referring to relevant authorities and quoting extensively from the judgments of Venning J in Byron (HC) and Heath J in Sunset (HC) and from the judgment in Sunset (SC) Mr Wright summarised:
Accordingly factual causation ―opens the door‖ for the plaintiffs to be said to have suffered damage; legal causation assesses whether the factual cause should be regarded as the real and substantial cause of the loss having regard to the defendants‘ conduct and the other circumstances of the case. As Heath J said, ultimately a judicial value judgment is required.
[146] He referred to Tipping J in Price Waterhouse v Kwan53 when in dealing with the ―crucial difference‖ between causing a loss and providing the opportunity for its occurrence, he said:
No form of words will ultimately provide an automatic answer to what is essentially a question of commonsense judgment.
[147] Mr Wright submits that in determining whether Mr Aldridge‘s own decision was the only substantial and material cause of the claimants‘ loss, thus constituting an intervening cause and thereby absolving the defendants from liability, the issue turns on Mr Aldridge‘s knowledge at the relevant time. Based on his analysis of the judgments in Sunset (HC) and Byron (HC), he submits that it is only where the purchaser has full knowledge of the defects and takes this into account in abatement of the purchase price (or equivalent conduct by the purchaser), that the chain of causation back to the negligent acts of the defendants will be broken.
[148] He referred to the expression of this principle by Venning J in Byron (HC):54
If a plaintiff acted with such disregard to his or her own interests as to make their conduct the sole cause of the damage which they suffered then there may be a break in the chain of causation: Bowen v Paramount Homes.55
[149] Also to a passage from the judgment of Tipping J for the majority in Sunset
(SC) which explains this concept:56
[83] It is clear that the plaintiff‘s own conduct may go beyond contributory negligence and become the real cause of the damage. This is simply a plaintiff-based example of what was traditionally called a novus
53 Price Waterhouse v Kwan [2000] 3 NZLR 39 (CA) at [28].
54 Byron (HC) at [40].
55 Bowen v Paramount Builders [1977] 1 NZLR 394 at 412, 413.
56 At [83] and [84].
actus interveniens. That was a convenient label to describe a new cause which intervenes and removes all causal potency from the original negligence. The intervening cause can arise from the conduct of a third party or from the conduct of the plaintiff himself.
[84] In a case in which the issue arises, the Court will have to examine how to treat a failure by a prospective purchaser to request a LIM before becoming committed to the purchase. That failure may amount to contributory negligence or, depending on the circumstances, it may be the only real and effective cause of the purchaser‘s ultimate loss.
[150] Mr Wright then analysed the factual situations and the findings in respect of each of the claimants in Sunset and Byron. He noted that generally, the claimants‘ claims in both Sunset and Byron were dealt with on the basis of contributory negligence, and that the High Court‘s findings on contributory negligence were upheld by the Court of Appeal.
[151] In Byron, where there were no CCCs for any of the units (because there were ongoing disputes between the architect, builder and Council), and the Body Corporate had made provision for repairs, where the purchasers‘ inquiries yielded no concern, the purchasers‘ rights were unaffected. Where the purchasers should reasonably have made further inquiry which would have yielded relevant information, they were found to be liable in contributory negligence up to twenty five per cent.
[152] In Sunset, counsel identified two categories of plaintiffs arising from Heath J‘s findings – those represented by Mr and Mrs Sangha and Mr Devlin and his company, and the rest of the plaintiffs (leaving aside the Blue Chip purchasers who for other reasons were held by Heath J to have no claims, which was reversed on appeal). He said that Heath J‘s essential inquiry in determining liability for contributory negligence was whether the date on which the owner/plaintiff acquired actual knowledge of the manifest damage was before the date of purchase.
[153] The situations of two of the plaintiffs, the Sanghas and the Devlins, was held to be different from the other purchasers. The Sanghas‘ case provides the clearer example. They returned from the UK in May 2004. They investigated the purchase of a unit in the development. They became aware through the real estate agent, the Council and the Body Corporate that there were problems with the development.
The Body Corporate had obtained a report from a building company. An engineer had been instructed to oversee the prescribed repairs. They entered into an agreement for sale and purchase in which express provision was made for the quoted cost of repairs to be held back and applied as an abatement to the purchase price. The vendors were to carry out the repairs. Heath J found the Sanghas were in a different position from the other purchasers. He held that the information represented by the CCC was effectively spent. They were aware of water ingress problems and believed they would be remedied for the amount stipulated. They agreed to buy on the basis of their own judgment and in reliance on the abated purchase price, not on the basis of the CCC. Heath J held that their reliance on their own judgment and the abated purchase price was an intervening act which broke the chain of causation and the claim must fail.
[154] Mr Wright identified that the first issue in these cases was whether in the circumstances there was sufficient reason for the purchasers to have made further inquiry. Secondly, what that further inquiry would have revealed. If the inquiry would not have yielded further relevant information, failure to make it was not causative of loss.
[155] William Young P summarised in Byron (CA),57 that whether there was contributory negligence would depend on the circumstances and:
(a) What inquiries would have revealed by way of further information;
and
(b) What a prudent purchaser would have made of the information.
[156] Mr Wright noted that in Sunset (CA),58 Baragwanath J, in considering the effect of failure to seek a LIM or to make other inquiry of the Council, concluded
57 O’Hagan v Body Corporate 189855 [Byron Avenue] [2010] NZCA 445 (CA) at [138] (Byron
(CA)).
58 North Shore City Council v Body Corporate 188529 [Sunset Terraces] [2010] 3 NZLR 486.
that this goes to contributory negligence rather than constituting a bar to the claim.59
But he also observed:60
If contributory negligence is sufficiently great the reduction will be of 100 per cent, which may take the case into the zone embraced by a voluntary assumption of risk.
[157] In Sunset (SC) Tipping J for the majority, dealing with causation, considered the absence of a CCC. He said:61
What loss the home owner 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. What the absence of a CCC cannot do is overtake the earlier duty and any breach of it.
[158] Mr Wright referred to a number of other cases. Of particular relevance is Jung v Templeton62. A building report described the building as ―in good condition‖ but recommended remedial work to a ―significant number of items‖. Some of the work was ―more than minor‖. A number of features of the report suggested the building had problems with water or moisture ingress and potential leakage problems. The test applied by Venning J was:63
... what steps a reasonable person in the plaintiffs‘ position would have
taken to safeguard their interests upon receipt of the building report.
[159] All the plaintiffs did was to seek a reduction in the purchase price. Venning J held that a reasonable person would at least have been put on inquiry and should have followed up the potential leaking/water damage problems highlighted by the report by making further inquiries or at least discussing the report either with the report writer or their solicitor. He held there was contributory negligence between twenty five per cent and seventy five per cent.64
[160] Mr Wright noted that the plaintiffs‘ failure to follow up when put on inquiry
resulted in a finding of contributory negligence. But he submits that Jung v
59 At [60].
60 At [63].
61 At [60]-[62].
62 Jung v Templeton [2010] 2 NZLR 255.
63 At [47].
64 At [48].
Templeton is distinguishable on the facts. He said there was no suggestion in this case that Mr Aldridge failed to follow up. He made extensive inquiries. They revealed no indication of the defects the Tribunal ultimately found to be present. In his submission, the remaining question is whether the information Mr Aldridge had, amounted to knowledge of the defects. He submits it did not.
[161] Mr Wright submits that for the Aldridges‘ decision to purchase to amount to an intervening cause, it must have been made with knowledge of the defects and loss, because this negatives the reliance underpinning the cause of action in negligence against the respondents for causing or allowing moisture to damage the house. He acknowledges that the purchaser cannot claim to have suffered a loss where the matters said to give rise to the loss have been known and taken account of at the time of purchase. If the defects and damage have become sufficiently manifest the purchaser cannot rely on the Council and parties in a similar position to have built the house without defects.
[162] In this category he places the Sanghas and Devlins in Sunset. He submits that in none of the cases has knowledge of risk, objectively, in itself been sufficient knowledge to produce this outcome.
[163] He referred to William Young P in Sunset (CA) for authority that there is very limited opportunity for a purchaser to inspect a building during the course of construction and that it would be ―a very rare case indeed‖ where the significance of the opportunity for intermediate inspection would break the chain of causation. Also to Tipping J in Sunset (SC) that failure to inspect could raise questions of either causation or contributory negligence but only if the defect that was otherwise hidden
might have come to light.65
[164] In conclusion Mr Wright says that Mr Aldridge did not have actual knowledge of the leaking defects, and he had no knowledge of a sufficiently commensurate risk of leaking defects to justify a finding that he was the sole cause of the appellants‘ loss. As the Joyce Group subsequent report shows, only if Mr
Aldridge could have carried out full invasive testing of the property would the
65 Sunset (SC) at [42], [83]-[84] (Tipping J); Sunset (CA) [165]-[166], [177] (William Young P).
leaking defects have become known to him. His inquiries did not suggest that the property was suffering from these leaking defects.
[165] For these reasons Mr Wright submits that Mr Aldridge‘s knowledge was
insufficient to give rise to an intervening new cause of loss.
Respondents’ submissions
[166] As previously noted, the respondents‘ position on causation is that the Tribunal was correct in finding that the material and substantial cause of the appellants‘ loss was their decision to buy a dwelling with known weathertight concerns. 66 They refer to Mr Aldridge‘s acceptance in answer to a question in cross- examination that he ―took a punt which didn‘t pay off‖.67 They note the Tribunal accepted that this indicated that Mr Aldridge not only had awareness of the risk of purchasing the home without a CCC but also knew of the uncertainty as to whether one would be forthcoming, as indicated in the Council‘s letter dated 17 March 2006.
[167] Mr Talbot for the third respondent referred to the line of authority from Bowen v Paramount Builders68 that if a plaintiff acts with such disregard to his or her own interests as to make their conduct the sole cause of damage which they suffered, there may be a break in the chain of causation. He also referred to a passage from the judgment of Tipping J in Sunset (SC) which precedes the passage set out above:69
[79] If a prospective purchaser obtains a LIM which discloses a moisture problem before becoming committed to the purchase, it is unlikely that any proceedings could ever be taken against the council. A prospective purchaser may, however, fail to request a LIM in circumstances where the LIM, if requested, would probably have given notice of actual or potential problems. If, as is likely to be the case, the purchaser‘s failure amounts to negligence, a question may arise as to whether that negligence amounts only to contributory negligence, albeit probably at a high level, or whether the prospective purchaser‘s negligent omission amounts to a new and independent cause of the loss which removes all causal potency from the council‘s original negligence at the inspection stage.
...
66 Decision at [110].
67 Decision at [103].
68 Bowen v Paramount Builders [1977] 1 NZLR 394.
69 See [149] above.
[168] Mr Napier for the fourth respondent submits that if failing to request a LIM before becoming committed to a purchase could be viewed as the only real and effective cause of the purchaser‘s ultimate loss, then purchasing a substantial property when it is known that there is not a CCC and there have been problems obtaining one, must also be capable of being viewed as the only real and effective cause of the purchaser‘s ultimate loss.
Discussion
[169] I accept that failure to obtain a LIM or knowledge that there is no CCC and failure to make inquiry, could in some circumstances be the real and effective cause of the purchaser‘s ultimate loss. But that situation implicitly necessitates the inquiry: what is the causative effect of the failure of a prospective purchaser to obtain a LIM or to inquire as to the reasons for there being no CCC? In the case of a LIM, if the LIM would have provided no or no additional information of relevance, then failure to obtain it would have no causative effect on the loss suffered. At the other end of the scale, if the LIM would have provided critical information bearing on the loss that was ultimately suffered, then failure to obtain the LIM would evidence disregard by the purchaser of his own interests, possibly to the extent that it was the sole cause of the loss. Likewise in relation to knowledge that there was no CCC.
[170] Counsel for the various respondents addressed the situation of the Sanghas in Sunset which (with the Devlins) Mr Wright advanced as the only example in leaky building cases where the plaintiffs‘ conduct has been held to constitute a novus actus interveniens.
[171] The respondents submit that the situation of the Aldridges is not materially different from that of the Sanghas in Sunset. The appellants had knowledge of weathertight defects and issues of water ingress. They knew that a clean weathertightness report was required to the Council‘s satisfaction before a CCC would be considered. They had a recent registered valuation at $2.72m and purchased for $2.35m. It is submitted that, like the Sanghas, they agreed to buy the property based on their own judgment and that this was an intervening act which broke the chain of causation.
[172] Mr Grimshaw submits that on the facts, the Aldridges fit into a like category with the Sanghas. They knew, he says, that they would have to spend a considerable amount on repairs, up to $400,000 approximately, which was the difference between the valuation and the purchase price they agreed to pay at auction.
