Body Corporate 406198 v Argon Construction Ltd & or

• Jurisdiction: New Zealand
• Judge: Andrew J
• Judgment Date: 30 October 2023
• Neutral Citation: [2023] NZHC 3034
• Court: High Court
• Docket Number: CIV-2017-404-001772

[2023] NZHC 3034

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA

TĀMAKI MAKAURAU ROHE

Andrew J

CIV-2017-404-001772

IN THE MATTER OF The Bianco Apartments

BETWEEN

Body Corporate 406198

Plaintiff

and

Argon Construction Limited

First Defendant

Auckland Council

Second Defendant

Appearances:

D R Bigio KC, R D Butler, S C I Jeffs, I J Stephenson, R J H Scott, H Chung and J C Wedlake for Plaintiffs

W A McCartney and D A Cowan for First Defendant

S C Price, M J Ferrier, C M Fairnie and S H Ji for Second Defendant

Leaky Buildings, Limitation, Torts — claim for damages to remedy leaky building — negligence — reasonable scope of repairs and the costs to carry out repairs — actional damage — duty of care — standard of a reasonable inspector — standing — Building Act 2004 — Unit Titles Act 1972 — Unit Titles Act 2010

JUDGMENT OF Andrew J

This judgment was delivered by Justice Andrew on 30 October 2023 at 3.00 pm pursuant to r 11.5 of the High Court Rules 2016

Registrar / Deputy Registrar

Date……………

TABLE OF CONTENTS

Introduction	[1]
The parties	[6]
Factual background	[10]
Building consents	[14]
Construction	[17]
Auckland Council inspections	[37]
Discovery of the defects by the plaintiffs	[39]
Agreed defects	[40]
The history of the claims and pleadings	[41]
The pleadings	[46]
The issues	[47]
Defects and liability framework	[50]
Scope and quantum	[51]
Expert evidence	[54]
The defects at issue	[55]
Defect 1 – Cantilevered balconies	[57]
Defect 2 – Podium	[72]
The damage caused by the defects
Is the damage in respect of defect 1 of such a nature that the requirements of the Building Code are not met – is it actionable damage?	[76]
Is the damage in respect of defect 2 actionable damage?	[93]
Liability of Argon
Did Argon owe a non-delegable duty of care?	[102]
Argon's responsibilities	[115]
Conclusion – Argon's liability	[120]
Liability of the Auckland Council
Standard of care	[123]
Defect 1	[129]
Causation	[163]
Defect 2	[166]
Conclusion on liability	[169]
Reasonable remedial scope
Legal principles	[170]
The plaintiffs' proposed scope of remedial works	[180]
Interpretation of ss 17 and 112 of the Building Act 2004	[186]
Is the plaintiffs' scope reasonable?	[203]
Evidence of the façade engineers – cladding	[213]
Mr Earley's evidence – Auckland Council	[237]
Mr Alexander's scope of repair	[241]
The acoustic matting	[254]
What will it cost to repair the defects?
The parties' positions	[261]
Preferred approach	[272]
Betterment	[281]
Consultants' costs	[283]
Consequential losses	[287]
General damages	[288]
Standing	[296]
Contributory negligence	[322]
GST	[334]
Affirmative limitation defences	[337]
Apportionment between defendants	[340]
Other issues
The non-legally represented plaintiffs	[343]
Former owners/assignees	[345]
Result	[351]

Introduction

1 This is defective building litigation. It involves the 157-unit residential unit title development (comprised of two towers) known as the Bianco Off Queen Apartments (Bianco Off Queen). 1

2 The Body Corporate and individual unit owners sue in negligence. The defendants are the building contractor, Argon Construction Ltd (Argon), and the Auckland Council (i.e. the territorial authority).

3 The remaining defects at issue are weathertight-related. 2 The plaintiffs say the building was built with cantilevered balconies that have defective waterproofing (defect 1). They also say that the waterproofing on the ground level (including the podium common areas) suffers from similar problems (defect 2). The overwhelming majority of the damages sought relate to the cost of remedying defect 1.

4 The plaintiffs seek total damages of $40,739,870. 3 Their remedial scope (i.e. what is reasonably required to remedy the defects) involves wholesale/building-wide repairs including replacement of all cladding, joinery and balcony balustrades.

5 The defendants deny liability. In particular, the Auckland Council contests virtually every element of the plaintiffs' claims, including the nature and extent of the defects. A central issue is the reasonable scope of repairs and the costs to carry out those repairs. There is also an issue of standing; the ability of the Body Corporate to sue for the costs of repairs. On the critical issues, the respective positions are very far apart.

