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Body Corporate 324371 v Clark Brown Architects Limited [2021] NZHC 2379 (10 September 2021)

Last Updated: 1 October 2021

JUDGMENT OF VAN BOHEMEN J

This judgment was delivered by me on 10 September 2021 at 4.00pm and

re-delivered by me on 20 September 2021 in accordance with High Court Rules 2016, r 11.10

..............................

Registrar/Deputy Registrar

Solicitors/Counsel:

S A Thodey

Buddle Findlay

BODY CORPORATE 324371 v CLARK BROWN ARCHITECTS LIMITED [2021] NZHC 2379 [10 September

2021]

Introduction

• [1] The sixth defendant, the Auckland Council, seeks judgment against the fifth defendant, Brookfield Multiplex Constructions (NZ) Ltd (in liquidation), on the Council’s cross claim for 85 per cent of the amount the Council paid the plaintiffs in settlement of the plaintiffs’ claim for losses arising out defects in the construction of the apartment building, Century on Anzac, at 100 Anzac Avenue, Auckland.

• [2] Specifically, the Council seeks judgment for $ [REDACTED] plus GST, if any, plus interest at the rate in the Judicature Act 1908 from 30 June 2020,¹ being the date of settlement, and costs.

• [3] As a result of the settlement on 30 June 2020 and other actions, the plaintiffs’ claims against all defendants have been settled, discontinued or otherwise ended.

• [4] Brookfield Multiplex and the Council are the only parties still engaged in the proceeding. However, Brookfield Multiplex has taken no substantive steps in the proceeding since June 2015.

Background

• [5] In 2002, The 100 Limited, a developer, engaged Brookfield Multiplex to design and build Century on Anzac. The terms of their agreement were set out in a Contract Agreement dated 20 September 2002.

• [6] That same year, Brookfield Multiplex applied to the Council for consents to build Century on Anzac. On 21 March 2003, the Council issued a three-stage building consent to Brookfield Multiplex to build Century on Anzac in accordance with plans and specifications attached to the consent.

• [7] Between September 2002 and October 2003, Brookfield Multiplex and subcontractors engaged by it built Century on Anzac. During that period, the Council undertook inspections of the building work.

¹ In accordance with sch 1, cl 1 of the Interest on Money Claims Act 2016, s 87 of the Judicature Act 1908 continues to apply to proceedings commenced before 1 January 2018.

• [8] On 20 October 2003, the Council issued Code Compliance Certificates certifying completion of the construction of the building works.

• [9] In 2011, the plaintiffs, being the body corporate for Century on Anzac and present and past owners of unit titles to apartments in the building, alleged that there were various defects in the building which affected both the individual units and the common property.

• [10] On 19 September 2012, the plaintiffs issued this proceeding against parties involved in the design and construction of Century on Anzac. The defendants included Brookfield Multiplex, and the Council. The plaintiffs alleged negligence on the part of all defendants.

• [11] On 25 October 2012, the Council brought a cross claim against Brookfield Multiplex and other defendants engaged in the design and build of Century on Anzac. The Council’s claim alleged negligence on the part of Brookfield Multiplex and the other defendants, and sought contributions in respect of any liability that the Council would be held to have to the plaintiffs.

• [12] On 3 December 2012, Brookfield Multiplex was put into liquidation.

• [13] By minute dated 26 February 2015, Associate Judge Christiansen granted leave to the plaintiffs and the Council to continue the proceeding against Brookfield Multiplex in liquidation.²

• [14] On 1 May 2015, Brookfield Multiplex filed a statement of defence to the plaintiffs’ second amended statement of claim. Brookfield Multiplex denied most of the allegations in the second amended statement of claim.

• [15] On 22 June 2015, Brookfield Multiplex advised the Court that it did not intend to take any further significant steps to defend the plaintiffs’ claim but reserved its right to do so.

² Body Corporate 324371 v Clark Brown Architects HC Auckland CIV-2012-404-5664, 26 February 2012.

• [16] On 30 June 2019, the plaintiffs, the second defendants, the third defendants and the Council settled their claims with respect to each other in the proceeding.

• [17] On 26 September 2019, with the leave of the Court,³ the Council filed and served an amended cross claim against Brookfield Multiplex. The amended cross claim seeks an order that Brookfield Multiplex indemnifies the Council for the amount the Council was required to pay the plaintiffs under the settlement or, in the alternative, 85 per cent of the sum paid by the Council to the plaintiffs.

• [18] At the hearing on 19 June 2021, the Council limited its claim to 85 per cent of the settlement sum paid to the plaintiffs.

The hearing on 19 July 2019

• [19] Because Brookfield Multiplex filed a statement of defence to the plaintiffs’ claim, the hearing of the Council’s cross claim could not proceed by way of formal proof in accordance with r 15.9 of the High Court Rules 2016. The hearing proceeded on the basis that, in accordance with r 10.7 of the High Court Rules,⁴ the Council had to prove its case on the balance of probabilities, having regard to affidavits and briefs of evidence filed in the proceeding by the Council and the plaintiffs.⁵ That is consistent with the approach taken by Thomas J in Body Corporate 346799 v KNZ International Ltd (Victopia), a proceeding concerning the Victopia apartments, which also involved Brookfield Multiplex.⁶

• [20] In support of its claim, the Council relied both on affidavits of experts engaged by it and of experts engaged by the plaintiffs which were filed in the proceeding. The evidence relied on by the Council includes affidavits from:

³ Body Corporate 324371 v Clark Brown Architects HC Auckland, CIV-2012-404-5664, 25 September 2019 (Minute of Woolford J )at [2].