[173] In response to Mr Wright‘s contention that the Aldridges did not know of the latent defects as determined by the Tribunal, and that knowledge of the actual defects is essential before it could be said that the appellants puchased on the basis of their own judgment, counsel for the respondents submit that this is not necessary and was not the situation with the Sanghas.
[174] At [59] of the judgment in Sunset (HC) there is reference to nineteen defects identified by the Sanghas with the two primary causes of water ingress being failure to waterproof adequately the balconies (decks) on the upper levels of each dwelling and the wing walls between the roof and parapet. The Sanghas were aware there were problems with the deck and had received the report from the building company obtained by the Body Corporate detailing the work required to remedy the problems with the deck, but they obviously did not know about all the defects which ultimately had to be remedied involving a cost in excess of the $15,800 retention they negotiated as a condition of the agreement, pending completion of the repairs by the vendors. (The amount of the retention was the sum quoted for the repair work at the time. That amount was to be returned to the Sanghas if the repairs were not completed by settlement date).
[175] I consider there are essential differences between the situation of the Sanghas in Sunset and that of the appellants. As is made clear in the judgment in Sunset (HC)70 the Sanghas knew of water ingress problems and the estimated cost of repairs. Knowing of those water ingress problems and the estimated cost of repairs, they negotiated an abated purchase price. It was their reliance on their own judgment and the negotiated abatement that Heath J held to be the intervening act which broke the chain of causation. It appears that while the Sanghas did not have knowledge of the
full nature and extent of the defects, importantly, they knew there were water ingress
70 Sunset (HC) at [286] and [288].
problems. Heath J recorded71 that the water ingress problems had been identified by early 2000, at the latest. Mr and Mrs Sangha agreed to purchase their unit in 2004.
[176] By contrast:
(a) When the Aldridges inspected the property prior to purchase it appeared to be in pristine condition:
(b) It had been painted and the cracks referred to by Mr Murphy in his report of November 2005 had been repaired by Mr Martin.
(c) The valuation from Darragh Fergusson & Green provided by the vendors dated 6 October 2005 did not mention any water ingress problems.
(d) Mr Murphy‘s report in November 2005 relating to ―assessment of cracks in harditex cladding‖, while stating that ―moisture testing tended to suggest that moisture has begun to penetrate the cracks‖ also said that the level was indicative of the early stage of penetration suggesting a relatively low level of risk. He recommended remedial work and the information on inquiry by Mr Aldridge was that this work had been carried out by Mr Martin who was a competent tradesman.
(e) There was no CCC but the reason given by the Council was the delay since completion of the building. A weathertightness report was required, but there was no indication that this would not be available.
(f) No abatement was negotiated. The fact that the Aldridges purchased at a price approximately $400,000 below a valuation which was about a year old, cannot be construed as in the nature of abatement. It is equally consistent with being a competitive price in a market with
which the Aldridges had made themselves familiar. It probably
71 Sunset (HC) at [28] above.
reflected to some extent Mr Aldridge‘s assessment that he would have
to do battle with the bureaucracy to obtain a CCC.
[177] The things Mr Aldridge did not know, and could not know, are important. They are set out at [109] above.
[178] On the facts, I do not consider that the Aldridges can be regarded as in the same category as the Sanghas and the Devlins when considering whether there has been an intervening act or acts which broke the chain of causation.
[179] I consider that in his reasoning on the lack of causation defence the adjudicator erred in a number of respects:
(a) He distinguished the situation of claimants who did not realise they were purchasing a non-code compliant dwelling until after the transaction was complete.
The Aldridges knew there was no CCC issued for the dwelling. But that is not notification of defects. It does not provide evidence that the building is non-compliant with the building code. It is noteworthy that in Byron none of the units had CCCs at the time of purchase. Yet in all cases the maximum contributory negligence liability of the purchaser, depending on the particular circumstances, was assessed at twenty five per cent by Venning J and upheld by the Court of Appeal.
(b) He said the appellants decided to buy a dwelling with ―known weathertight concerns‖.
Mr Aldridge had the Council‘s letter of 17 March 2006 in response to Mrs Boe‘s inquiry about a CCC for the dwelling. It advised that the Council would ―require the cracks repaired in the cladding systems in accordance with the manufacturer‘s specifications‖. Mr Murphy had been instructed by the Boes to advise about this and Mr Martin carried out the repairs, according to the information provided to Mr
Aldridge. There was nothing to suggest otherwise. A producer statement by the cladding repair contractor was to be provided. Mr Aldridge was told that Mr Martin was to provide this. A total repaint was required because ―six-eight years water is starting to penetrate the paint system‖. Mr Aldridge was advised that a total repaint of the dwelling had been carried out. This was confirmed on visual inspection. The Council required that the cladding meet the durability requirements of the Building Act of fifteen years once a CCC was issued, but there was no indication from the Council or from Mr Murphy or Mrs Boe that this requirement could not be met. The Council required a ―clean weathertightness report‖ before it would consider issuing a CCC. Again there was no indication from the Council or Mr Murphy or Mrs Boe of any impediment to such a report being obtained. Finally the letter invited any queries to be addressed to the writer, Mr Martens or Phil (a reference to Phil Saunders, the building inspector). Mr Aldridge made inquiry of Mr Martens and did not receive any information that there were defects in the building or that the requirements of Council could not be met. (He was advised that Mr Saunders would make the final decision but he did not speak to Mr Saunders who apparently was on holiday).
[180] None of these matters were evidence or notification of a building with
―known weathertight issues‖ or ―known weathertight concerns‖. Mr Murphy did suggest to Mr Aldridge in a telephone conversation on the day before the auction that the hardiflex cladding required a high level of maintenance but that did not constitute advice or an opinion as to ―known weathertight concerns‖.
[181] Nor can it be said of Mr Aldridge that he acted with such disregard for the appellants‘ own interests as to make his conduct the sole cause of the damage they have suffered from the weathertightness defects in the house, thereby overtaking any earlier duty and breaches of it. Mr Aldridge made known to Ms Fischer his concern to carry out proper due diligence. He obtained all available relevant information, including making two visits to the Council to inspect the file. He pursued inquiries with the available Council officer, Mr Martens. He followed up on Mr Murphy‘s
report by discussing it with him. In short, and in contrast to the purchaser in Jung v Templeton, he took the steps and made the inquiries a prospective purchaser could reasonably be expected to make.
Conclusion
[182] I conclude that on the facts of this case, there was no proper basis for the Tribunal‘s determination that the claimants‘ decision to proceed with the purchase of the dwelling with ―known weathertight concerns‖ operated as a novus actus interveniens breaking any causal chain with the respondents and rendering the alleged breaches of the respondents‘ respective alleged duties of care, mere opportunities for the occurrence of the appellants‘ losses. The ―but for‖ test72 is not met on the facts of this case.
Mr and Mrs Boe : misrepresentation
[183] The Aldridges alleged that the Boes are liable in contract for misrepresentations made prior to the purchase. They claimed those representations were made in two documents:
(a) An email from Mrs Boe to Ms Fischer of Lodge Real Estate in
October 2006;73 and
(b) The report prepared by Mr Murphy in November 2005.74
[184] The Aldridges claimed that through these documents, the Boes represented that:
(a) The house complied with the building consent and the Building Code;
and
72 ACC v Ambros [2007] NZCA 304, [2008] 1 NZLR 340 at [25]. Scandle v Far North District
Council HC Whangarei CIV 2008-488-203, 30 July 2010 at [37].
73 See [42] above. Mrs Boe‘s email is undated. Mrs Boe said it was provided to Ms Fischer
―around September 2006‖. A copy of the letter on Lodge letterhead is dated 12.11.06.
74 See [28]-[31] above.
(b) The house did not suffer from weathertightness issues.
[185] The Tribunal found that no representations had been made, and further that no reliance had been placed by the Aldridges on the representations if they had been made.75 The Aldridges say the Tribunal erred in those determinations as set out in paragraphs 9, 10, and 11 of the Notice of Appeal.76
Submissions
[186] The Aldridges contend that the portions of Mrs Boe‘s email77 are express statements of fact, even if it is only Mrs Boe‘s opinion that the Council should give them a letter. They submit that a necessary implication of the email is that those statements are true because the email does not state or imply that Mrs Boe is conveying things the Council said. Further that the email represents that the only reason a CCC was not issued was because of delay, not because the house was improperly built.
[187] The Boes maintain that the Tribunal was correct to find that the statements were opinion, being prefaced by the words ―I think‖. They submit it is clear that this was a private email to Ms Fischer and that Mrs Boe was merely recording her understanding of why a CCC had not been issued by the Council.
[188] As to Mr Murphy‘s report the Aldridges contend that it represents that the only reason the house had no CCC was because of delay and that there was ―nothing wrong with it‖. They submit the conclusion an ordinary reader would take from the report was that there were only maintenance issues and once the cracks were repaired the cladding was unlikely to fail, which negated the presence of other defects.
[189] Mr Grimshaw for the Boes emphasised that the extent of Mr Murphy‘s
retainer was to inspect and report on the cracking in the cladding as is stated in his report. The Boes submit that no reasonable reader could conclude that Mr Murphy
75 See [60]-[68] above.
76 See [97] above.
77 Shown in italics at [42] above.
was reporting on whether the dwelling was built in accordance with the building consents or the Building Code, or that it was a general report on weathertightness. They say it is also clear Mr Murphy did not represent that the house was weathertight because the report actually mentions moisture penetration. The Boes further submit that at most they were only passing on Mr Murphy‘s findings and opinions when they made the report available to Ms Fischer. They could not have endorsed or adopted Mr Murphy‘s report as neither of them had the requisite expertise to do so.
Relevant law
[190] Section 6(1) of the Contractual Remedies Act 1979 provides:
6 Damages for misrepresentation
(1) If a party to a contract has been induced to enter into it by a misrepresentation, whether innocent or fraudulent, made to him by or on behalf of another party to that contract—
(a) He shall be entitled to damages from that other party in the same manner and to the same extent as if the representation were a term of the contract that has been broken; and
...
(emphasis added)
[191] Section 6 sets out a number of requirements that need to be met before damages can be awarded for misrepresentation. These were listed by the Tribunal in its decision78 and are not in dispute. They are:
(a) There must be a misrepresentation (a false or erroneous statement of fact);
(b) The representation must have been made by or on behalf of the Boes to the Aldridges;
78 See [61] above.
(c) The misrepresentation must have induced the Aldridges to enter into the contract of purchase; and
(d) The Aldridges must have suffered loss as the result of relying on the
Boes‘ misrepresentation.
(a) Meaning of “misrepresentation”
[192] The term ―misrepresentation‖ is not defined in the Contractual Remedies Act so the common law definition has been applied.79 A representation has been held to have the following characteristics:
(a) It must relate to some past or present fact;
(b) It must be a statement of fact, not opinion or intention.
[193] A statement of opinion is prima facie not a statement of fact because it is a belief based on grounds incapable of proof. In Bisset v Wilkinson80 a vendor told a prospective purchaser that in his judgment the land (which had never been previously used as a sheep farm) could carry 2,000 sheep. This was held to be an honest statement of opinion of the capacity of the farm and not a representation as to its actual capacity.
[194] However, an expression of opinion contains an implied statement that: (a) The representor actually holds the opinion;81 and
(b) There are reasonable grounds for such an opinion to be held, especially where the representor has greater knowledge of the
situation than the representee.
79 Ware v Johnson [1984] 2 NZLR 518 (HC) at 537-538. See also Savill v NZI Finance Ltd [1990]
3 NZLR 135 (CA) at 145.
80 Bisset v Wilkinson [1927] AC 177.
81 Edgington v Fitzmaurice (1885) 29 Ch D 459.
[195] Accordingly, in Smith v Land and House Property Corporation,82 a statement of opinion was held to contain a representation that the statement maker had information that justified that opinion. There, a vendor described his property as being let to ―a most desirable tenant‖, thus offering a ―first-class investment‖, although that tenant was in fact chronically late in paying rent and was in arrears. Bowen LJ said:83
In a case where the facts are equally well-known to both parties, what one of them says to the other is frequently nothing but an expression of opinion. ... But if the facts are not equally well-known to both sides, then a statement of opinion by the one who knows the facts best involves very often a statement of material fact, for he impliedly states that he knows facts which justify the opinion.
[196] Mr Grimshaw cited from Dawson and McLauchlan‘s The Contractual
Remedies Act 1979:84
Thus there is prima facie no misrepresentation if one party makes it clear that he is merely expressing his opinion or belief on the matter or that he is passing on information received, or a statement made by a third party, and not adopting it as his own. This, of course, is simply another way of saying
‗Our rule is caveat emptor. You must look after yourself, I am not prepared
to take responsibility for the accuracy of this‘.
