Blain and Another v Evan Jones Construction Ltd

• Jurisdiction: New Zealand
• Judge: O'Regan
• Judgment Date: 19 December 2013
• Neutral Citation: [2013] NZCA 680
• Docket Number: CA272/2013
• Court: Court of Appeal
• Date: 19 December 2013

Between

Andrew Scott Blain And Kevin O'Connor & Associates Limited

First Applicants

Carter Holt Harvey Limited

Second Applicant

Lht Design Limited

Third Applicant

and

Evan Jones Construction Limited

Respondent

[2013] NZCA 680

Court:

O'Regan P, Stevens and Miller JJ

CA272/2013

IN THE COURT OF APPEAL OF NEW ZEALAND

Application for review of the High Court's (“HC”) decision to set aside a third party notice — applicants and third party had been involved in construction of council's aquatic centre — council was suing applicants in tort for negligence and under the Fair Trading Act 1986 for misleading and deceptive conduct — applicants said respondent should be joined as it would be a concurrent tortfeasor based on alleged breaches of its duty of care — whether it was arguable that the law recognised a cause of action in negligence against the builder of a commercial building whether the terms of the contract were consistent with respondent owing a duty of care in tort — whether the disputes procedure in the Construction Contracts Act 2002 meant that the obligations were to be governed exclusively by contract, and a concurrent duty in tort should not be imposed.

Counsel:

J N Bierre and D J MacRae for Applicants G M Brodie for Respondent

JUDGMENT OF THE COURT

• A The application for review of the Associate Judge's decision is allowed.

• B The order setting aside the third party notices issued by the applicants is quashed and the third party notices are reinstated.

• C The costs order made by the Associate Judge is quashed. In the absence of agreement, costs should be redetermined by the Associate Judge in light of this judgment.

• D The respondent must pay costs to the applicants calculated on the same basis as for a standard appeal to this Court on a band A basis plus usual disbursements. For the avoidance of doubt only one set of costs and disbursements is payable. We certify for two counsel.

REASONS OF THE COURT

(Given by O'Regan P)

Introduction

1 In this judgment, we deal with an application under s 26P of the Judicature Act 1908 and r 2.3 of the High Court Rules to review a decision of Associate Judge Matthews. 1 The application was transferred to this Court for hearing under s 64 of the Judicature Act by Fogarty J. 2 The case therefore involves this Court exercising the High Court's jurisdiction under s 26P, under which the High Court is required to review the decision to which the application for a review relates and “make such order as may be just”. 3 Under r 2.3(4) of the High Court Rules, the review proceeds as a rehearing of the proceedings to which the decision under review relates.

Background

2 The decision under review was an interlocutory application made by the respondent, Evan Jones Construction Ltd (EJCL) to have third party notices issued by the applicants set aside.

3 The underlying High Court proceeding is an action commenced by the Grey District Council (the Council) against the applicants for damages arising out of their respective roles in relation to the construction of an aquatic centre in Greymouth.

4 The Council entered into a construction contract with EJCL (the third party in the High Court proceeding) for the construction of the aquatic centre. The Council also entered into a design and construction administration contract with the third

applicant (the fifth defendant in the High Court), LHT Design Ltd (LHT). LHT trades as LHT Engineering Solutions, and is an engineering consultancy

5 LHT engaged the first applicants, (the first and second defendants respectively in the High Court), Mr Blain and Kevin O'Connor & Associates Ltd (KOA) to provide an independent review of part of the design work for the aquatic centre. KOA is a firm of consulting engineers, and Mr Blain is an engineer employed by KOA. The Council alleges that Mr Blain issued a producer statement and signed it on behalf of KOA, which then supplied it to the Council.

6 The Council sued Mr Blain and KOA in tort, alleging that they owed the Council a duty of care and were negligent, and breached that duty of care by issuing the producer statement because documents in the schedule to that statement were not wholly complaint with the relevant provisions of the building code. In the alternative, they sued Mr Blain and KOA under the Fair Trading Act 1986 for misleading and deceptive conduct.

7 The Council also sued LHT in tort, under the Fair Trading Act and for breach of the design and construction administration contract.