⁴ Rule 10.7 of the High Court Rules 2016 provides:

If the plaintiff appears and the defendant does not, the plaintiff must prove the cause of action so far as the burden of proof lies on the plaintiff.

⁵ Body Corporate 324371 v Clark Brown Architects HC Auckland CIV-2012-404-5664, 11 June 2021.

⁶ Body Corporate 346799 v KNZ International Ltd [2017] NZHC 511, (Victopia) at [5].

Experts engaged by the Council:

(a) Mark Powell, a registered building surveyor, with expertise in the analysis and identification of weathertightness and structural waterproofing issues in residential and commercial buildings;

(b) Peter Lalas, an engineer who specialises in the design, manufacture, testing and installation of new and existing façades to buildings; and

(c) Michael Simpson, an engineer with expertise in fire engineering, including the performance design of fire safety systems;

Experts engaged by the plaintiffs:

(d) Peter Jordan, a building surveyor with expertise in building defect investigations and analyses, who provided his opinion on the performance of the Council and of Brookfield Multiplex in the construction of Century on Anzac;

(e) Nicholas Batchelor, a building surveyor with expertise in investigations of residential buildings, apartment buildings and large commercial complexes that have building defects;

(f) Timothy Womack, an engineer with expertise in façade design, manufacture and installation;

(g) James White, a quantity surveyor, who provided an estimate of the costs of repair of the alleged defects under three alternative scenarios for the remediation of the building.

• [21] In addition, Ms Thodey, counsel for the Council, refers to briefs of evidence of other experts engaged by the plaintiffs which were filed in the proceeding. These include briefs of evidence from:

(a) Joanna Williams, an engineer with expertise in fire safety and fire protection systems for residential and other buildings; and

(b) Ronald Green, a passive fire consultant.

• [22] The Council also relies on an affidavit from Sarah Hann, a solicitor employed by the Council, who explains the basis of the Council’s settlement with the plaintiffs.

• [23] The Council also filed an affidavit from Stephen Tomlinson, a solicitor with expertise in the calculation of GST, who explains why any judgment sum awarded to the Council should be expressed as being on a “plus GST (if any)” basis.⁷

• [24] Mr Snell, counsel for the liquidator for Brookfield Multiplex, appeared at the hearing on 19 July 2021. Mr Snell agreed that the Court could look at any relevant evidence and did not challenge the evidence relied on by the Council or call evidence or make submissions.

The questions for decision

• [25] Ms Thodey acknowledges that the Council has the onus of establishing the sum it paid in settlement of the plaintiffs’ claim and that Brookfield Multiplex was liable to the plaintiffs for that sum or a greater sum. Since the settlement sum is the consequence of an acceptance of liability by the Council, I infer from that submission that the Council accepts it has the onus of establishing that the liability of Brookfield Multiplex for the defects alleged by the plaintiffs was at least equal to the liability of the Council for those defects.

• [26] In order to be satisfied that this onus has been discharged, the Court must be satisfied, on the balance of probabilities, that:

(a) Century on Anzac has the defects alleged by the plaintiff;

(b) The defects give rise to the damages claimed by the plaintiffs for remediation of those defects;

⁷ In summary, whether or not GST is payable on the settlement with the plaintiffs, and on any judgment sum, is contingent on whether the Body Corporate is liable to pay GST on compensation it received. That question was outside the scope of the settlement and of this judgment.

(c) Brookfield Multiplex and the Council are liable to the plaintiffs for the defects and the damages to which the defects gave rise;

(d) The Council has paid the sum alleged in settlement of the plaintiffs’ claim;

(e) Brookfield Multiplex should pay the Council 85 per cent of the sum the Council paid the plaintiffs;

(f) Brookfield Multiplex is liable for the costs claimed by the Council.

Does Century on Anzac have the defects alleged and do the defects give rise to the losses claimed by the plaintiffs?

• [27] Because of the way the issues are discussed in the evidence, it is convenient to consider together whether the defects exist and, if so, the extent to which the defects give rise to the damages claimed by the plaintiffs.

• [28] The plaintiffs’ fifth amended statement of claim alleges that Century on Anzac was constructed with defects, including the defects set out in sch 3 to the amended statement of claim.

• [29] Schedule 3 to the amended statement of claim identifies defects to the balconies, building envelope and roofs to the penthouse apartments, as well as fire defects.

• [30] The amended statement of claim sought damages resulting from the alleged defects as follows:

(a) Costs of repair: $20,583,122.85 plus GST, as set out in schedule 3;

(b) General damages: $1,640,000.00, as set out in schedule 4;

(c) Consequential losses: $3,473,031.05, as set out in schedule 5.

Defects to the balconies

• [31] Century on Anzac has large partially enclosed balconies on the east and west elevations and smaller cantilevered balconies on the north elevation. There are no balconies on the south elevation.