(b) Made “by or on behalf of”
[197] A party to a contract is liable under s 6 for misrepresentation made by his or her agents. In Wakelin v R H and E A Jackson Ltd,85 a vendor was held liable for statements made by an agent it had employed to sell the property, as the agent had
made those statements on behalf of the vendor.
82 Smith v Land and House Property Corporation (1884) 28 Ch D 7.
83 At 15.
84 Francis Dawson and David W McLauchlan The Contractual Remedies Act 1979 (Sweet and
Maxwell, Wellington, 1981) at 187-188.
85 Wakelin v R H and E A Jackson Ltd (1984) 2 NZCPR 19 (HC).
(c) Made “to him”
[198] Under s 6 it is also necessary for the misrepresentations to be made ―to him‖ or ―to her‖. In Law of Contract in New Zealand,86 the authors state that the expression is wide enough to encompass misrepresentation made to a group of which the plaintiff is a member, or even to the general public through advertisement, which was the position at common law.
(d) Inducement
[199] The misrepresentation must have induced the party to enter into the contract in order to succeed under s 6. There are two elements to inducement: the representation must have caused the representee to enter into the contract; and the representor must have intended to induce the representee to do so.
[200] Inducement was discussed in Savill v NZI Finance Ltd by Hardie Boys J as follows:87
At general law, inducement involves purpose as well as result. Not only must the representation have caused the representee to enter into the contract but also the representor must, either in fact or in contemplation of law have intended to cause him to do so: .... In Ware v Johnson ..., Prichard J, referring to fraudulent misrepresentation, expressed the view that the Act has done away with this requirement; whilst in Shotover Mining Ltd v Brownlie
... McGechan J left the point open. I cannot think that the legislature intended such a change, which would make the test of inducement a purely subjective one, judged from the point of view of the representee. Not only is there no spelling out of an intention of that kind; but the familiar verb
―induce‖, which has always had its two aspects, has been retained. Therefore
I consider that it remains the law that it is not enough for a party to say that a representation caused him to act in a particular way. He must also show either that the representor intended him to do so, or that he ―wilfully used language calculated, or of a nature to induce a normal person in the circumstances of the case to act as the representee did‖: .... To view the Act in this way is to be consistent with the objective approach generally taken in regard to the law of contracts.
(citations omitted)
86 Burrows, Finn and Todd Law of Contract in New Zealand (3rd ed, LexisNexis NZ, Wellington,
2007) at [11.2.4].
87 Savill v NZI Finance Ltd [1990] 3 NZLR 135 (CA) at 145–146.
[201] The misrepresentation need not be the sole inducement to enter the contract; it is enough if it was a significant influencing factor: New Zealand Motor Bodies Ltd v Emslie.88
Application of the principles – Mrs Boe’s email
[202] The first question is whether Mrs Boe‘s statement in the email was a false or erroneous statement of fact. I do not consider the statements in her email can be taken to represent that the house did not suffer from weathertightness issues; there is no reference to that matter. However, there is a clear statement that all building consents had been obtained and that the plans were complied with when the house was built, this statement being prefaced by the statement that Mrs Boe ―thinks‖ the Council should give a letter to that effect.
[203] The words ―I think‖ indicate that the statement is Mrs Boe‘s opinion. In this I agree with the Tribunal although I do not consider it is clear that the statement simply records her understanding of the Council‘s position. It can also be interpreted as a representation of what the situation was, together with her opinion as to how the Council should respond to it.
[204] The Tribunal did not go on to consider the truth of the underlying representations – whether Mrs Boe actually held the opinion and that there were reasonable grounds for such an opinion to be held.
[205] In light of Mr Murphy‘s email to Mrs Boe of 14 October 2005 there has to be doubt that she had reasonable grounds for her opinion. Mr Murphy had stated in October 2005 that he had ―a real problem with the Code Compliance report at this stage‖ and had gone on to express concern about potential moisture ingress and extensive movement and cracking of the cladding. He said those issues were ―... fundamental to compliance with the Building Code and compromised compliance
with ss E2 and B2 particularly‖.
88 New Zealand Motor Bodies Ltd v Emslie [1985] 2 NZLR 569 (HC) at 595.
[206] On the other hand, Mrs Boe gave evidence that Phil Saunders at the Council made it clear to her that the Council had no issues with the way the house had been constructed. She said he stressed that it was simply because of its age they would not issue a Code Compliance Certificate. She said in her brief of evidence:
He said I should tell potential purchasers that:
(a) We had obtained all the necessary building consents;
(b) The house had been built in accordance with the Consents issued, as evidenced by the fact that the Council had conducted and passed all of the required Council inspections throughout the building process;
(c) The delay in conducting the final Council inspection meant the Council would not issue a Code Compliance Certificate because of the age of the house.
She said:
It was very clear to me at this point that, short of re-cladding the house so that the cladding was then ―new‖, the Council would not issue a Code Compliance Certificate.
[207] Mrs Boe said she had these discussions with Mr Saunders after they received
Mr Murphy‘s report following his visit to the property on 5 November 2005.
[208] Mrs Boe was not cross-examined on this evidence. Mr Saunders was not called to give evidence, but Mrs Boe‘s evidence on this point is consistent with his brief of evidence.
[209] Mrs Boe‘s unchallenged evidence about her discussions with Mr Saunders would suggest that the assurances she received would have negated the concerns raised by Mr Murphy‘s email of 14 October 2005 and provided reasonable grounds for the opinion she expressed in her letter, particularly given that her letter did not extend to weathertightness issues but was directed at the reasons that a Code Compliance Certificate had not been issued.
[210] The statement was clearly made by Mrs Boe. I am also satisfied that the representation was made to the Aldridges. Mrs Boe would have known when she provided the letter to Ms Fischer that it would be conveyed to prospective purchasers.
[211] As to the requirement for inducement, I do not agree with the Tribunal‘s determination. Although Mr Aldridge had taken steps to make further inquiries he was unable to contact Mr Saunders, who was away at the time, to receive the verification he sought. The issue is not whether he took steps to obtain verification but whether the further inquiries he made negated any reliance he placed on Mrs Boe‘s representations (if they were indeed representations). In my view it cannot be excluded that because Mr Aldridge could not get the verification he sought from the Council, he did place reliance to some extent on the representations in Mrs Boe‘s letter. The misrepresentation need not be the sole inducement, if it was a significant influencing factor.89 There is no requirement that he relied solely on Mrs Boe‘s statements, as the Tribunal infers.90
[212] However, I do not need to reach a final determination on the aspects in which I have indicated I disagree with the decision because of the conclusion I have reached on the effect of cl 5.2 in the agreement for sale and purchase.
Mr Murphy’s report
[213] I do not consider that Mr Murphy‘s report contains any express
representations either that:
(a) The house complied with building consents and the Building Code; or
(b) It did not suffer from weathertightness issues.
[214] At paragraph 2.4 of his report Mr Murphy expressly states that the inspection:
... is not an audit of the building design, cladding system installation or compliance with the NZ Building Code‖.
[215] At paragraph 5.1 under the heading ―diagnosis‖ he states:
The moisture testing tends to suggest that moisture has begun to penetrate the cracks that at this stage is of a level indicative of being in the early stages
89 New Zealand Motor Bodies Ltd v Enslie [1985] 2 NZLR 569 (HC) at 595.
90 Decision at [65].
of penetration which following a winter season suggests relatively low level risk at this stage.
[216] This cannot be interpreted as a representation that the house was weathertight. The most that could be said of the report is that the overall impression it gives is that if the cracks were properly fixed:
... there is little likelihood of further significant failure.
[217] Further, the report expressly defines the limited purpose for which the inspection was made and the limited scope of the inspection. At paragraph 2 the report states that the reason is ―To carry out visual assessment of cracking in the Harditex clad dwelling‖, specifically focusing on the cracks that have appeared and the recommended repair protocol; inspection was to be non-invasive; testing was not exhaustive; the inspection was not an audit of the building design, cladding system installation or compliance with the NZ Building Code‖; and no destructive or invasive investigation or testing was carried out.
[218] The report further expressly makes clear the limited basis on which the report was prepared. On page 2 of the report there is a disclaimer:
Disclaimer
This report has been prepared for the addressee‘s use only, in terms of instructions to us. It is not to be relied upon by other persons without our written approval. Where items are concealed, or we have been unable to gain access, we have used our judgment and experience, but actual conditions may only be evident upon opening up the relevant areas.
...
[219] At the end of the report there is the following statement:
Limits to Accountability:
The comments herein are limited to that which is available to visual inspection. Concealed items such as ... structural elements/framing concealed by claddings, and other such concealed items are not confirmed by this report. The information herein is prepared for the addressee only and INSPECT NZ Ltd and all its principals, employees ... disclaim all responsibility and liability to third parties. This report is not supplied as, nor intended as, a guarantee either implied or otherwise and may not be used as such.
[220] Mr Murphy clearly had reasonable grounds for the opinions he expressed but they were very limited and cautious opinions.
[221] Further, it cannot be said that the representations in Mr Murphy‘s report were made ―by or on behalf of the Boes‖. The Boes simply passed on Mr Murphy‘s report through Lodge Real Estate. The report expressly states that it was prepared for the Boes‘ use only and was not to be relied upon by others without written approval. Mr Murphy‘s report was an opinion, limited in scope, by an expert who was competent to express such an opinion. But all the Boes did was to make the report available to prospective purchasers.
[222] I conclude that Mr Murphy‘s report does not amount to an actionable misrepresentation by the Boes that the house complied with the building consent and/or the Building Code and did not suffer from any weathertightness issues. Nor can Mr Murphy‘s report ―together with Mrs Boe‘s email of October 2006‖ provide a basis for the misrepresentations claimed by the Aldridges.
Clause 5.2 sale and purchase agreement
[223] In the event that the Court were to find the alleged misrepresentations made out the Boes also rely on the acknowledgment contained in cl 5.2 of the sale and purchase agreement as is pleaded at paragraph 27 of the first respondent‘s amended response to the statement of claim. The Tribunal did not consider this aspect because it found that neither Mrs Boe‘s letter nor Mr Murphy‘s report amounted to a misrepresentation under s 6 of the Contractual Remedies Act. As there are two respects in which I have differed from the Tribunal‘s conclusions on Mrs Boe‘s letter, I turn to consider cl 5.2.
[224] Clause 5.2 of the Particulars and Conditions of Sale dated 15 November 2006 states:
5. The Purchaser acknowledges:
...
5.2 That the Purchaser does not rely on any representation of the Vendor, the Vendor‘s agent or the auctioneer or the auctioneer‘s agents as to any matter whatever pertaining to the property ...
[225] Section 4(1) of the Contractual Remedies Act 1979 provides:
4 Statements during negotiations for a contract
(1) If a contract, or any other document, contains a provision purporting to preclude a Court from inquiring into or determining the question—
(a) Whether a statement, promise, or undertaking was made or given, either in words or by conduct, in connection with or in the course of negotiations leading to the making of the contract; or
(b) Whether, if it was so made or given, it constituted a representation or a term of the contract; or
(c) Whether, if it was a representation, it was relied on—
the Court shall not, in any proceedings in relation to the contract, be precluded by that provision from inquiring into and determining any such question unless the Court considers that it is fair and reasonable that the provision should be conclusive between the parties, having regard to all the circumstances of the case, including the subject-matter and value of the transaction, the respective bargaining strengths of the parties, and the question whether any party was represented or advised by a solicitor at the time of the negotiations or at any other relevant time.
[226] In PAE (New Zealand) Ltd v Brosnahan,91 the Court of Appeal described the purpose of s 4(1) in the following way:
An entire agreement clause, however, is not absolute or conclusive. Section
4(1) recognises a wide judicial discretion to determine whether it is ―fair and reasonable that the provision should be conclusive‖. While the issue is to be determined ―having regard to all the circumstances of the case‖, the specified criteria focus the inquiry on an assessment of the relative positions of the parties and their access to independent legal advice. Its apparent purpose is to protect one party‘s relative vulnerability from another party‘s power to impose an exemption from liability which is contrary to the factual reality or an existing legal obligation and is thus unreasonable and unfair. Section 4(1) is a mechanism for striking balances, both individually between parties and conceptually between freedom of contract and unfair or unreasonable commercial conduct. ...
