Andrews Property Services Ltd v Body Corporate

• Jurisdiction: New Zealand
• Judge: Brown J
• Judgment Date: 22 December 2016
• Neutral Citation: [2016] NZCA 644
• Docket Number: CA487/2015
• Court: Court of Appeal
• Date: 22 December 2016

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

[2016] NZCA 644

Court:

French, Miller and Brown JJ

CA487/2015

IN THE COURT OF APPEAL OF NEW ZEALAND

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.

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

• 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 erroneous and misleading?	[138]
The applications for an extension of time to bring a cross-appeal	[143]
Result	[156]

Introduction

1 The owners of Fleetwood Apartments, a central Auckland 40-unit apartment building constructed in 1994, suffered the dual misfortune of weathertightness issues and a defective remediation undertaken in 2005. The owners brought proceedings in respect of the defective remediation against the architectural consultants, Babbage Consulting Limited (Babbage) 1 the contractor, Andrews Property Services Limited (APS), and the Auckland Council (the Council). The Council cross-claimed against Babbage and APS seeking a contribution (up to a full indemnity) in respect of any liability the Council was held to have to the owners.

2 In the High Court, Whata J found all three defendants at fault. 2 With reference to APS, the Judge held:

• (a) While APS's tender for the remediation contract had transferred to Babbage the obligation to undertake a survey of damage which the tender specification required, APS was nevertheless obliged to be satisfied that Babbage had undertaken a proper survey and it failed to do so.

• (b) APS failed to correctly install the new exterior cladding by omitting to obtain design details for the fixing of the cladding panels and failing to use a clearance hole for the screws which resulted in the cladding panels cracking on movement.

• (c) APS's producer statement misled the Council into thinking that a survey had been undertaken and that the new cladding had been properly affixed.

3 Liability in respect of the owners' losses was apportioned as Babbage 60 per cent, APS 20 per cent and the Council 20 per cent. On the Council's cross-claim Whata J held APS liable for 20 per cent of the sum for which the Council was liable to the purchasers of units after the issue of the Code Compliance Certificate (CCC).

4 On appeal APS challenged the Court's findings:

• • concerning the requirement to carry out a survey and the conclusion that APS failed to ensure a survey was carried out;

• • that APS failed to affix the new cladding in accordance with design specifications; and

• •that producer statements provided by APS to the Council were a breach of the Fair Trading Act 1986 in that they were likely to mislead the

  Council into thinking that a survey had been undertaken and that the new cladding had been properly affixed.

Narrative of events relevant to appeal

Moisture damage discovered

5 The apartments' original construction consisted of concrete slab walls and floors, an in-fill steel frame, fire-rated plaster board and Harditex cladding. There was no cavity through which air and moisture could pass. When water damage to the apartments was identified in 2003, Babbage was commissioned to undertake a review of the building for moisture damage.

6 Babbage's September 2003 report advised that the Harditex clad exterior to the end sections of the building and the Fleet Street elevations had considerable moisture in the sub-frames, then assumed to be largely timber, which needed to be removed and replaced. It indicated that substantial remedial works were required including the formation of a cavity in accordance with the Council requirements and the installation of new exterior cladding.

The tender documents

7 Babbage was then engaged to prepare a tender for the substantial remediation works it advised were necessary to repair the damage. The tender specification document provided for three cladding options. Two involved removal of the exterior cladding and replacement with new cladding. The third option was an overcladding system that, as its name implies, would be installed over the existing cladding which would remain in place. A particular form of this system, the Overclad Support System (Overclad), was described in a test report provided by Window Engineering Consultants dated 29 October 2002 (the WEC test report), and annexed to the tender specification, in this way:

The “Overclad” system is a proprietary external building cladding system designed to create a drained, vented (pressure equalised cavity) behind the cladding line. The drained & ventilated cavity is designed to allow water penetrating the outer building skin to be drained to the exterior & allow controlled air movement in the cavity. The “Overclad” aluminium extrusions form a support grid for the cladding and manage air and water movement at the panel joints.

8 The WEC test report listed a variety of cladding materials which could be mounted on the Overclad system, including a 9 mm medium density fibre cement board called Eterpan available from Progressive Building Systems (PBS). It noted that several fixing systems were used to mount the panels onto the Overclad system, such as adhesive or pop rivet fixing.

9 An Overclad fixing diagram sourced from Prendos New Zealand Limited (Prendos), the company which undertook the 2015 remediation work, usefully displays the various layers of materials in a cut-away format:

10 The tender specification did not incorporate...