• [32] Schedule 3 to the fifth amended statement of claim alleges a number of defects to all of the balconies. Mr Batchelor’s affidavit explains the nature of those defects and the steps he considers are required to remedy them. Mr Powell does not accept that all the alleged defects generate a need for substantial remediation. However, Mr Powell and Mr Batchelor agree that the balconies on all three elevations are subject to the following defects which require remediation:

(a) Deficiencies in the installation of waterproofing membranes, including inadequate thickness of the membranes;

(b) A lack of waterproofing around the balcony balustrades which penetrate the waterproofing membranes because their base plates are fixed directly to the concrete substrate of the balconies rather than to the edges of the balconies; and

(c) The lack of a drip edge to the outside edge of each balcony.

• [33] Mr Powell and Mr Batchelor also agree that these defects have resulted in water entry likely to cause damage and amount to breaches of the Building Code,⁸ specifically cls B2 (Durability) and E2 (External Moisture),⁹ and require substantial remediation works to the balconies on the east, west and north elevations of the building.

• [34] The agreed remediation work entails: removing balustrades, uplifting existing tiles, waterproof membranes and materials down to the concrete topping pads on all

⁸ See Building Regulations 1992, sch 1.

⁹ The references to the Building Code are to the Code as it stood at the time Century on Anzac was constructed.

balconies, repairing water damage, installing new membranes, tiles and balustrades and carrying out associated work to wall claddings and balcony joinery.

• [35] Mr Batchelor recommends that the repairs to the balconies on the east and west elevations should include a curtainwall on both elevations to enclose the balconies. This recommendation is reflected in Scenario 3, the plaintiff’s preferred scenario for remedying the defects in the building, as discussed in Mr White’s affidavit.

• [36] Mr Powell accepts that the recommended repairs to the balconies on the east and west elevations would include curtainwalls which would avoid the need to remove the cladding on those elevations. However, Mr Lalas considers that enclosure of the balconies with curtainwalls would result in an element of betterment for the apartments concerned.

• [37] Subject to the issue of betterment, I accept that the Council has established to the required standard the existence of the above defects to the balconies, which both entailed breaches of the Building Code, and the appropriateness of the proposed remediation as described above, including the installation of curtainwalls on the east and west elevations.

Defects to building envelope

• [38] The defects to the building envelope alleged in sch 3 to the fifth amended statement of claim entailed extensive cracking to the cladding panels of the building façade on the north and south elevations of the building. The experts’ consideration of the defects and recommendations for remediation focuses on the Overclad cladding system used on those elevations, as distinct from the Ventclad cladding system used on the western and eastern elevations, although it appears that both systems used Eterpan fibre cement cladding sheets.

• [39] The plaintiffs’ experts, Mr Batchelor and Mr Womack, identified a number of design and installation flaws with regard to the Eterpan cladding. Not all of these alleged defects were accepted by the Council’s expert, Mr Lalas. However, Mr Lalas and Mr Womack agreed that there were two principal reasons for the cracking of the cladding panels:

(a) A design flaw which specified the use of countersunk screws, which had the effect of locking the panels on to the rails fixed to the building surface and meant the panels could not expand and contract in response to changes in temperature and moisture; and

(b) An installation flaw whereby the installers failed to follow the procedure specified in the manufacturer’s manual for screwing the panels to the rails. However, the experts agree that, even if the installers had followed the procedure specified in the manual, the panels would have cracked.

• [40] Following a meeting in June 2019, the three experts agreed that the cladding system breached cls B1 (Structure) and B2 (Durability) of the Building Code and that the cladding on the building needed to be removed and replaced with a new cladding system.

• [41] Ms Thodey submits that this expert agreement extended to replacement of the cladding on all four elevations of the building. However, paragraph 10 of the fifth amended statement of claim, which alleged the flaws discussed in the affidavits of the three experts, addresses only the cladding on the north and south elevations. In addition, paragraph 10 of Mr Lalas’s affidavit of 12 September 2019 and the summary of the conclusions of the meeting of experts exhibited to that affidavit, to which Ms Thodey refers in support of her submission, both state conclusions with respect to the cladding on the north and south elevations only.

• [42] For these reasons, I accept that the Council has established to the required standard, that is on the balance of probabilities, the existence of the defects in the cladding on the north and south elevations of the building envelope, which entail breaches of the Building Code, and the need for the removal of that cladding and its replacement with a new cladding system.

• [43] However, for the reasons discussed above in relation to the repair of the balcony defects, I also accept that the installation of curtainwalls on the east and west elevations is part of the proposed repair of the defects in the building.
• [44] For completeness, I also note that Mr Lalas accepts that the proposed remediation under Scenario 3 for all four elevations of the building is suitable. However, Mr Lalas considers that that remediation would result in significant benefits to the plaintiffs including the installation of a cladding system that is of a higher quality, requires less maintenance and has a longer life than the existing facades. For that reason, betterment is also a consideration with respect to the remediation of the cladding defects on all elevations.

Defects to penthouse apartment roofs

• [45] In schedule 3 to the fifth amended statement of claim it is alleged that:

(a) The parapet cap flashings were poorly installed and were incorrectly fixed and did not cover the full perimeter of the roof membrane; and

(b) The saddle flashings were not properly fixed to adjacent walls.