91 PAE (New Zealand) Ltd v Brosnahan [2009] NZCA 611, (2010) 9 NZBLC 102,862 at [15].
[227] The leading authority on s 4(1) is Brownlie v Shotover Mining Ltd.92 In delivering the judgment of the Court, McKay J observed that:93
There can be nothing inherently unfair in such an exclusionary clause. It is highly desirable that written contracts should be so drawn as to state all the terms of the intended contract, and so avoid the uncertainties which can arise from allegations of verbal representations or collateral warranties. If parties have not agreed to include express warranties in their written contract, then it is reasonable for them to state expressly that verbal warranties are excluded. ...
[228] McKay J then recorded that if the alleged misrepresentations were made fraudulently, it would be a factor of very considerable weight indicating that it would not be ―fair and reasonable‖ for the acknowledgment clause to be conclusive.94
[229] The intention of s 4(1) is to allow the Court to go behind such exclusion clauses unless the Court can be satisfied that the provision is fair and reasonable and should be conclusive between the parties in all the circumstances of the case. The onus is on the party seeking to enforce the clause to establish its fairness and reasonableness in the circumstances. In this case that onus is carried by the Boes.
[230] Both parties cite Leigh v MacEnnovy Trust Ltd,95 in which an acknowledgment clause in terms similar to cl 5.2, was considered in the context of sales of apartments in proposed residential developments in Remuera by an experienced developer to private individuals. Although the agreements for sale and purchase were silent on the actual floor area of each apartment, the developer was held to have overstated the size of the apartments by about 20 per cent. In holding that the clause should be conclusive between the parties, Harrison J had regard to:
(a) The specific nature of the representations about floor size that purchasers would not expect to be incorrect was balanced by the fact
that the misrepresentations were not made deliberately or fraudulently.
92 Brownlie v Shotover Mining Ltd CA187/87, 21 February 1992.
93 At 31–32.
94 At 33.
95 Leigh v MacEnnovy Trust Ltd [2010] ANZ ConvR 10-028 (HC).
(b) The purchasers‘ agreement to waive a contractual right was an element of the bargain which they were prepared to accept in exchange for other benefits.
(c) The purchase price agreed on was not directly influenced by the floor area representations.
(d) The subject matter and value of the transaction justified contractual certainty.
(e) There was no disparity in parties‘ respective bargaining strengths. The purchasers were not in positions of vulnerability to the developers such that they required the Court‘s protection against the consequences of their own voluntary concessions.
(f) Each party sought and received legal advice before entering into the contracts.
(g) All parties were financially aware; both purchasers were relatively sophisticated.
[231] Harrison J concluded:96
There was no disparity in the parties‘ respective bargaining strengths. The purchasers were not in positions of vulnerability to MacEnnovy such that they required the Court‘s protection against the consequences of their own voluntary concessions. Each party sought and received legal advice before entering into the contracts ... Finally, all parties were financially aware; both purchasers were relatively sophisticated.
[232] He held that it was fair and reasonable that the relevant clause should be conclusive between the parties.
[233] Mr Wright submits that Harrison J‘s approach must be viewed with caution as many of the factors to which Harrison J had regard were relevant to any contract
containing an acknowledgment clause where there has been a misrepresentation. He
96 At [34].
submits that the correct approach ought to focus on the nature and importance of the representation, the parties‘ knowledge, actual reliance and the amount of the loss. He submits that because Mrs Boe was aware of weathertightness issues from Mr Murphy‘s 14 October 2005 email, it could not be fair and reasonable for her to represent to Mr Aldridge that the sole reason a CCC could not be obtained was because of time delay.
[234] I consider the following factors to be relevant:
In favour of conclusiveness
The property was sold for $2.35 million, a substantial
figure (especially for a
residential property).
There was no disparity in the parties‘ respective
bargaining strengths, both
being private individuals.
Both parties appear to have sought and received legal
advice before entering
into the contracts. Mr Aldridge took legal advice.
Both parties were sophisticated and financially aware. Mr
Aldridge was an experienced property purchaser with commercial acumen.
He had
purchased
14 properties in the past and was a director of numerous companies.
The terms of the agreement were subject to some
negotiation prior to purchase. Mr Aldridge could have sought to exclude
or
vary cl 5.2 but he did
not.
The property was sold at auction whereby property is
commonly sold on an
―as is where is‖ basis.
Against conclusiveness
The condition of the house was of primary importance to the
Aldridges, which the Boes would have known from the importance Mr Aldridge
placed
on Mr Murphy‘s report and verifying its contents.
The condition of the house was predominantly within the
Boes‘ knowledge.
The amount of loss was significant, being approximately
$1m.
Mr Aldridge placed some actual reliance on Mrs Boe‘s
representation that the reason a Code Compliance Certificate could not
be
obtained was because of the time delay since the house was constructed and the
age of the house (putting at their highest in favour
of the Aldridges the
matters to which I have
referred above).97
[235] Considering all those factors, I conclude on balance it is fair and reasonable that cl 5.2 should be treated as conclusive between the parties. Mr Aldridge was not in a position of particular vulnerability in relation to any power that the Boes‘ knowledge of the property gave them. He knew that a CCC was not available, as was expressly acknowledged by the Aldridges at paragraph 22 of the Particulars and Conditions of Sale. Mr Murphy‘s report of 5 November 2006 was made available, and Mr Aldridge discussed the report with Mr Murphy by telephone shortly before the auction. The Council‘s letter of 17 March 2006 addressed to Mrs Boe dealing with cladding and durability requirements and stating the requirement for an
―acceptable ... clean weathertightness report‖ prior to consideration of the issue of a CCC, had been made available to Mr Aldridge. Thus Mr Aldridge was made aware of weathertightness issues, at least in general terms.
[236] Mr Aldridge was an experienced ―savvy‖ (on his own admission) businessman and property owner. He had access to the Particulars and Conditions of Sale in advance of the auction and he had access to legal advice to the extent he chose to seek and take it. (The evidence was that on 30 October 2006 a copy of the Particulars was sent by Ms Fischer of Lodge Real Estate to the real estate agent representing the Aldridges). He purchased at auction on terms and conditions
including cl 5.2. I am satisfied that in all the circumstances of this case cl 5.2 is a
97 See [211] above.
fair and reasonable provision which should be treated as conclusive between the parties.
Conclusion
[237] For these reasons cl 5.2 would operate to exclude the Boes from liability in respect of any pre-contractual misrepresentation (if such there was).
Mr and Mrs Boe : vendor warranty
[238] The Aldridges alleged that the Boes breached the contractual warranty in cl 14.2 of the Particulars and Conditions of Sale. The Tribunal held that there was a breach of the warranty in cl 14.2 but that the Aldridges could not recover the loss and damage suffered because the provisions of cl 5.3 excluded the Boes from liability.98
The Aldridges appeal against that finding.99
Relevant contractual provisions
[239] The relevant contractual provisions in the Particulars and Conditions of Sale are:
14. The Vendor warrants and undertakes that:
...
14.2 Where the Vendor has done or caused or permitted to be done on the property any works for which a permit or building consent was required by law:
(a) The required permit or consent was obtained; and
(b) The works were completed in compliance with that permit or consent; and
...
98 See [69]-[75] above.
99 See [97] above – para 12 notice of appeal.
5. The Purchaser acknowledges:
...
5.3 That neither the Vendor, the Vendor‘s agent nor the auctioneer shall be liable in any manner whatsoever in respect of the condition of the property, and in particular but not in limitation in respect of the condition or structural soundness of the buildings and the condition or functioning of the drains, the water pipes and the installation thereon.
23. The purchaser acknowledges that they are aware that there is no final Local Body Code of Compliance Certificate issued in respect of this property.
24. The purchaser acknowledges that the property does not have a Hamilton City Code of Compliance and the vendor will not be obtaining one.
[240] It is relevant to note that clauses 14.2(c) and (d) of the standard form of Particulars and Conditions of Sale adopted by Lodge Real Estate at the time were omitted from the agreement between the parties. These read:
(c) Where appropriate, a Code Compliance Certificate was issued for those works; and
(d) All obligations imposed under the Building Act 1991 and/or the Building Act 2004 (together ―the Building Act‖) were fully discharged.
[241] Clause 14.3 of the standard form was also omitted. It related to a warranty regarding compliance with any compliance schedule in respect of any building on the property under the Building Act.
Appellants’ submissions
[242] Mr Wright says the Tribunal accepted that if cl 5.3 was not effective to negative cl 14.2 then the Boes would be liable. I doubt that is so. The Tribunal said:100
On a strict reading of cl 14.2 it is clear that as vendors the Boes have failed to meet their obligations contained therein given the defects in the construction at para [45] above.101
100 At [69] of the decision.
101 Presumably a reference to [46] of the decision where the Tribunal identified the defects - see
[56] above.
[243] The Tribunal continued, however:
... to make a determination solely on the words of cl 14.2, would ignore the reality of the agreement‘s constitution and also the intentions of the parties to the agreement.
[244] The Tribunal then looked at the evidence in order to inform its interpretation of cl 14.2 in the context of the agreement.
[245] Mr Wright first notes that the purported exclusion of contractual liability under cl 14.2 by cl 5.3 is not governed by any particular statutory rule and that the starting point under the common law is the contra proferentem doctrine – that any ambiguity in respect of an exclusion clause will be resolved against the person relying on it.
[246] Relying on the Tribunal‘s finding that there is a direct inconsistency between clauses 5.3 and 14.2,102 Mr Wright submits that the inconsistent exclusion clause must be read down.103 Accordingly, cl 14.2 should prevail and the Boes should be liable under it.
[247] In the alternative Mr Wright submits that the two clauses can be read in a consistent manner if each is read in its own terms.104 He submits that cl 5.3 does not address a cause of action for breach of warranty, only a cause of action based on the condition of the house.
[248] He cites Klinac v Lehmann105 for the proposition that the Boes could not have intended the warranty in cl 14.2 to have no effect from the outset because of the exclusion of liability in cl 5.3.
[249] On this approach Mr Wright says the Aldridges‘ claim is for breach of
warranty because the house was not completed in compliance with the building
102 The Tribunal found at [74] of the decision: ―In terms of cl 5.3 it is clear that it is wholly inconsistent with the wording of cl 14.2‖. The Tribunal rejected a submission from Mr Wright that the two clauses could be read together and said ―... due to the inconsistencies between clause 5.3 and 14.2, such an exercise is impossible‖.
103 Dairy Containers Ltd v Tasman Orient Line CV [2005] 1 NZLR 433 (PC).
104 Presumably this is the argument rejected by the Tribunal on the basis that the clauses are
―wholly inconsistent‖.
105 Klinac v Lehmann (2002) 4 NZ ConvR 193,549 (HC).
consent, as evidenced by the defects identified by the Tribunal. Their claim does not relate to the condition of the property as such, so as to be excluded by cl 5.3.
The Boes’ submissions
[250] Mr Grimshaw disagrees with the Aldridges‘ contention that cl 14.2(b) amounts to a warranty by the Boes that the house was built in accordance with the Building Code. He submits that such an interpretation is at odds with the amendments to the draft Particulars and Conditions of Sale, including the addition of the special conditions (clauses 23 and 24) and the other provisions of the agreement, namely clauses 5.1106 and 5.3. He submits that the deletion of paragraph (d) from cl
14.2 plainly demonstrates that the Boes were not warranting that the house was built in accordance with the Building Code. Further, it could not have been the Boes‘ intention to warrant compliance with the Building Code, because at the time of sale they knew the property did not have a CCC.107
[251] Mr Grimshaw emphasised that the Aldridges knew that the house did not have a CCC; the Boes would not be obtaining a CCC; the Council had concerns about the house such that it required a clean weathertightness report before it would consider issuing a CCC (referring to the Council‘s letter of 17 March 2006); and Mr Murphy‘s report recorded that water had started to penetrate the cladding and repairs were needed to prevent further water ingress.
[252] Mr Grimshaw further submits that clauses 4.3 and 5.3 are not inconsistent and that the two clauses may be read consistently so that giving effect to cl 5.3 will not render cl 14.2 nugatory. He identified situations in which cl 4.2 could be breached giving rise to an action for breach of warranty by the purchaser to which cl 5.3 would have no application, for example, non-compliance with a height
limitation.
106 Clause 5.1 contains an acknowledgment by the purchaser ―That the Purchaser has inspected the
property and buys it solely in reliance on the Purchasers‘ own judgment‖.
107 Mr Grimshaw noted that in the most recent version of the standard ADLS/REINZ Sale and Purchase Agreement the equivalent of paragraph 14.2(d) has been omitted, apparently on the basis that it was considered inappropriate for a vendor to give a blanket warranty for all time that all obligations imposed under the Building Act were fully discharged while other parties such as builders and architects may be protected from liability through the expiry of limitation periods.
[253] Finally, Mr Grimshaw submits that cl 5.3 is expressed in the clearest terms and specifically prevents the Aldridges from seeking compensation from the Boes in relation to the condition or structural soundness of the building.