8 The second applicant (and fourth defendant in the High Court), Carter Holt Harvey Ltd (CHH), was the supplier of laminated veneer lumber (LVL) used for the beams supporting the roof of the main building of the aquatic centre. CHH supplied the LVL to a timber laminating company which in turn supplied them to the Council. The Council sued CHH for negligent misstatement in relation to the instructions relating to the installation and use of the LVL beams, or alternatively for misleading and deceptive conduct under the Fair Trading Act.

9 The Council also sued the architects for the aquatic centre (the architect was the third defendant in the High Court), but has now discontinued proceedings against the architect.

10 The essential problem with the aquatic centre that has led to the litigation was described by the Associate Judge as follows:

[2] The Council says that the LVL rafters have a deflection which is outside the recommended deflection levels in the building code, that the design of the roof structure allowed for the use of untreated LVL rafters and purlins which has had negative consequences for their structural integrity, and that at a point where aluminium-coated steel fixings have been installed with the use of galvanised steel nails, the nails have started to oxidise and corrode. The Council says it has suffered loss and damage yet to be quantified, for remedial work replacing the LVL rafters and purlins, and the galvanised nails. The damages will include professional fees and the cost of consequential repairs to the building.

11 The Council did not sue EJCL.

Third party notices

12 Each of the applicants joined EJCL as a third party to the High Court proceedings by issuing third party notices under r 4.4. They allege that EJCL owed the Council a duty of care to exercise reasonable skill, care and diligence in carrying out the construction of the aquatic centre, in addition to its contractual obligations under the construction contract. They say that if they are liable to the Council as the Council claims, EJCL would be liable as a concurrent tortfeasor because it breached its duty of care by:

• (a) failing to allow a sufficient pre-camber when making up the LVL beams;

• (b) leaving the LVL materials unwrapped and exposed to the weather for an excessive period;

• (c) failing to sufficiently prop the beams; and

• (d) removing the propping prior to the construction of the roof cladding.

13 Consequently, the applicants say that EJCL's breach of its duties will have caused the same damage and loss as that which the Council seeks to recover from the applicants.

14 The applicants claim that, if EJCL is liable in tort to the Council, then it would be liable as a concurrent tortfeasor under s 17 of the Law Reform Act 1936.

That was the basis in which they joined EJCL as the third party. It is accordingly necessary for them to show that EJCL owed a tortious duty of care to the Council in the performance of its obligations under the construction contract.

Application to set aside third party notices

15 EJCL then applied in the High Court to have the applicants' third party notices set aside. Associate Judge Matthews set aside the notices on the basis that it was clearly untenable that EJCL owed a duty of care in tort to the Council. His reasons for that conclusion were:

• (a) The law does not recognise a cause of action in negligence against a builder of a commercial building. 4

• (b) The contract between the Council and EJCL was inconsistent with the proposition that EJCL owed a concurrent duty in tort to the Council alongside its contractual obligations. 5

• (c) The procedure for determining disputes set out in the Construction Contracts Act 2002 was consistent with the obligations between the Council and EJCL being governed exclusively by contract, and therefore indicated that a concurrent duty in tort should not be imposed. 6

Issues for determination

16 All of those conclusions are challenged by the applicants. The issues for determination are therefore:

• (a) Is it arguable that the law recognises a cause of action in negligence against the builder of a commercial building?

• (b) Is it arguable that the terms of the contract between the Council and EJCL are consistent with EJCL owing a duty of care in tort to the Council?

• (c) Is the Construction Contracts Act relevant to the existence of a duty of care in tort owed by EJCL to the Council?

Test to be applied

17 The application to set aside the third party notices was made under r 4.16 of the High Court Rules. Rule 4.16 provides as follows:

4.16 Setting aside third party notice

• (1) A third party may apply to the court to have a third party notice issued and served with the leave of the court set aside.

• (2) A party to a proceeding served with a third party notice issued and served without leave of the court may apply to the court to have the notice set aside.

• (3) In either case, the court may–

  • (a) set the third party notice aside and dismiss the defendant's statement of claim against the third party–

    • (i) on the merits; or

    • (ii) without prejudice to the right of the defendant to pursue that claim against the third party in an independent proceeding; or

  • (b) give other directions.

18 Rule 4.16 gives a wide discretion to set aside third party notices. The Court will have regard to the grounds for issuing a third party notice set out...