• [46] Mr Batchelor’s evidence is that, as a consequence of these defects, the cap flashings and saddle flashings do not comply with cls B2 (Durability) and E2 (External Moisture) of the Building Code. Mr Batchelor says that repair of these defects requires the demolition of some roof structures, the replacement of the existing roof membrane, and the temporary removal of the plant and other structures on the roof.

• [47] Mr Lalas accepts that the installation of the parapet caps does not accord with good industry practice. However, he does not accept that there was evidence that the asserted defects have resulted in any Building Code performance failure that requires remediation. Mr Lalas reaches the same conclusion with respect to the saddle flashings. Mr Lalas maintained that position at the conference of experts. For that reason, the experts were not able to agree on the remedial scope for the defects.

• [48] Ms Thodey submits that it is nonetheless open to the Court to make findings about the liability of Brookfield Multiplex for these defects. However, if the Council’s own expert does not accept that remediation of these defects is required, the Court cannot be satisfied on the balance of probabilities that the defects caused the losses the alleged by the plaintiffs in relation to these defects. That is because the repair costs

claimed for these defects are based on the remediation that the Council’s expert does not accept was required.

• [49] For that reason, the Court cannot be satisfied that the Council has established to the required standard that the defects breached the Building Code or that the defects give rise to the losses claimed.

The fire defects

• [50] Schedule 3 to the fifth amended statement of claim alleged nine specific passive fire safety defects. Six concerned inadequate fire ratings for penetrations for various services, ducts and fire doors. One concerned inadequate fire stopping of wall and service penetrations. Another concerned lack of required substrates behind wall joints adjacent to mechanical and hydraulic risers. The remaining defect was the lack of adequate egress in the event of fire.

• [51] In his brief of evidence, Mr Green addresses all of the defects except that concerning egress and says that all of those defects entail a failure to comply with cl C3 (Spread of fire) of the Building Code in one or more respects and require repair. In her brief of evidence, Ms Williams says that the failure to provide a suitable alternative means of egress from the building other than exit through the lobby entails a breach of cl C2 (Means of escape) of the Building Code. Ms Williams says the ramp exit from the car park is not suitable because of difficulties of access to the car park and because of the steepness of the ramp which does not comply with the Building Code.

• [52] In his affidavit, Mr Simpson does not dispute the existence of the defects and accepts that all defects were a breach of cl C3 of the Building Code when Century on Anzac was constructed. However, he considers that the majority of the defects do not breach the Building Code as it now stands. For that reason, he does not consider the plaintiffs’ proposed scope of repair is reasonable or necessary.

• [53] At the conference of fire experts on 19 June 2019, all experts agreed that all of the defects exist and were a breach of the Building Code or the technical literature at the time Century on Anzac was constructed. However, they disagree about whether

the defects breach the current Building Code, particularly with regard to the probability of damage in the event of fire. The experts agreed that remediation of some of the defects is required but they could not agree on the extent of that remediation. The experts agreed that an alternative means of egress is required but could not agree on how that should be provided.

• [54] On the basis of the evidence, therefore, all I can conclude is that the Council has established to the required standard that the alleged fire defects exist and that, at the time of construction, each of the defects entailed breaches of the Building Code. I also accept that remediation of some of the defects entails a proportion of the losses suffered by the plaintiffs. I cannot be satisfied, however, as to the amount of the losses to which those defects give rise.

Are the Council and Brookfield Multiplex liable for the losses that have been established?

• [55] The Council has acknowledged its liability to the plaintiffs by agreeing to pay the amount in the Settlement Agreement in full and final settlement of the plaintiffs’ claims. However, because the Settlement Agreement by its nature does not particularise the basis of that acceptance of liability, and because the Council’s cross claim seeks the contribution in respect of any liability that the Council would be held to have to the plaintiffs, it is necessary for the Court to be satisfied that the amount sought from Brookfield Multiplex is properly attributable to defects for which the Council and Multiplex are both liable.

• [56] The liability of councils to owners and subsequent purchasers of residential properties is settled. The Supreme Court in North Shore City Council v Body Corporate 188529 (Sunset Terraces)¹⁰ confirmed that the principle affirmed by the Privy Council in Invercargill City Council v Hamlin,¹¹ namely that councils are liable to original and subsequent homeowners for loss caused by the failure of Council inspectors to carry out their inspection functions with reasonable skill and care, remains valid. The Supreme Court also confirmed that that principle was unaffected

¹⁰ North Shore City Council v Body Corporate 188529 (Sunset Terraces) [2010] NZSC 158, [2011] 2 NZLR 289 at [17] and [24] – [26].

¹¹ Invercargill City Council v Hamlin [1996] 1 NZLR 513 (PC) at 526.

by the entry into force of the Building Act 1991 and extends to all residential premises.¹² The Supreme Court also held that, in relation to buildings where ownership is exercised under the Unit Titles Act 1972,¹³ bodies corporate may sue on behalf of unit owners for damage to common property.¹⁴

• [57] There is no doubt, therefore, that the Council can be liable to the plaintiffs in the present case for loss caused by the failure of Council inspectors to carry out their duties with reasonable skill and care.

• [58] The liability of developers to owners and subsequent purchasers of residential properties is also reasonably settled.