[254] He submits the parties‘ intention was that the property was to be purchased
―as is, where is‖ to the intent that no warranty was to attach to the condition of the
building.
Principles of contractual interpretation
[255] The starting point in approaching contractual interpretation is Lord Hoffman‘s five principles in Investors Compensation Scheme Ltd v West Bromwich Building Society:108
(a) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would have been reasonably available to the parties at the time of the contract.
(b) The background ―matrix of fact‖ includes anything reasonably available to the parties which would have affected the way in which the language of the document would have been understood by a reasonable person.
(c) Prior negotiations of the parties and declarations of subjective intent are excluded from the admissible background.
(d) The meaning a document would convey to a reasonable person is not the same thing as the meaning of its words. The meaning of the document is what the parties using those words against the relevant
background would reasonably have been understood to mean.
108 Investors Compensation Scheme v West Bromich Building Society [1998] 1 WLR 896 at 912–
913, adopted by the Court of Appeal in Boat Park Ltd v Hutchinson [1999] 2 NZLR 74 at 81–82.
(e) The ―rule‖ that words should be given their ‗natural and ordinary meaning‘ is not absolute. If one would conclude from the background that something must have gone wrong with the language, judges will not attribute to the parties an intention which they plainly could not have had.
[256] In Pyne Gould Guinness Ltd v Montgomery Watson (NZ) Ltd,109 McGechan J
adopted Investors Compensation and set out a useful ―cross-check‖ approach:
The best start to understanding a document is to read the words used, and to ascertain their natural and ordinary meaning in the context of the document as a whole. One then looks to the background — to ―surrounding circumstances‖ — to cross-check whether some other or modified meaning was intended. Apart from matters of previous negotiation, and matters of purely subjective intention as to meaning, both excluded on policy grounds, one looks at everything logically relevant. At some extremes, background can be compelling. If background shows natural and ordinary meaning flouts commonsense, natural and ordinary meaning very probably must give way. ...
Exclusion Clauses
[257] Mr Wright relies on common law principles in interpreting the exclusion of liability in cl 5.3. I summarise these.
[258] The contra proferentum rule is that any ambiguity in the meaning or scope of an exclusion clause is to be resolved against the party propounding the clause for protection. The onus is on the person seeking the protection of the clause to show that the words clearly and aptly describe the situation in which liability is sought to be excluded. This was stated in Dairy Containers Ltd v Tasman Orient Line CV,110 where it was said:111
This clause must be construed in the context of the contract as a whole. The general rule should be applied that if a party, otherwise liable, is to exclude or limit his liability or to rely on an exemption, he must do so in clear words; unclear words do not suffice; any ambiguity or lack of clarity must be resolved against that party...
109 Pyne Gould Guinness Ltd v Montgomery Watson (NZ) Ltd [2001] NZAR 789 (CA) at [29].
110 Dairy Containers Ltd v Tasman Orient Line CV [2005] 1 NZLR 433 (PC).
[259] More recently, in Trustees Executors Ltd v QBE Insurance (International) Ltd112 the Court of Appeal has said:
[39] It is also clear that the Court will employ the contra proferentem rule, by which a court will resolve an ambiguity against the party who proffered the phrase, in cases of genuine ambiguity. As recently acknowledged by this Court the contra proferentem rule has a place for resolving ambiguity in the interpretation of insurance contracts as it does in other contracts. However, there is need for a genuine ambiguity to exist before the contra proferentem rule is applied by a court. ...
[40] In light of the recent decisions of this Court, it is apparent that, while exclusion clauses (including those in insurance contracts) are to be narrowly construed, a court should adopt an interpretation that correlates with the presumed mutual intention of the parties. ... While it is clear that, in cases of genuine ambiguity, a court will resolve the ambiguity against the party who proffered the phrase, a court should be wary of creating an ambiguity when no such ambiguity exists.
[260] In summary, an exclusion clause will be given effect if it is expressed in clear and unambiguous terms. If, and only if, there is an ambiguity, it is to be resolved against the party the clause protects.
Building Act provisions
[261] Before turning to consideration of the clause at issue, it is useful to understand the definitions in the Building Act 1991 (which was the legislation in force at the relevant time) of terms used, particularly in cl 14.2:
[262] Building Code. The Building Code is a set of regulations made under Part VI of the Building Act 1991. This was set out in Schedule 1 of the Building Regulations 1992.
[263] Building Consent. This is defined under s 2 as ―a consent to carry out building work granted by a territorial authority under Part V of this Act; and includes all conditions to which the consent is subject‖. Section 32 specifies that building work can only be done with a building consent. On application, a building consent
shall be granted by a territorial authority under s 34(3) if:
112 Trustees Executors Ltd v QBE Insurance (International) Ltd [2010] NZCA 608.
... it is satisfied on reasonable grounds that the provisions of the building code would be met if the building work was properly completed in accordance with the plans and specifications submitted with the application.
[264] Code Compliance Certificate. Section 2 defines a code compliance certificate as ―a certificate to that effect issued by a territorial authority or a building certifier pursuant to section 43 of this Act‖:
(a) Section 43(1) states that once ―the building work has been completed to the extent required by the building consent‖, the owner should ―as soon as practicable‖ advise the territorial authority.
(b) Section 43(3) then provides that a code compliance certificate shall be issued by the territorial authority if it is ―satisfied on reasonable grounds‖ that the ―building work to which the certificate relates complies with the building code‖ (or complies with it to the extent of any approved modifications).
[265] In summary, a building consent is issued only where the territorial authority is satisfied that the plans and specifications comply with the Building Code, so that building work completed in compliance with such permit or building consent would comply with the Building Code. A CCC is issued when and if the territorial authority confirms that the building work does comply with the Building Code.
Analysis of a Vendor Warranty in cl 14.2
[266] It follows from the above that a warranty that the building works were completed in compliance with the building consent includes a warranty that the works comply with the Building Code because the consent has been issued on that basis. The issue of a CCC is simply a confirmatory step and provides evidence by the territorial authority that the works do in fact comply with the Building Code.
[267] The Boes‘ contention that the removal of paragraphs (c) and (d) of the standard form of agreement plainly demonstrates they were not warranting that the
house was built in accordance with the Building Code need not necessarily be so. The following scenarios could apply:
(a) It is possible that the building work was done in compliance with the building consent (and the Building Code) but the owner has not taken the final administrative step of obtaining the CCC from the territorial authority. In such a case the vendor would comply with paragraph (b) of cl 14.2 but would need to delete paragraph (c).
(b) It is also possible that the building work was done in compliance with the building consent, but upon inspection the building work does not comply with the Building Code so that a CCC cannot be issued. This could occur where, for example, the building consent was issued in error so that while there was compliance with the building consent the work would not comply with the Building Code; or while the building work would have complied with the Building Code at the time the building consent was issued, through the passage of time it no longer does; or it transpires that there is ambiguity in the plans and/or specifications on the basis of which the building consent was issued and that the building work while possibly complying with an interpretation of the plans and/or specifications does not comply with the Building Code. In such cases the vendor would technically comply with paragraph (b) but not with paragraph (c).
(c) The third scenario is that the works were not done in compliance with the building consent but a CCC could not be issued for the works because those works do not comply with the Building Code. This seems to be the position here because the Tribunal found that because of the defects in the construction, cl 14.2(b) had not been complied with and the CCC could not be issued because the building work does not comply with the Building Code.
[268] However, the meaning to be given to cl 14.2 has to be informed by the intention of the parties in entering into the contract taking into account all the
surrounding circumstances and the factual matrix. Accordingly the knowledge of the parties at the time they entered into the contract is relevant. Specifically, it is relevant that the Aldridges knew the CCC had not been issued. But it is relevant to ascertain whether they knew:
(a) That the CCC had not been issued but in the absence of knowledge about the state of the building work, could have assumed it was simply an administrative process that had not been undertaken (as given in evidence by Mr Aldridge); or
(b) The CCC had not been issued because the Council considered the work had not been done in compliance with the Building Code and had been put on notice to that effect.
[269] The significance of the parties‘ knowledge is to determine whether cl 14.2(b) should be given strict effect. Although on its natural and ordinary meaning the Boes would be warranting that the work complied with the building consent, in accordance with the approach in Investors Compensation Scheme v West Bromich Building Society113and Pyne Gould Guinnes Ltd v Montgomery Watson114 the surrounding circumstances and background knowledge of the parties may indicate that this was not the intention of the parties such that the natural and ordinary meaning of the clause should give way. The question therefore is whether the understanding and intention of the parties was that, with the exclusion of paragraphs (c) and (d), paragraph (b) ought to be read down such that the Boes did not warrant that the building work complied with the building consent and therefore with the Building Code.
[270] If the Aldridges knew or were aware prior to purchase that there was outstanding work that had to be done to achieve compliance with the Building Code and by inference the building consent, that would indicate it was unlikely that the
Boes intended to warrant that the works complied with the building consent as they
113 Investors Compensation Scheme v West Bromich Building Society [1998] 1 WLR 896 at 912-913
114 Pyne Gould Guiness Ltd v Montgomery Watson (NZ) Ltd [2001] NZAR 789 (CA).
knew from the terms of the agreement that the Boes were selling the contract ―as is where is‖.
[271] What the Aldridges knew, is summarised at [107] and [108] above and need not be repeated here.
[272] On the basis of the evidence and information available to the Aldridges, I do not consider they had knowledge prior to purchase that the property was not compliant with the Building Code and that the work had not been done in accordance with the building consent. The only indication they could have had of this was the Council‘s letter of 17 March 2006 stating that a clean weathertightness report was required before they would consider the issue of a CCC. In addition there was the evidence of Mr Murphy‘s reluctance to provide such a report, but the Aldridges could have fairly understood this reluctance to stem from his unwillingness to provide such a significant long-term guarantee, as he indicated to Mr Aldridge in the telephone conversation, rather than any belief or concern that the property was not code compliant.
[273] The letter from Mrs Boe to Ms Fischer outlined a version of events that was consistent with the contemporaneous documentation, that the Boes had done everything in accordance with the plans but the CCC was not forthcoming simply due to the lapse of time and the Council‘s concern about its long-term liability. It appears from Mrs Boe‘s letter that she herself believed that the work had been done in accordance with all building consents. The warranty in cl 14.2 was consistent with that belief.
[274] The Boes were aware that this was the level of knowledge that the Aldridges had.
[275] That being the state of knowledge of the parties, I consider that in entering into the contract the parties intended that cl 14.2(b) should apply to provide a warranty by the vendors that the building work was done in accordance with the building consent. This has been found not to be so. Accordingly the Boes have
breached the warranty in cl 14.2(b). The issue then becomes what is the effect of the exclusion clause in cl 5.3.
The exclusion clause 5.3
[276] Clause 5.3 purports to exclude liability ―in any manner whatsoever‖ in respect of the ―condition of the property‖, and in particular but not limited to ―the condition or structural soundness of the buildings‖.
[277] Both parties submit, on different bases, that cl 5.3 and cl 14.2 are not ―wholly inconsistent‖ as found by the Tribunal.
[278] I do not agree with the Tribunal‘s finding that the two clauses are ―wholly inconsistent‖. It is possible for there to be a breach of cl 14.2 without cl 5.3 having any application, such as breach of a building consent by the building contravening a height or boundary restriction. In such a case the purchaser would have a cause of action under cl 14.2 which would be unaffected by cl 5.3.
[279] It is also possible for cl 5.3 to exclude liability by the vendor relating to the condition of the property and the buildings which is unrelated to a breach of the warranty in cl 14.2. Each clause can have effect quite independently of the other. They are not ―wholly inconsistent‖.
[280] On the Boe‘s interpretation there will be situations where the clauses overlap. Where the breach of the warranty under cl 14.2 in relation to a building consent affects the condition or structural soundness of the buildings then the exclusion clause will be effective to exclude liability.
[281] On Mr Wright‘s interpretation there would never be any overlapping because in his submission cl 5.3 does not address a cause of action for breach of warranty and liability under cl 14.2 arises only from a breach of warranty. It does not arise from defective building work affecting the condition or structural soundness of the buildings. Accordingly, the exclusion clause never applies to exclude liability for breach of warranty under cl 14.2.
[282] In Klinac v Lehman115 it was contended that the 10 year long-stop limitation period in the Building Act applies for any claim in respect of building work from the time the building work occurred, regardless of the cause of action that is pleaded. The Court of Appeal rejected this argument, holding that where the warranty concerned is to the effect that certain building works have been carried out in a proper and workmanlike fashion, the long-stop limitation period starts from the date of the alleged breach of contract for the sale of the property, not the date of the antecedent building works. The Court reasoned that the act on which the proceeding is based is the entering into the contract, while the faulty building work is relevant solely because it makes the representation a misrepresentation.
