Andrews Property Services Ltd v Body Corporate

JurisdictionNew Zealand
CourtCourt of Appeal
JudgeBrown J
Judgment Date22 December 2016
Neutral Citation[2016] NZCA 644
Docket NumberCA487/2015
Date22 December 2016

[2016] NZCA 644

IN THE COURT OF APPEAL OF NEW ZEALAND

Court:

French, Miller and Brown JJ

CA487/2015

BETWEEN
Andrews Property Services Limited
Appellant
and
Body Corporate 160361
First Respondent
Body Corporate 160362
Second Respondent
Fong Hong Yuen & Others
Third Respondent
BC 2004 Limited and BC 2009 Limited
Fourth Respondent
Auckland Council
Fifth Respondent
John Lukaszewicz
Sixth Respondent
Counsel:

J D McBride and D A Cowan for Appellant

G B Lewis and S L Tomlinson for First Second and Third Respondents

No appearance for Fourth Respondent

S A Thodey and K M Parker for Fifth Respondent

No appearance for Sixth Respondent

Appeal against a High Court (“HC”) decision concerning the defective remediation of an apartment complex that suffered from weathertightness issues — the HC found that the appellant had failed to ensure a survey was carried out, it had failed to affix the new cladding in accordance with design specifications and that producer statements it had provided to the fifth respondent had breached the Fair Trading Act 1986 (“FTA”) — the Fleetwood Apartments, a central Auckland apartment building constructed in 1994, suffered weathertightness issues and a defective remediation undertaken in 2005 — the appellant was the contractor for the fourth respondent (which had provided architectural and engineering consultation) for the design of the remediation — their agreement provided that each would undertake a survey of the building — whether the architectural services company was required to undertake a survey - whether it had had modified that obligation - whether the appellant had failed to comply with a contractual obligation concerning the method of affixing the cladding sheets - whether the appellant had breached an implied duty to install the sheets in a proper workmanlike manner - whether the appellant's producer statement provided to the fifth respondent was misleading and breached the FTA.

The issues were: whether Babbage was required to undertake a survey; whether Babbage had modified that obligation; whether APS had failed to comply with a contractual obligation concerning the method of affixing the sheets; whether APS had breached an implied duty to install the sheets in a proper workmanlike manner; and whether the APS producer statement provided to the Council breached the FTA.

Held: The agreement required an inspection to be undertaken of all external and associated walls to establish moisture content. The word “survey” had not appeared in any of the relevant clauses of the Babbage specification. The reference to a “survey” was derived from the APS tender itself. The contractual obligation rested with Babbage as a consequence of the terms of the APS tender. Any modification of the inspection obligation could only be made with the owners' agreement, which was neither sought nor obtained. The mere giving of notice to APS and the Council of a unilateral decision by Babbage to modify or depart from the cl 1.0 obligation therefore had no legal consequence so far as Babbage's contractual obligation to the owners was concerned.

The evidence established that Babbage had not adequately discharged the obligation it had assumed under cl 1.0 which had clearly contemplated a more substantive assessment than a mere assumption as to the likely state of the damage to the building.

In performing the particular work it had contracted to undertake, APS had an obligation to comply with the building code and, to the extent to which specifications incorporated in the building consent applied to APS. However, as contractor, APS was the recipient of instructions by and approvals from Babbage in its capacity as architect and specialist engineer, not the reverse. APS's responsibility was to comply with instructions it received from Babbage. The fact that only Babbage had responsibility for undertaking the cl 1.0 inspection meant that it was for Babbage to identify the fact and extent of any repairs necessary to rectify damage revealed on its inspection.

The alleged breach of the duty lay in an omission on the part of APS either to be satisfied that a survey had been undertaken by Babbage or to require that it be undertaken. APS did not have sufficient power and ability to exercise the necessary control over Babbage which had assumed a contractual obligation to the owners to undertake an inspection. There was no proper basis for a conclusion that APS owed a duty of care to the owners to take steps to require Babbage to undertake its contractual inspection obligation and thereby prevent Babbage causing loss to the owners.