• [59] In Bowen v Paramount Builders (Hamilton) Ltd, the Court of Appeal accepted that English law had developed to the point that contractors, architects and engineers are all subject to a duty to use reasonable care to prevent damage to persons whom they could reasonably expect to be affected by their work.¹⁵ Applying that principle to the case before it, the Court of Appeal held that a builder of a house owes that duty of care to subsequent purchasers.¹⁶

• [60] In Hamlin, the Privy Council confirmed that the law as it had developed in New Zealand, under which local authorities and builders owed duties of care to ensure compliance with regulatory requirements, was unaffected by developments in English law which considered a local authority’s liability to be more limited.¹⁷

• [61] In Cashfield House Ltd v David & Heather Sinclair Ltd, Tipping J held that, in some circumstances, a principal may owe a primary non-delegable duty of care and thus be liable for the negligent actions of an independent contractor.¹⁸ Tipping J also held that a principal may also owe a primary duty of care to those who could

¹² Sunset Terraces, above n 10, at [25] and [51].

¹³ At [58]. The Supreme Court’s analysis applies equally to a body corporate’s right to sue under the Unit Titles Act 2010.

¹⁴ At [58] – [59].

¹⁵ Bowen v Paramount Builders (Hamilton) Ltd [1977] 1 NZLR 394 (CA) at 406.

¹⁶ At 410. See Murphy v Brentwood District Council [1991] UKHL 2; [1991] 1 AC 398 (HL).

¹⁷ Invercargill City Council v Hamlin, above n 11, at 521 – 522.

¹⁸ Cashfield House Ltd v David & Heather Sinclair Ltd [1995] 1 NZLR 452 (HC) at 465.

foreseeably be damaged by the acts or omissions of the independent contractor, but the scope of that duty will be dependent on the circumstances of the case.¹⁹

• [62] In addition to its common law obligations, Brookfield Multiplex, as contractor, accepted a number of specific obligations under the Contract Agreement with The 100 Limited that bear on its liability to the plaintiffs.

• [63] The relationship between the Body Corporate and The 100 Limited is not pleaded or addressed in evidence or in submissions. It is not known, therefore, whether The 100 Limited assigned to the Body Corporate the benefit of its contractual rights, warranties or guarantees held by it as developer of Century on Anzac, including its rights under the Contract Agreement with Brookfield Multiplex. If it has done so, as was done in another case involving Brookfield Multiplex,²⁰ Brookfield Multiplex would be directly liable to the Body Corporate for any breaches of the Contract Agreement. However, the plaintiffs’ claim against Brookfield Multiplex in the fifth amended statement of claim is only in negligence. Accordingly, I consider the liability of Brookfield Multiplex on the basis that it owed a duty of care to the Body Corporate and to present and past unit holders for its own acts and omissions and may owe to all plaintiffs a primary non-delegable duty of care for the acts and omissions of its contractors, bearing in mind that the nature of its contractual obligations may have a considerable bearing on whether it owed such a duty of care.²¹

Brookfield Multiplex’s responsibilities under the Contract Agreement

• [64] Clause 1 of the Contract Agreement provided:

The Contractor shall design, complete, deliver and remedy defects in the works described in the Contact Documents.

• [65] The General Conditions of Contract²² included the following provisions:

4.1.1 Authority to sub contract

¹⁹ At 466.

²⁰ Body Corporate 326421 v Auckland Council [2015] NZHC 862.

²¹ Bowen v Paramount Builders (Hamilton) Ltd, above n 15, at 407.

²² The General Conditions of Contract were those set out in NZS 3910:1998, New Zealand Standard Conditions of Contract for Building and Civil Engineering Construction, as amended in the Contract Agreement.

The Contractor may sub contract elements of work under the Contract, but must not sub contract or assign the whole of its rights and obligations under the Contract. ...

• 4.1.2 Contractor retains overall responsibility

Regardless of the right given to the Contactor by this part of the Contract to sub contract any of the work under the Contract, the Contractor will remain primarily liable to discharge all of its obligations under the Contract.

• 5.1 General responsibilities

• 5.1.1 The Contractor shall complete, handover to the Principal, and remedy defects in the Contract Works and provide all services, labour, Materials, Plant, Temporary Works, transport, and everything whether of a temporary or permanent nature required so far as the necessity for the same is specified in, or is to be inferred from the Contract Documents.

All works carried out by the Contractor shall be executed with reasonable skill, care and diligence and with sound workmanship and materials. The Contractor shall use reasonable skill, care and diligence to ensure that the Contract Works are designed and constructed so as to be fit and adequate for the purposes specified in the drawings and specifications for the Contract Works and that such Contract Works when constructed, comply with the requirements of the buildings consents and resource consents issued for the Contract Works.

• 5.11 Compliance with laws

• 5.11.1 In carrying out the Contract, the Principal and the Contractor shall comply with the provisions of all statutes, regulations and bylaws of government, local and other public authorities that may be applicable to the Contract Works.

• [66] The above provisions establish that, as a matter of contract, Brookfield Multiplex accepted responsibility for the overall design and construction of Century on Anzac and for ensuring that its works, and works carried out by its sub-contractors, were carried out with reasonable skill, care and diligence, were in accordance with the contact documents and complied with the law.