[283] Klinac v Lehman was approved by the Court of Appeal and Supreme Court in Gedye v South.116 In Gedye v South (which was not referred to by counsel), an action for breach of the cl 6.2(5) warranty117 had been brought. The Gedyes argued that the
10 year limitation period applied as the building work was carried out in 1997. The Court of Appeal agreed that the proceeding arose from ―building work associated with the ‗design, construction, alteration, demolition, or removal of any building‘‖ such that the limitation provision in s 91 applied, and then had to consider what was the ―act or omission on which the proceedings are based‖. It held that ―it is not the building work itself which comprises the act or omission, but the approval of the work (or reliance on that approval) which sets time running for the purposes of the longstop provision‖.118
[284] The Court of Appeal then commented on the nature of the warranty:
[42] Here, the claimant points to the warranty that work previously undertaken was in full compliance with the Building Act as analogous to an act of certification. It is a voluntary act, readily verifiable and known to both parties. The warranty comprises a part of the bundle of rights and obligations assumed under the agreement for sale and purchase. Such rights and obligations are ordinarily enforceable for up to six years from the date of the breach, whereas adoption of the building work as the relevant act or omission would restrict the limitation period to four years in the present case and, in other factual circumstances, would result in the warranty being
115 Klinac v Lehman (2002) 4 NZ ConvC 193,549 (HC).
116 Gedye v South [2010] NZCA 207, [2010] 3 NZLR 271.
118 At [41].
ineffective from the moment it was given. While we accept that the truncation of a normal limitation period is a necessary incident of a longstop provision, that is not so in this instance.
[285] On appeal, the Supreme Court agreed with the lower courts, saying:119
[4] We consider that this view is undoubtedly correct. The act or omission is the breach of contract. The claim against the Gedyes, as framed, could not succeed simply and only if the building works were non-compliant and the contractual warranty had not been given. It was in respect of the latter event that the claim arose. Furthermore, on the argument proposed for the applicant, if the warranty had been given on a sale more than 10 years after the building works were done, it would never be enforceable by proceedings. That cannot be the position.
[286] Mr Wright cites the judgment in Klinac for the proposition that liability in this case is for breach of warranty and is not liability in respect of the condition of the property per se, ―in the same way that in Klinac the claim was for breach of warranty and not inadequate building work‖. He states that Glazebrook J was significantly influenced by the proposition that the parties could not have intended to give a warranty that would be worthless from the outset. He argues that, similarly, if the Boes were correct then the warranty in cl 14.2 would have no effect or value whatsoever.
[287] Although there is some force in Mr Wright‘s arguments I am not persuaded by them. Klinac and Gedye dealt with different situations. The basis for the decisions turned in each case on what was the ―act or omission on which the proceedings are based‖ in terms of s 91(2) of the Building Act 1991 (the long-stop limitation provision). It was held that it was the entering into and breach of the warranty rather than the carrying out of the building works, which was the ―act or omission on which the proceedings are based‖.
[288] In contrast, cl 5.3 does not require identification of an act or omission. It is worded broadly. It states that the Boes shall not be liable ―in any manner whatsoever in respect of the condition of the property‖. Arguably, liability for breach of warranty that relates to defects in building works is ―in respect of the condition of
the property‖ and is covered by the exclusion clause.
119 Gedye v South [2010] NZSC 97, [2010] 3 NZLR 271 at [4].
[289] I also disagree with Mr Wright‘s contention that cl 14.2 would have no effect if cl 5.3 operates to exclude liability under cl 14.2. As I have reasoned above, the two clauses are not wholly inconsistent and cl 14.2 may have application without cl 5.3 excluding liability for its breach.
Conclusion
[290] I conclude that liability for a breach of warranty under cl 14.2 that building works were completed in compliance with the building consent, is liability ―in respect of the condition of the property‖ and more particularly ―in respect of the condition or structural soundness of the buildings‖. This proceeding arises from building works carried out defectively, leading to defects in the property‘s condition.
[291] Accordingly, liability of the Boes for breach of the warranty in cl 14.2(b), in the circumstances of this case, is excluded by cl 5.3.
Was Mrs Boe a head contractor?
[292] In considering the claim in tort against the Boes, the Tribunal found that Mrs Boe was not a developer and did not owe the Aldridges a non-delegable duty of care. This finding is not the subject of appeal. The Tribunal then found that Mrs Boe was a head contractor but that she did not breach her duty of care because there was insufficient evidence that the tradespeople she engaged had relied upon her.120
[293] In reaching the conclusion that Mrs Boe was not a developer the Tribunal referred to a number of relevant factors derived from the evidence in considering Mrs Boe‘s role in the construction process and made factual findings on the basis of those factors.121 The Tribunal then concluded that the evidence which informed its conclusion that Mrs Boe was not a developer ―clearly indicates that Mrs Boe‘s role
in the project was akin to that of a head contractor‖.122
120 See at [76] to [87] above.
121 See [78] to [82] above.
122 At [88] of the decision. See [83] above.
Submissions
[294] The Aldridges say that the Tribunal‘s finding that Mrs Boe was a head contractor was essentially factual and was open to the Tribunal on the evidence. They refer to the authority of Riddell v Porteous.123 They challenge the Tribunal‘s finding that there was no evidence that Mrs Boe breached her duty of care as a head contractor. Mr Wright referred to expert evidence given by Mr O‘Sullivan and Mr Jones. He submits that the duty of care owed by a head contractor can be breached by omission as well as commission. He points to the evidence of inadequate supervision on site and submits that failure to employ a supervisor to check the subcontractors‘ work and failure to ensure the property was constructed to an appropriate standard were negligent omissions.
[295] The Boes challenge the finding that Mrs Boe was a head contractor. Mr Grimshaw referred to the Boes‘ evidence that they both had fulltime jobs during the period of construction and they did not carry out any building work. He says that they reasonably relied on the expert tradesmen to carry out their work properly and there is no evidence that Mrs Boe had ever given directions as to how subcontractors should carry out the work. He submits her involvement was limited to making aesthetic decisions and that the Boes were not involved in technical issues. He notes, and relies on, the Tribunal‘s finding that there was ―no evidence that any decision Mrs Boe made or any sequencing issues for which she would have had some responsibility would have led to or caused any of the building defects‖. 124
Head contractor authorities
[296] The following authorities consider in the ―head contractor‖ context the role of
owners who engaged builders on a labour only basis.
123 Riddell v Porteous [1999] 1 NZLR 1 (CA).
124 Decision at [95].
Gardiner v Howley
[297] A central issue in Gardiner v Howley125 was whether the former owners of a dwelling were ―head contractors‖ in relation to the construction of the dwelling. They had hired builders on a labour only basis and employed various other contractors to undertake different aspects of the work. In the District Court, the Judge found they were head contractors. On appeal, Temm J considered there was a foundation on the facts for the Judge to come to that conclusion and that he could not hold the conclusion to be wrong.
[298] Temm J said:126
As one can see from the background, if they had simply contracted some builder to construct the premises for them, then the respondent‘s cause of action, if it existed at all, would exist only against that builder. It was a central part of the dispute in the Court below as to whether the appellants could properly be described as ―head contractors‖ but the evidence in the record shows that they took a very active part in controlling the whole of the construction.
[299] The District Court Judge considered it was ―incontrovertible‖ that on the facts the defendants had placed themselves in the position of head contractors, because:
... they paid for labour only [and] although the various tradesmen were to use their own skill, it was the defendants who assumed and took control and had the power of ‗hire or fire‘ over the work which the various tradesmen did, e.g. as evinced by the substitution of the various tradesmen.
[300] In relation to the position of a home owner arranging for contractors on a labour-only basis, Temm J went on to note:127
A significant part of the argument before me rested upon the nature of the work done by the appellants when the house was built. It was submitted in argument that the liability of a builder or perhaps an owner/developer is different from the liability of a person who arranges for a house to be built on a labour only basis. There is a fine line to be drawn between the two on the one hand and the one on the other but on the facts of this case that line is not required. Once the Judge decided that the appellants were in the category of builder for the purposes of this case and once I am satisfied that the
125 Gardiner v Howley (1995) ANZ ConvR 521 (HC).
126 At 3.
127 At 9.
evidence was sufficient to justify that conclusion, the argument as to whether there is a difference in liability between the professional builder on the one hand and the home handyman on the other evaporates.
Mowlem v Young
[301] The dispute in this case related to a defective wall. The High Court had to consider whether an owner of a private residential dwelling was a builder and head contractor. Mr Young, a chartered accountant with some experience as a developer, had built for himself a private residential dwelling that he lived in for five years. Robertson J observed that it was clear Mr Young did not himself carry out the work but engaged contractors to do it. His Honour recognised that the issue was whether Mr Young owed a ―non delegable‖ duty of care in terms of Mount Albert Borough Council v Johnson, and noted that it was a case of weighing the factual position. He referred to Gardiner v Howley and noted the importance of the relationship in determining whether a tortious obligation was owed.
[302] Robertson J then rejected the argument that Mr Young was a head contractor, noting that such a finding had not been expressly made by the District Court Judge. He said:128
This was nothing more than a professional man building a house and getting appropriate workmen to come in and do the physical jobs which needed to be done. I cannot accept the submission that the evidence discloses that Mr Young was the builder and head contractor and was accordingly the constructor of the retaining wall. I understand why Mr Bush uses those words in his submission. But they lack an air of reality in what was going on. Mr Young needed walls. Mr Young arranged for people to do it. To now say that makes him a contractor or developer, is in my judgment to miss the import of the distinction which the Court of Appeal was drawing in Mt Albert Borough Council.
[303] It is necessary to elaborate on the distinction drawn in Mount Albert Borough Council v Johnson.129 There, the Court of Appeal differentiated between a person who arranges to build a dwelling for their own use and a commercial developer:
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
128 At 7. This passage was cited by the Tribunal at [91] of the decision.
129 Mount Albert Borough Council v Johnson [1979] 2 NZLR 234 (CA) at 240–241.
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.
(emphasis added)
[304] Although the passage focused on the role of a developer, the distinction appears also to have relevance to the classification as head contractor, as seen in Mowlem v Young.
[305] Nonetheless, such a distinction will be secondary to whether, on the facts, an owner is a builder or head contractor. In Chase v de Groot,130 Tipping J said that the builder of a house owes a duty of care in tort to future owners, and the position is no different when the builder is also the owner. An owner/builder owes a like duty of care in tort to future owners. There, Mr de Groot had been found primarily responsible for building the foundations and owed a duty of care to the purchasers,
the Chases. In Mowlem, Robertson J noted that Tipping J did not have to address the point of whether Mr de Groot was the builder as it had been clear that he was the actual builder ―in a real and meaningful way‖ and accordingly owed a duty of care in that capacity.
Riddell v Porteous
[306] In Riddell v Porteous,131 the Riddells obtained a building permit and engaged Mr Porteous to do the construction work on a labour only basis. They contracted the electrical, plumbing and roofing work to other specialist tradespeople. The work done did not comply with the building permit. The High Court held that because Mr Porteous was employed as a labour only carpenter, the Riddells assumed the
responsibility of a head contractor and it was for them to ensure that the house was
130 Chase v de Groot [1994] 1 NZLR 613 (HC) at 619.
131 Riddell v Porteous [1999] 1 NZLR 1 (CA).
constructed in accordance with the plans and specifications. In so finding John
Hansen J overturned the District Court Judge‘s findings on this point.
[307] The Court of Appeal considered Hansen J wrong to do so. It said:132
It seems that Hansen J was encouraged to ignore this warning by his belief that the Riddells could properly be characterised not merely as owners or employers in relation to Mr Porteous but as head contractors to whom he and the specialist tradesmen were subcontractors. This characterisation was in error. It does not follow that because a landowner engages a building contractor on a labour only basis that the former plays the role of a head contractor or even undertakes to perform the functions of a supervisor or clerk of works. The owner may elect to leave the carrying out of the contract entirely in the hands of the contractor just as he or she would do if the engagement was an ordinary contract with a price fixed for labour and materials. It seems to us that, within the scope of the work Mr Porteous agreed to do, that was the position notwithstanding he was remunerated by an agreed weekly sum. The Riddells were the employer and Mr Porteous was their contractor (or, more correctly, one of their contractors). It can be accepted that he did not have responsibility for the work of the other tradesmen.
(emphasis added)
[308] On the basis of these authorities there is an important factual distinction to be made between:
(a) Owners who engage contractors on a labour only basis and act as head contractors in a supervisory role; and
(b) Owners who engage contractors on a labour only basis to complete specified works leaving the carrying out of the work entirely in their hands.