The Judge had reached an erroneous conclusion primarily as a consequence of its view of the extent of the obligations imposed by the BA 2004 and the application to the present case of certain statements in Body Corporate No 207624 v North Shore City Council [Spencer on Byron]. The HC had amalgamated the building code and building consent obligations.

It would not be reasonable to hold that APS had a duty to warn the owners about Babbage's performance of the inspection obligation. In its tender APS had specifically declined to assume a joint obligation to undertake the inspection, with the consequence that Babbage assumed the sole obligation of inspection. APS was only required to undertake repair work which was the subject of a specific direction by Babbage. When it was discovered that the structure was mainly steel, and not timber as originally believed, Babbage made the decision concerning the steps to be taken for the remedial treatment of the steel structure. APS had no contractual obligation to undertake a survey.

A contractor such as APS, when undertaking a discrete remediation task, did not have a duty to undertake remedial work outside of its contractual responsibility to ensure that the entirety of a building would be code compliant.

In failing to seek clarification on the issue of how to affix the cladding sheets, APS had not discharge the contractual obligation imposed by the specifications. APS had failed to take up the offer of the cladding manufacturer to send an installer to the site to advise APS's staff on installation. APS breached an implied duty to install the cladding in a proper workmanlike manner. The APS producer statement had been erroneous and misleading to the extent that it certified that the sheets had been installed in a good workmanlike manner.

The appeal was allowed in part. The HC finding that APS was liable for failing to ensure that the building was properly inspected by the fourth respondent was set aside. The finding that APS was liable to the first, second and third respondents directly for their losses occasioned by the omission to properly inspect the building was set aside. The HC allocation of responsibility for the losses of the first, second and third respondents among the APS, Babbage and the Council respondent was set aside. The issue of contribution among APS, Babbage and the Council was reserved pending the determination of the cross-appeal.

  • A The appeal is allowed in part.

  • B The finding in the High Court that the appellant was liable for failing to ensure that the building was properly inspected by the fourth respondent is set aside.

  • C The judgment entered in the High Court that the appellant is liable to the first, second and third respondents directly for their losses occasioned by the omission to properly inspect the building is set aside.

  • D The judgment allocating responsibility for the losses of the first, second and third respondents among the appellant, the fourth respondent and the fifth respondent is set aside. The issue of contribution among the appellant, fourth and fifth respondents is reserved pending the determination of the cross-appeal.

  • E The applications for an extension of time within which to bring the cross-appeal are granted.

  • F The Registrar is directed to arrange a telephone conference with counsel and the Court early in 2017 for the fixing of a timetable for the exchange of written submissions on the issues specified at [154] and a further hearing date.

  • G All questions of costs are reserved pending consideration of the cross-appeal.

INTERIM JUDGMENT OF THE COURT
REASONS OF THE COURT

(Given by Brown J)

Table of Contents

Introduction

[1]

Narrative of events relevant to appeal

[5]

Moisture damage discovered

[5]

The tender documents

[7]

The APS tender

[12]

The building consent process

[19]

Construction and completion

[26]

Defective remediation discovered

[29]

The High Court judgment

[33]

The survey obligation

[34]

Affixing of the Eterpan sheets to the Overclad brackets

[38]

The APS producer statement

[42]

Issues on appeal

[43]

Liability for the lack of a survey

[44]

Did cl 1.0 require Babbage to undertake a survey?

[44]

Was that obligation modified by Babbage?

[56]

Was Babbage's obligation cancelled by the placement of the “Revised” stamp on cl 1.0 in the building consent documentation?

[58]

Did Babbage undertake the survey required by cl 1.0?

[64]

Did APS have an obligation to be satisfied that a survey had been undertaken by Babbage?

[68]

(a) A pleading issue

[68]

(b) The significance of the Building Act 2004 in the judgment

[69]

(c) First alternative: the specification incorporates cl 1.0

[78]

(d) Second alternative: cl 1.0 deleted from specification by Council's stamp

[115]

Conclusion

[120]

Liability for screw fixings

[121]

Did APS fail to comply with a contractual obligation concerning the method of affixing the Eterpan sheets?

[121]

Did APS breach an implied duty to install the Eterpan sheets in a proper workmanlike manner?

[134]

Liability to the Council

[138]

Was the APS producer statement of 27 September 2006...

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