• [67] I consider that, consistently with those undertakings, Brookfield Multiplex is subject to a primary non-delegable duty of care to ensure that works carried out by its sub-contractors were carried out with reasonable skill, care and diligence, were in accordance with the contact documents and complied with the law.

Liability for the defects

• [68] As recorded above, Century on Anzac was built by Brookfield Multiplex and contractors instructed by it on the basis of the three-stage building consent issued by the Council to Brookfield Multiplex. The Council undertook a series of inspections of the building works and, upon completion of construction, issued code compliance certificates to Brookfield Multiplex.

Balcony defects – Council liability

• [69] With respect to the balcony defects, Mr Jordan’s evidence is that a prudent Council:

(a) would not have granted building consent for the installation of the balconies on the basis of the information submitted to it for the waterproofing of the balconies;

(b) would have ensured that the building consent conditions were met and would have implemented an inspection regime that included membrane inspections and found no record of such inspections; and

(c) would not have had sufficient grounds to be satisfied that the membrane complied with the building consent and ought not to have issued a code compliance certificate.

• [70] I accept that evidence as establishing that the Council failed to discharge with reasonable skill and care its responsibilities with respect to the supervision of the design and specification of materials used for the balconies, and with respect to the construction of the balconies. I also accept that the evidence establishes the Council’s liability for the remediation of the established balcony defects, including the costs of installation of curtain walls on the east and west elevations, and consequential losses.

Balcony defects – Brookfield Multiplex liability

• [71] Mr Jordan’s evidence is that, as a prudent head contractor for the development, and as the applicant for the building consent and for the code compliance certificates,

Brookfield Multiplex had a responsibility to review the designs and supporting documents and to have satisfied itself that the products and systems to be used on the building would meet the requirements of the Building Code.

• [72] Mr Powell’s evidence is that Brookfield Multiplex became involved in aspects of the design of the balconies and, because it did not request or receive design information from the architect, effectively became the designer of those aspects. More generally, Mr Powell says that Brookfield Multiplex did not take all the steps a competent head contractor should have taken to ensure that the building was constructed in a Building Code compliant manner, including with respect to the balconies.

• [73] I accept that evidence as establishing that Brookfield Multiplex failed to discharge with reasonable skill and care its responsibilities with respect to the design and specification of materials used for the balconies, and with respect to the construction of the balconies. I also accept that the evidence establishes Brookfield Multiplex’s liability for the remediation of the established balcony defects, including the costs of installation of curtain walls on the east and west elevations, and consequential losses.

Cladding defects – Council liability

• [74] Mr Jordan says that a prudent Council would have recognised that the Overclad and Ventclad cladding systems were relatively new to the market and did not have a history of satisfactory performance in service of confirmed durability capabilities. With respect to the Overclad system used on the north and south elevations, Mr Jordan says a prudent council would have sought confirmation from Brookfield Multiplex, as the applicant for building consent and that the cladding system complied with the Building Code. He also says there is no evidence of such a request, and that a prudent council would not have accepted this cladding system.

• [75] While Mr Lalas takes issue with some of those conclusions and says greater responsibility for these matters lies with other parties, some of Mr Lalas’s statements relate to his initial view that the Overclad system did not entail a breach of cl B2 (Durability) of the Building Code. Mr Lalas subsequently revised that assessment

after the conference of experts on 19 June 2019 and accepted that the system also breached cl B2 of the Building Code. For these reasons, I accept Mr Jordan’s evidence as establishing that the Council failed to discharge with reasonable skill and care its responsibilities with respect to the supervision of the design of the Overclad cladding system and as establishing the Council’s liability for the costs of replacement of the Overclad cladding system and any consequential losses.

Cladding defects – Brookfield Multiplex liability

• [76] Mr Jordan says that because the cladding systems used at Century on Anzac did not fall within the provisions of acceptable solutions to the Building Code and were considered alternative solutions, they required careful assessment before Brookfield Multiplex could be satisfied on reasonable grounds that the building work, if properly carried out, would comply with the Building Code.

• [77] Mr Jordan considers that Brookfield Multiplex failed to meet the standard of a prudent head contractor by failing to:

(a) Obtain a producer statement (design review) for the cladding systems in addition to that prepared by the second defendant;

(b) Identify that the second defendant’s producer statement did not verify compliance with the Building Code and was not relevant to the Overclad system; and

(c) Obtain independent appraisals of the cladding systems.

• [78] There is no disagreement with that assessment in the other evidence regarding the cladding systems.

• [79] For these reasons, I am satisfied that Brookfield Multiplex failed to discharge with reasonable skill and care its responsibilities with respect to the supervision of the design and installation of the Overclad cladding system by its sub-contractors. Accordingly, Brookfield Multiplex is liable for the costs of replacing the Overclad cladding system and any consequential losses.

Roof defects

• [80] As discussed above, I am not satisfied to the required standard that the alleged defects to the penthouse apartment roofs breached the Building Code or that the defects give rise to the losses claimed. Because the alleged losses have not been established, it is unnecessary to make any findings of liability of the Council or Brookfield Multiplex for those losses.

Fire defects

• [81] As discussed above, I am satisfied that the Council has established to the required standard that the alleged fire defects existed and that, at the time of construction, each of the defects entailed breaches of the Building Code.