[309] I now consider a number of cases in which this issue has been considered:
Findlay v Auckland City Council133
[310] Mr Findlay, the houseowner, appealed against a finding of the Tribunal that he was contributorily negligent due to his failure to manage, oversee and coordinate
132 At 6–7.
133 Findlay v Auckland City Council HC Auckland CIV-2009-404-6497, 16 September 2010.
the construction process. Ellis J accepted the finding that the contractor, Mr Slater, was engaged on a labour only basis and not in some supervisory role. She then considered the Tribunal‘s findings in relation to Mr Findlay‘s (a) failure to employ a project manager; (b) assumption of role of project manager; and (c) failure properly to manage, coordinate or oversee the work done by different contractors.
[311] Ellis J considered ―questionable‖ the finding that Mr Findlay‘s failure to
employ a project manager meant that he assumed that role. She stated:
[70] ... Mr Findlay was not a developer; my own view of the facts is that he was merely organising the building of a house in which he and his family would live. I do not accept that the evidence shows that he undertook, in any positive or meaningful way, active responsibility for controlling or supervising the various contractors or for checking their work in any but a superficial sense. To the extent there are statements in the determination that suggest that the Tribunal formed a different view I do [not] consider that such an assessment is consistent with the evidence; it can only have been based on the assumption I have referred to in the previous paragraph.
[71] Nor (as far as I have been able to ascertain) was there any evidence to suggest that the contractors were expecting, or relied upon, Mr Findlay to control, supervise or check their work for compliance with the regulatory requirements or (in that sense) to ―control‖ the build. Any such expectation would in the circumstances have been inexplicable and unrealistic given Mr Findlay‘s undisputed lack of relevant expertise and the fact that he was employed in full-time work elsewhere.
[312] Ellis J thus considered the situation ―on all fours‖ with Mowlem v Young and that Mr Findlay did not assume the role of project manager. She then went on to consider if Mr Findlay‘s failure to employ someone to fulfil a supervisory role could amount to a negligent omission. Ellis J cited the following passage from Invercargill City Council v Hamlin:134
... it has never been a common practice for new house buyers, including those contracting with builders for construction of houses, to commission engineering or architectural examinations or surveys of the building or proposed building. In the low-cost housing field the ordinarily inexperienced owner was contracting with a cottage builder on fairly standard plans amended to suit the owner's wishes and pocket. That contracting was within the framework of encouragement and often financial support from the State and of the protection provided by local body controls and adherence to the standard bylaws. It accorded with the spirit of the times for local authorities to provide a degree of expert oversight rather than expect every small owner to take full responsibility and engage an expert adviser.
134 Invercargill City Council v Hamlin [1994] 3 NZLR 513.
[313] Ellis J observed that Mr Findlay‘s project was not ―low-cost housing‖, but heard evidence that when the house was built in 1996 it was not common practice to employ project managers in more complex projects either. She ultimately accepted that Mr Findlay did not take all reasonable steps to protect his position and, to a limited extent, was contributorily negligent.
Harris v Sell135
[314] Mr Harris appealed against the Tribunal‘s finding that he was contracted to be the head contractor and project manager. He argued that the evidence established that he was only engaged as a labour only contractor and Mrs Sell was the head contractor. Rodney Hansen J referred to the evidence before the Tribunal and the adjudicator‘s preference for Mrs Sell‘s evidence, despite the recognition that Mrs Sell played a much more active role in the building project than would normally be the case.
[315] The adjudicator had accepted that Mrs Sell had obtained quotes, ordered materials, organised and paid the contractors, arranged for them to be onsite, applied for the building consent and arranged for insurance, but found that she did not provide on-site supervision. It was stated that Mrs Sell could not have been head contractor because she was not responsible for the construction side of the project, but had contracted Mr Harris for such construction and supervision. Rodney Hansen J agreed with this finding, saying:
[21] The finding that Mr Harris assumed responsibility to supervise is not only supported by the evidence but accords with common sense. It is common ground that Mrs Sell was not competent to supervise the job. Indeed, no-one but Mr Harris was in a position to properly do so. It seems to me most unlikely that Mrs Sell would have chosen to assume that responsibility in such circumstances.
135 Harris v Sell HC Auckland CIV-2009-404-3465, 22 December 2009.
Young v McQuade.136
[316] Mrs Young appealed to the District Court against the Tribunal‘s finding that she was liable as developer and head contractor to the subsequent purchasers, the McQuades. Judge Barber set out the adjudicator‘s findings on this issue as follows:
[15] The Adjudicator proceeded to deal with liability in some detail. He considered that for Mrs Young to have owed a duty of care, her role must be established as more than just an owner/developer. He continued:
6.3.3 It was not contested that Mrs Young was the owner when the majority of the construction work was carried out. The evidence established that Mrs Young was also in control of the building after the transfer of the property to the Trust and until it was sold to the claimant. Mrs Young was also in control of the process to complete any outstanding work and carry out remedial work after the sale took place, albeit she was assisted at times by Darren Young.
6.3.4 Mrs Young gave evidence that she is employed as a motelier and her previous background is as a hairdresser. She maintains that she had no direct involvement with the technical construction of any of the five units and her involvement was limited to selection and organisation of the furnishing and fittings. I accept that Mrs Young did not physically get involved with the construction but the evidence overwhelmingly showed that not only was Mrs Young in control but it was Mrs Young that organised everything to do with the development from having revised drawings prepared, contacting the local authority and organizing all parts of the contract and the sub contractors. In effect Mrs Young was the main contractor. The Closing Submissions by Claimants' Counsel at paragraph 35 is a very convincing list substantiating that Mrs Young was deeply involved with the process.
6.3.5 It is well established in New Zealand that those that own/develop/build have a duty of care to future owners, ...
[317] Judge Barber held that the findings were sound and well supported by the evidence. After referring to submissions from the parties he held:
[86] I am in no doubt that Mrs Young acted as a developer of Unit 5. It was one of five in a development carried out by her and her husband. They had applied for the original building permit, but she was in control of the project. Mrs Young dealt with Porirua City Council building consent requirements and notified Porirua City Council of amendments to the internal layout. Mrs Young contacted Porirua City Council about any inspections. She dealt with
136 Young v McQuade [2005] DCR 673 (DC).
the architect regarding changes. She engaged a labour-only builder for a limited task, and the builder did not undertake any project management activity. She instructed subcontractors, ordered materials, and dealt with disputes between tradesmen. She has substantial property development experience. She did not permanently move into the apartment 5, but only occupied it for the odd night. She lived at her motel; although she seems to have made some use of Unit 5 for office purposes.
[318] It is important to note that in this case Mrs Young was held on the facts to be both a developer and a head contractor.
Analysis
[319] The main principles derived from the above cases can be stated as:
(a) When a landowner engages a building contractor on a labour only basis, it does not follow that he or she undertakes the role of a head contractor or supervisor of the works: Riddell v Howley.
(b) Former owners, simply in their capacity as owners, are not liable to subsequent purchasers. However, whether an owner is a head contractor and liable to subsequent purchasers in that capacity is a factual question in the circumstances of the case: Gardiner v Howley.
[320] It is clear that whether an owner is a head contractor is a factual question, but there is a fine line as to the nature and level of involvement that is required for an owner to be classified as a head contractor. The following table summarises factors the courts have considered in the analysis of whether an owner is a head contractor:
Owners found to be head contractors Owners found not to be head contractors
Gardiner v Howley. Temm J agreed with the District
Court Judge that the owners were head contractors because they took a
“very active part”
in controlling the whole construction. They:
(a) paid for labour only
Mowlem v Young. Mr Young was a chartered accountant
with some developer experience. He was a “professional man building a
house and getting
appropriate workmen to come in and do the physical jobs which
needed to be done”, in respect of a defective
(b) had the power of “hire or fire” over the work which the tradesmen did and substituted various trademen
Young v McQuade. Mrs Young was found both to be a
head contractor and developer. Although she:
(a) did not physically get involved with the construction
(b) was employed as a motelier and has a background as a hairdresser; she:
(a) had revised drawings prepared (b) liaised with the local authority about inspections
(c) organised all parts of the contract and the sub contractors and ordered materials
(d) was in control of the process to
complete any outstanding work and carry out remedial work after the sale took place
(e) had substantial property
development experience
Mrs Young was found to have breached her duty because she: (a) instructed a different exterior
cladding system be used from that
shown on the drawings
(b) failed to take steps to ensure that the building work was properly supervised or checked
(c) caused the house to be constructed
from different drawings than those lodged for the building permit
(d) failed to lodge the amended
drawings with the local authority
(e) failed to request inspections by the local authority at appropriate intervals, times or stages
(f) failed within a reasonable time to
ensure the defective works were properly remedied once she became aware of them
retaining wall.
Riddell v Porteous. The Riddells obtained a
building permit, contracted specialist tradespeople and hired Mr Porteous as a
labour-only carpenter.
They left the carrying out of the contract entirely in
Mr Porteous’ hands as if the engagement
were an ordinary contract for labour.
Findlay v Auckland City Council. Mr Findlay was
merely organising the building of house in which he and his family would live.
He:
(a) did not undertake in any positive or meaningful way active responsibility for supervising the various contractors or for checking their work in any but a superficial sense.
(b) lacked relevant expertise and the
contractors did not, and could not have, expected to rely on Mr Findlay to “control” the build.
(c) was employed in full-time work elsewhere.
Mr Findlay was ultimately found to have been contributorily negligent to a limited extent for failing to employ a project manager (despite evidence that it was uncommon to do so in 1996)
Harris v Sell. Although Mrs Sell had had obtained
quotes, ordered materials, organised and paid the contractors, arranged for them
to be onsite,
applied for the building consent and arranged for insurance,
she:
(a) did not provide on-site supervision
(b) was not responsible for the construction side of the contract
(c) was not competent to supervise the
job
(c) had contracted Mr Harris for such control and supervision
[321] The question appears to be whether the owner‘s organisational involvement and input was sufficiently significant that he or she was acting as head contractor, or whether the involvement was limited to engaging contractors to perform specified work or works in the construction of the dwelling, leaving it in the contractor‘s hands as to how the work was performed with checking by the owner only at a superficial level. The mere fact that the owner engaged various tradespeople on a labour only basis and has the power to ―hire and fire‖ them no longer seems to be a sufficient ground for a finding that the owner was a head contractor, although engagement at this level implies a degree of understanding as to whether the work done was satisfactory.
[322] Factors that suggest a finding of ―head contractor‖ are where the owner:
has significant property development experience (and is
thus competent to
assume the role);
attends on-site meetings;
is involved in the process of applying for building
consents and permits, including input in the drawings and specifications;
arranges for inspections by the local authority;
assumes a supervisory role over the various
tradespeople, engaged on a labour only basis.
Application of the principles in this case
[323] From the finding that Mrs Boe was not a developer the Tribunal seems to have jumped to the conclusion that she was a head contractor, relying only on the decision in Gardiner v Howley referred to him by counsel for the Aldridges. He said it was the fact that in that case the owners had assumed and taken control over the various tradesmen that attracted liability.
[324] The Tribunal referred to the decisions in Mowlem v Young and Findlay in determining whether Mrs Boe had breached her duty of care as head contractor but did not consider those authorities in determining whether a duty of care as head contractor existed on the facts of this case. In both Mowlem v Young and Findlay the owners were found not to be head contractors. While it is clear that a failure adequately to supervise the works can amount to a breach of duty of care as head contractor (as in Young v McQuade), a prerequisite is that such a duty is found to exist.
[325] The Tribunal‘s reasoned as follows:
[89] ... Mrs Boe engaged each of the trades, paid the contractors‘ invoices, controlled the designs for the dwelling, and processed the resource and building consents. ... Mrs Boe also had the power to make all important decisions and as there was no overall contracted site supervisor, the building project was in effect run and controlled by Mrs Boe. Moreover the evidence also suggests that it would have also been Mrs Boe‘s decision not to engage a site supervisor for the project.
(emphasis added)
[326] The above passage demonstrates the Tribunal‘s reliance on the reasoning in Gardiner v Howley and also (though not mentioned by the Tribunal in this context) Riddell v Porteous. Further, some of the factors the Tribunal took into account in finding that Mrs Boe had not breached her duty of care - her lack of expertise; the fact that she was employed full-time in the Boes‘ motel business; the absence of evidence that she was involved in any decision or any sequencing issues which would have led to or caused any of the building defects - were factors that are relevant to, and usually considered, in determining whether such a duty should be imposed at all.
[327] Accordingly, it is necessary to consider whether the evidence in this case in fact supports the Tribunal‘s conclusion that Mrs Boe was a head contractor.