The parties

6 The first plaintiff is Body Corporate 406198. There are 93 second plaintiffs who constitute the current or former proprietors of 132 of the 157 legal units. I note

that there are 178 units in total if dual key units are counted as two units, where the second plaintiffs represented by Lane Neave in these proceedings own 147 of the 178 total units. 4 Some of the second plaintiffs own more than one unit

7 Two of the second plaintiffs are self-represented. They are Yinling Linda Wu and Haixin Wang. These two plaintiffs seek a discrete award of damages in favour of them individually, although their claims are based wholly on the expert evidence in the case generally advanced by the Body Corporate.

8 Some of the units are rented out via the Residential Tenancies Act 1986 and some are used for temporary accommodation as part of a serviced accommodation business (Hotel Pool) that operates in the towers. The 147-total units owned by the second plaintiffs are comprised of the following:

• (a) 67 units are rented out to tenants;

• (b) 30 units are part of the Hotel Pool;

• (c) 38 units are owned by Kāinga Ora; and

• (d) 12 units are owner-occupied.

9 A number of the second plaintiffs purchased their respective units in either 2016 or 2017. Most of these owners received pre-contract disclosure statements which referred to Body Corporate AGM minutes. Most of these owners also had solicitors acting for and advising them on their respective purchases.

Factual background

10 Bianco Off Queen is located in central Auckland, between Symonds Street and Queen Street. Tower A consists of 14 storeys and 3 basement levels. Tower B consists

of 13 storeys, including one mezzanine level, and two basement levels. The basement levels include car parks

11 The above-ground units are individual apartments which, as stated, are a mix of rentals, short-term accommodation and owner-occupied units. The only exception is a unit on level 1 which is used as the hotel reception and hotel offices.

12 A central podium and pedestrian walkway separate the two towers. These areas are covered with ceramic floor tiles over liquid-applied waterproof membrane.

13 Each tower is served by a staircase and two lifts which extend to all levels, including basement levels. Above ground, the staircases are situated on external walls and are partially exposed to weather.

Building consents

14 On 1 March 2007, Argon and the original developer, Bianco Limited, entered into a contract for the construction of Bianco Off Queen. The critical consents for the purposes of these proceedings are as follows:

• (a) BLD 20041713901 – which concerned the super-structure and building services (this was referred to by the parties and their witnesses as the “901” consent.);

• (b) BLD 20041713904 – which concerned a change of cladding.

15 Argon completed construction around January 2009. The Auckland Council issued the relevant Code Compliant Certificates on 30 January 2009.

16 The apartments were designed to be affordable and relatively low-cost. They were described by Mr Stephen Alexander, expert building surveyor witness for Argon, as “a low initial cost/high life cycle cost building”.

Construction

17 The building structure is reinforced concrete with steel frame infill sections to the external walls.

18 The steel framing of the main structural exterior wall is designed to resist wind loads, hold the interior lining (plasterboard), contain the insulation, and hold the rigid air barrier (RAB). The purpose of the RAB is to prevent uncontrolled air infiltration through the wall and also to deflect any water that gets past the outer portion of the wall.

19 The majority of the external walls are clad with a rainscreen cladding system, comprising of prefabricated “Moduclad” cladding modules. This system is denoted as a James Hardie ExoTec façade panel rainscreen and RAB (with James Hardie's rigid air barrier product being called RAB(tm) Board).

20 The rainscreen portion (i.e. the outer portion of the wall) consists of narrow steel battens fixed over the outside of the RAB. The exterior cladding of the building is then fixed to these rainscreen battens. The purpose of the rainscreen is to resist water entry into the inner portion of the wall. Water that enters behind the exterior cladding should drain out the bottom of the rainscreen without causing damage to the other parts of the wall.

21 Attached and marked ‘Appendix A’ is a copy of the structural drawings of the cladding system contained in the consent drawings by the manufacturer Jacobson Facade Systems Ltd.

22 Each of the 157 units have at least one balcony. The balconies to the apartments above ground-level are cantilevered. The balconies are covered with ceramic tiles, installed over liquid-applied waterproofing membranes and acoustic matting, with metal-framed railings providing fall protection.

23 The structure and waterproofing of the balconies were designed by ADC Architects and Buller George Engineers Ltd. The initial drawings for the balconies specified that the concrete was to be poured off-site, with screed to be applied on-site to provide the...