• [82] Although none of the affidavits to which counsel referred discussed the liability of the Council, I am satisfied from the description and photographs of the defects in Mr Green’s brief of evidence that the majority of the fire rating, penetration and stopping defects ought to have been identified by the Council in their inspections and before issuing code compliance certificates for the building. It is also apparent from Ms Williams’ brief of evidence that the Council did not ensure that the alternative means of egress complied with the Building Code. To that extent, I am satisfied that the Council failed in its duty to carry out its inspections with reasonable diligence and care and is liable for the costs of remedying those defects to the extent remediation is necessary.

• [83] In his affidavit, Mr Simpson says that, as an experienced commercial contractor, Brookfield Multiplex was in a position to ensure that the building work was in accordance with expected construction requirements for fire rating of building elements and that this would include ensuring that the penetrations pleaded in the plaintiffs’ claim would be properly fire stopped. Mr Simpson also says Brookfield Multiplex was in a position to ensure the performance requirements for the building works, including escape routes, were met. In Mr Simpson’s view, Brookfield Multiplex could have detected all of the nine fire defects pleaded. I am satisfied, therefore, that in failing to detect and remedy these defects, Brookfield Multiplex failed to discharge with reasonable skill and care its duty to ensure that the building

complied with the Building Code and is liable for the costs of remedying those defects to the extent remediation is necessary.

• [84] The difficulty is that the experts could not agree on the extent of the remediation required for the fire rating, penetration and fire-stopping defects or on how to provide an alternative means of egress was required. On the basis of the evidence adduced, I cannot be satisfied to the required standard as to the extent of the liability of the Council or of Brookfield Multiplex for these defects. For that reason, I am not able to quantify the liability of the Council or of Brookfield Multiplex for the fire defects.

Did the Council pay the sum alleged in settlement of the plaintiffs’ claim?

• [85] In her affidavit, Ms Hann states that following mediation and, as part of the settlement, the Council the sum set out in her affidavit, including GST (if any), to the plaintiffs. I am satisfied, therefore, that the Council has paid that sum to the plaintiffs.

Should Brookfield Multiplex pay the amount claimed by the Council?

• [86] The Council seeks judgment for 85 per cent of the sum it paid the plaintiffs.

• [87] That claim is based on the submission that the respective liability of the Council and Brookfield Multiplex for the defects should be 15 per cent to the Council and 85 per cent to Brookfield Multiplex based on the respective roles and responsibilities of the Council and Brookfield Multiplex in the construction of Century on Anzac and apportionments of liability adopted in other cases, in particular Victopia,²³ which involved similar cladding and fire defects.

Reasonableness of settlement

• [88] Ms Thodey submits that it is unnecessary for the Council to establish that the settlement was reasonable and refers to the observation by Thomas J in Victopia that

²³ Victopia, above n 6.

Her Honour was unaware of any New Zealand authority to the effect that a party such as the Council must establish that a settlement was reasonable.²⁴

• [89] While I am satisfied that there is no need for the Council to establish that the settlement was reasonable, given the findings I have made with regard to liability for the roof defects and the quantification of the remediations costs of the fire defects, I consider it appropriate to record the following.

• [90] First, although I have held that the liability of the Council and Multiplex for remediation of the roof defects has not been established, according to the evidence of Mr White, remediation of those defects comprised only five per cent of the total repair costs estimated by Mr White.

• [91] Secondly, although I have held that the liability of the Council and Multiplex for remediation of the fire defects has not been quantified, according to Mr White, the roof repair costs comprised 23 per cent of the total repair costs estimated by Mr White. In other words, over 70 per cent of the claimed repair costs related to the remediation of the balcony and cladding defects over which there is no dispute, subject to the question of betterment.

• [92] Thirdly, even if remediation of the roof defects and fire defects is excluded from consideration, that would be unlikely to have a significant effect on the claims for consequential losses. These relate principally to the costs of finding alternative accommodation and storage while the building is evacuated, as it will need to be to remedy the balcony and cladding defects. Nor would exclusion of remediation of the roof and fire defects be likely to have a significant effect on the claims for general damages.

• [93] Fourthly, even if the liability of the Council and of Multiplex for the roof defects was in doubt and even if the quantification of the liability for the fire defects was uncertain, Ms Hann’s affidavit confirms that the Council took into account its potential liability on all categories of defects in its settlement with the plaintiffs.

²⁴ At [169].

• [94] Given these considerations, I accept that the reasonableness of the settlement is not open to question.²⁵

Apportionment

• [95] As Ms Thodey submits, there is no fixed rule for the apportionment of liability between parties in a building defects case, although, typically, the regulator’s liability as a secondary tortfeasor is held to be considerably less than that of the primary tortfeasor. Ms Thodey referred to various cases considered by the Courts and the Weathertightness Homes Tribunal where liability of a defendant has been found in a range of between five and 25 per cent.