[328] Mrs Boe appears to have previous property development experience, although this may have been limited to the construction of their beach house and their motel. The Boes had initially engaged a Mr Harvey as a builder, and it was intended that he would be in charge of the construction on a day-to-day basis with
Mr Scott, the architect, supervising the construction.137 However, Mr Harvey withdrew from this position as he considered that the construction was beyond his expertise. Soon after, Mr Scott also disengaged from the project.
[329] In the end the Boes engaged a builder, Mr Swart, on a labour only basis. The
Tribunal said of his role:
[12] ... He had some role in co-ordinating the sequential operation of the other trades, but he did not have any supervisory or management control over the other trades engaged by Mrs Boe. Mr Swart was also the person who contacted the suppliers for materials to be delivered when necessary, but he did not supply any of the materials himself as the Boes sourced and purchased the materials. It is noted that during construction Mr Swart contacted Mr Scott on two occasions .... However as Mr Scott had already been disengaged from the project, Mr Scott made it clear that his involvement in the construction had ended and indicated that he was not at all willing to assist.
[330] Mr Swart completed most of the work on the dwelling, although a Mr Visser had done work on the foundation. While Mr Swart was on site, he called for building inspections to be undertaken during construction. The last inspection was the pre-lining inspection in September 1997. The Council did an ―audit‖ inspection in early 2000 when they discovered that no final inspection had been requested or undertaken.
[331] Of the factors the Tribunal listed in considering Mrs Boe‘s involvement,138 I consider the following particularly relevant to the issue of whether she was a head contractor:
(a) Mrs Boe had experience with previous building projects for houses and motels.
(b) Mrs Boe was involved in obtaining the necessary building and resource consents from the Council in order to begin construction
work.
137 Decision at [11].
138 Decision at [83]–[85].
(c) Mrs Boe contracted tradespeople she considered sufficiently competent. She engaged the various contractors to undertake the construction work on a labour only basis and all invoices were provided directly to and paid by Mrs Boe.
(d) Mrs Boe sourced and purchased the building materials herself.
(e) The evidence of the tradesmen was that Mrs Boe was on site regularly, was running the job, was cost conscious, and was directly involved in making decisions regarding heights, aesthetics and other decisions as to the nature and extent of the works.
(f) It might have been Mrs Boe‘s decision not to engage a site supervisor
for the project.
[332] On the other hand, the Tribunal also noted that:
(g) There is insufficient evidence suggesting that the contractors relied on Mrs Boe to control, supervise or monitor the work in terms of compliance with the necessary building requirements.
(h) Any expectation of such reliance would have been unrealistic given
Mrs Boe‘s lack of relevant building expertise.
(i) Mrs Boe was employed full time in the Boes‘ motel business.
(j) There is no evidence that Mrs Boe made any decision or had any responsibility for sequencing issues that would have led to any of the building defects.
[333] I do not consider it relevant that Mrs Boe arranged for plans to be drawn up or gave Mr Scott extensive specifications for the home she wanted him to design. Those involvements are common to owners wishing to construct a house rather than head contractors.
[334] Although Mrs Boe‘s involvement was clearly significant, I do not think she can be classified as a head contractor, as Mrs Young was in Young v McQuade. Although there are some similarities between the two (Mrs Young also had other employment and did not physically participate in the construction), Mrs Young was clearly competent enough to have significant input in the plans and specifications, including instructing on the exterior cladding system to be used. Although the evidence was that Mrs Boe was on-site regularly, she did not appear to make decisions on issues aside from matters such as height and aesthetics, and was unlikely, because of her lack of building expertise, to have supervised or monitored the contractors‘ work in anything other than a superficial manner.
[335] Aside from Mrs Boe‘s on-site visits, her involvement appears to be similar to that of Mrs Sell in Harris v Sell. Mrs Sell had organised contractors, quotes, ordered materials, arranged for building consents, but lacked the expertise to supervise the construction works. In that case the court found that Mr Harris had been hired for that purpose. Here, although Mrs Boe may have deliberately decided not to hire a head contractor after Mr Harvey withdrew, it appears to be a result of not being able to find someone willing and competent to take on that role. However, it does not follow that she assumed the role. On balance the evidence points against such a finding.
Conclusion
[336] I consider the Tribunal‘s finding that Mrs Boe was a head contractor, on the basis of all the evidence, to be incorrect. The reasons given by the Tribunal in finding that she did not breach her duty as head contractor should have been taken into account in the Tribunal‘s inquiry as to whether in fact she was a head contractor. Having regard to all the relevant factors as I have listed them above and on the basis of the authorities I have referred to, I do not consider that Mrs Boe assumed the role of head contractor in the circumstances of this case. Accordingly she did not owe a duty of care to the Aldridges as head contractor.
Limitation defence : third respondent
[337] Mr Talbot for the third respondent seeks a determination from this court that the causes of action against the third respondent cannot succeed because of the clear findings of fact by the Tribunal that all his work on the main building envelope was completed outside the 10 year long-stop limitation period. It is not disputed that 7
July 1998 is the relevant date for the long-stop limitation period. The Aldridges claim was filed with the Tribunal on 7 July 2008.
[338] Section 91 of the Building Act 1991 relevantly provides:
91. Limitation defences—
(1) Except to the extent provided in subsection (2) of this section, the provisions of the Limitation Act apply to civil proceedings against any person where proceedings arise from—
(a) Any building work associated with the design, construction, alteration, demolition, or removal of any building; or
(b) The exercise of any function under this Act or any previous enactment relating to the construction, alteration, demolition, or removal of that building.
(2) Civil proceedings may not be brought against any person 10 years or more after the date of the act or omission on which the proceedings are based.
...
[339] As the Court of Appeal said in Johnson v Watson,139 an act or omission occurs on a particular day. Subsection (2) is a statutory bar which is self-contained both as to the commencement of the period allowed and its duration. A plaintiff cannot in any circumstances sue more than 10 years after the act or omission on which the proceedings are based.
[340] Mr Talbot‘s submissions for Mr Swart principally focused on the volenti and causation grounds of appeal. He noted that the only other ground of appeal expressed to apply to Mr Swart is that in paragraph 14 of the notice of appeal (Mr
Swart being the fourth respondent before the Tribunal):
139 Johnson v Watson [2003] 1 NZLR 626 (CA) at [8].
As to the Liability of the Second, Third and Fourth Respondents, that the decision of the Tribunal was erroneous as follows:
14. By failing to articulate findings as to their liability including by reference to the existence of and breach of duties of care and/or other duties or causes of action alleged by the appellants against the second, third and fourth respondents.
[341] Counsel submits that the Tribunal made findings of fact in favour of the third defendant that are material to the limitation defence. He referred to the following passages in the decision:
[11] ... In the end the Boes engaged the fourth respondent, Mr Swart, on a labour-only basis to erect the framing, install the external and internal joinery, and to fit the Harditex cladding and the internal gib board. There was no written contract for Mr Swart‘s employment.
[12] Mr Swart commenced work in either late December 1996 or early
1997 ...
[13] Mr Swart completed his work on the main part of the dwelling between early 1998 and March 1998 with the main building envelope having all been completed by the end of 1997, including the framing, joinery installation, roof, plastering, internal lining and gib stopping. Although Mr Swart also erected most of the foundation work he did not do all of it as some of the foundation work had already been commenced by Mr Visser when he arrived on site. Mr Visser was engaged by the Boes to commence the foundation work particularly for the squash court and its retaining wall. Mr Swart had no involvement in that particular work.
[14] Whilst Mr Swart was on site he called for building inspections to be undertaken during construction. The last building inspection during the construction process was the pre-lining inspection in September 1997.
[342] Mr Talbot referred to evidence which he said is relevant background. All building work on the dwelling which Mr Swart was contracted to carry out was completed by 2 March 1998. However, Mr Swart returned in 1999 at the request of the Boes to carry out a discrete job, namely the erection of a pergola which was attached to the cladding on the north-west face of the house. He was instructed and paid separately for this work. Item 6 in the schedule of agreed defects prepared by the experts refers to the pergola and states:
Pergola - connections to dwelling are not waterproofed – poor workmanship issue - isolated to pergola area – minor only – some question as to when it was fitted.
[343] Mr Talbot accepted that Mr Swart fitted the pergola and that it was fitted within the 10 year long-stop period. But he submits that these facts do not assist the appellants as, in accordance with the findings of the Tribunal, Mr Swart completed his work on the dwelling by March 1998, well outside the long-stop period.
[344] Further, he notes there is no finding by the Tribunal that fitting of the pergola beams gives rise to a defect causing loss.140
[345] Counsel submits that while the appellants were able to place reliance on the authority of Johnson v Watson to resist an application by Mr Swart to be removed from the proceedings at a much earlier stage, the factual findings now made by the Tribunal clearly put Mr Swart‘s involvement outside the 10 year long-stop period. Thus Johnson v Watson must be distinguished on its facts.
[346] Mr Wright submits that paragraph 14 of the notice of appeal provides a good and sufficient basis to include the limitation issue (a point contested by Mr Talbot). He submits there is no clear finding by the Tribunal as to the date of completion. He referred to the Tribunal‘s finding141 that the Boes took occupation of the new home sometime between early Autumn 1998 and mid-summer 1999, and that this period straddles the critical long-stop date.
[347] In reliance on Johnson v Watson Mr Wright submits that Mr Swart had a continuing duty of care that extended into the long-stop period and that there were continuing omissions in breach of the continuing duty of care.
[348] In Johnson v Watson a builder, Mr Watson, constructed a building for the plaintiffs from March to December 1990. From 1991 to 1998 he returned to effect prevention work on leaks. In March 2001 the plaintiffs filed proceedings against the builder alleging negligence as to his original work and prevention work. The Court of Appeal held (allowing an appeal against summary judgment in favour of the builder on the ground that the claims were barred by s 91(2) of the Building Act
1991), that the builder owed the plaintiffs a duty of care in tort each time he returned
140 Decision at [42] and [46].
141 Decision at [15].
to effect prevention work. The fact that the original work was causative of the total damage did not mean that the prevention work could not be an additional and concurrent cause of part of the damage since in law it was enough that a cause was substantial and material (that is, more than trivial or de minimis). The Court pointed out that had another builder been engaged by the plaintiffs to effect the prevention work and had been negligent, then that builder could not have relied on the defendant‘s original work as the sole cause of the plaintiffs‘ damage.
[349] The Tribunal did not mention Mr Swart‘s return in 1999 to carry out the job of erecting the pergola in the decision. The Tribunal‘s finding that Mr Swart completed his work on the main part of the dwelling between early 1998 and March
1998 does not factor in the effect (if any) of Mr Swart carrying out later work in
1999. If his work on the pergola was a discrete task unrelated to any defects that had at that stage manifested themselves, then Johnson v Watson will indeed be distinguishable on its facts, as Mr Talbot submits.
[350] However, the issue of any ―continuing duty‖ in terms of Johnson v Watson must, I consider, be determined in the context of the full factual background. The Tribunal had the advantage of hearing all the evidence and of receiving full submissions on all relevant matters. Because of the conclusions it reached on the volenti and causation defences, the Tribunal did not articulate specific findings or conclusions on this issue. I consider the matter should be remitted to the Tribunal to make the relevant factual findings and to consider the principle of a ―continuing duty‖ against the full factual background.
Summary of conclusions
[351] The Aldridges‘ appeal is allowed in relation to the respondents‘ defences of
volenti non fit injuria (voluntary acceptance of risk) and lack of causation.
[352] The Aldridges‘ appeal is dismissed in relation to the causes of action in contract against the Boes, misrepresentation and vendor warranty.
[353] The Boes‘ cross-appeal against the finding that Mrs Boe was a head contractor is allowed.
[354] The issue of the third respondent‘s limitation defence is referred back to the
Tribunal for findings of fact and determination on the basis of those findings.
[355] Issues of the liability of the respondents and any of them (other than the Boes), contributory negligence, availability of limitation defences and quantum are referred back to the Tribunal for determination in the light of the findings on appeal.
Costs
[356] Mr Heaney suggested that if my findings resulted in matters being referred back to the Tribunal, determination of costs on the appeal and cross-appeal should await the further decision of the Tribunal. I am content for that course to be adopted if all counsel are agreed. However, if counsel are not agreed, any memoranda as to costs should be filed within 21 days. If Mr Heaney‘s proposal is agreed, he should file advice to the Court by email or memorandum.
Other matters
[357] In my (amended) minute of 15 June 2011 I said that after the judgment issued I would convene a conference of counsel to determine how outstanding issues should best be progressed. If counsel consider such a conference would be of assistance they should file memoranda within 21 days identifying the matters they consider such a conference should address.
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