• [96] In Victopia, the Council submitted that its liability should be set at 10 per cent while Brookfield Multiplex submitted that the generally accepted apportionment of responsibility between a builder and a council is 80 per cent and 20 per cent and that there was nothing about that case that warranted a different approach. Thomas J reviewed the relevant authorities²⁶ and considered the submissions of the parties.²⁷ Thomas J concluded that the apportionment of responsibility was not simply a matter of adopting apportionments made in other cases but required an analysis of the roles of the parties. Her Honour said that, in her assessment, the matters referred to by the Council in support of its position that Brookfield Multiplex carried considerable weight. Thomas J also noted that Brookfield Multiplex had not adduced evidence as to what facts should influence apportionment and said that it was significant that in respect of two of the three proven defects, the relevant works did not comply with the building consent. In these circumstances, Thomas J assessed the appropriate

²⁵ This acceptance takes into account the information from Ms Thodey that there was no agreement at the settlement discussions on the extent to which deductions should be made to reflect betterment, whether all consequential losses were recoverable, on the level of general damages that might be awarded or whether deductions should be made to reflect contributory negligence on the part of the plaintiffs.

²⁶ At [157] – [164]; reviewing Mount Albert Borough Council v Johnson [1979] NZCA 46; [1979] 2 NZLR 234 (CA); Morton v Douglas Homes [1984] 2 NZLR 548; Scottv DC Parsons & Ors HC Auckland, CP776/90, 19 September 1994; Body Corporate 326421 v Auckland Council [20 15] NZHC 862 [Nautilus]; Body Corporate 160361 v BC 2004 Ltd [2015] NZHC 1803; Chapman v Western Bay of Plenty District Council TRI-2008-101-1 00, 11 November 2009; McAneney v Auckland Council [2011] NZWHT Auckland 63; and Engela South Trustee Ltd v Auckland Council [2013] NZWHT Auckland 12.

²⁷ At [165] – [167].

apportionment of liability to be 15 per cent to the Council and 85 per cent to Brookfield Multiplex.²⁸

• [97] Ms Thodey submits that most of the considerations that the Council put forward in support of its position in Victopia and to which Thomas J had regard, apply in the present case. The relevant considerations are:

(a) Brookfield Multiplex was responsible for making the design decision as to the use of the cladding and, as an international building company, were better equipped than the Council to resolve whether there was adequate information to determine whether the cladding system would comply with cls B1 and B2 of the Building Code. In addition, as Thomas J noted in Victopia, it was well known that issues had arisen with the use of fibre cement board in Australia where Brookfield Multiplex had a high presence in the industry.²⁹

(b) Brookfield Multiplex was responsible for the implementation and auditing of a quality control system onsite, had personnel onsite daily, had control over the assurances of sub-contractors as to compliance with the Building Code and elected when Council officers came on site. For that reason, when issues of workmanship arose, such as with the installation of the waterproof membranes on the balconies and the failure to ensure passive fire safety measures complied with the Building Code, it follows that the quality assurance system was either not being implemented or was carried out negligently.

(c) In seeking code compliance for the building works, Brookfield Multiplex had provided specific assurance that the works had been completed to a Building Code compliant standard.

• [98] I accept that all of these considerations apply equally in the present case. I addition, and while the balcony defects in Victopia were somewhat different from

²⁸ At [168].

²⁹ At [166(a)].

those in the present case, I accept that, as in that case, Brookfield Multiplex were responsible for key design decisions that led to the balcony defects. In the present case, these were the fixing of the balustrades to the concrete substate through the waterproofing membrane and the lack of a drip edge to the outside edge of each balcony.

• [99] Given these close similarities between the circumstances in Victopia and the absence of any submission or evidence from Brookfield Multiplex in support of a different apportionment of liability, I am satisfied that an apportionment of responsibility of 15 per cent to the Council and 85 per cent to Brookfield Multiplex is appropriate, even though the evidence does not establish that there were breaches of the building permits in the present case.

Costs

• [100] The Council seeks costs of $34,532.00 and disbursements of $91,297.17. A breakdown of costs and disbursements is provided with Ms Thodey’s submissions. Brookfield Multiplex makes no challenge to this claim.

• [101] The costs reflect the steps taken by the Council since the proceeding commenced. Most costs are calculated on a 2B basis, but some have been calculated on a 2A basis to reflect that there was some duplication in steps taken with respect to multiple parties.

• [102] The bulk of the disbursements relate to the fees paid to experts. The Council seeks to recover only specified portions of those fees, 33 per cent in some cases and 20 per cent in others, to reflect the fact that much of that evidence was adduced in relation to the Council’s liability to the plaintiffs.

• [103] I am satisfied that the calculation of costs and the apportionment of disbursements are appropriate.

Result and orders

• [104] I uphold the cross claim by the sixth defendant, the Auckland Council, against the fifth defendant, Brookfield Multiplex Constructions (NZ) Ltd (in liquidation), for 85 per cent of the amount the Council paid the plaintiffs in settlement of the plaintiffs’ claim for losses arising out defects in the construction of the apartment building, Century on Anzac, at 100 Anzac Avenue, Auckland.

• [105] I give judgment in favour of the Auckland Council for the amount of

$ [REDACTED] plus GST, if any, and interest at the rate in the Judicature Act 1908 from 30 June 2020, plus costs of $34,532.00 and disbursements of $91,297.17.

• [106] I direct that the amounts sought by the Council and ordered by this Court, as set out at [2] and [105], are redacted in public versions of this judgment in order to preserve the confidentiality of the settlement with the plaintiffs.

G J van Bohemen J