Body Corporate No. 207624 v North Shore City Council

• Jurisdiction: New Zealand
• Judge: Elias CJ,TIPPING J,Chambers
• Judgment Date: 11 October 2012
• Neutral Citation: [2012] NZSC 83
• Docket Number: SC 58/2011
• Court: Supreme Court
• Date: 11 October 2012

BETWEEN

Body Corporate No. 207624

First Appellant

and

Alan Millar Parker & Others

Second Appellants

and

North Shore City Council

Respondent

[2012] NZSC 83

Court:

Elias CJ, Tipping, McGrath, William Young and Chambers JJ

SC 58/2011

IN THE SUPREME COURT OF NEW ZEALAND

Appeal from a Court of Appeal decision which upheld a High Court ruling that the respondent council did not owe a duty of care to the appellant as the owner of a commercial building and was not liable in negligent misstatement — involved Spencer on Byron block in Takapuna which was a leaky building — mixed use residential and commercial, but dominant use was commercial — High Court and Court of Appeal held that councils did not owe a duty of care to commercial building owners in respect of building inspection and the issuing of Code Compliance Certificates — effect of North Shore City Council v Body Corporate 188529 (Sunset Terraces) (duty owed in respect of residential buildings) — whether New Zealand law recognised a distinction between types of buildings when establishing a duty of care owed by a local authority for inspection and code compliance certification — whether existence of a duty of care was inconsistent with the Building Act 1991 — whether policy factors told against the imposition of a duty.

Counsel:

J A Farmer QC, M C Josephson and G B Lewis for Appellants

D J Goddard QC, S B Mitchell and N K Caldwell for Respondent

JUDGMENT OF THE COURT

• A The appeal is allowed.

• B The orders made in the High Court and Court of Appeal are set aside.

• C The appellants' claim against the respondent is permitted to proceed in the High Court.

• D The appellants are entitled to costs in the High Court and the Court of Appeal. If the parties cannot agree quantum, costs are to be fixed in the respective Courts.

• E The respondent is to pay the appellants' costs in this Court in the sum of $40,000 plus disbursements to be fixed, if necessary, by the Registrar.

REASONS

	Para No
Elias CJ	[1]
Tipping J	[23]
McGrath and Chambers JJ	[56]
William Young J	[226]

Elias CJ

1 In North Shore City Council v Body Corporate 188529 ( Sunset Terraces) 1 this Court declined to depart from the line of authority followed in New Zealand for more than 30 years and affirmed by the Privy Council in Invercargill City Council v Hamlin. 2 We refused to strike out a claim that a territorial authority owed duties of care to a building owner in carrying out its statutory responsibilities of inspection and approval of building construction. The Court also rejected the fall-back argument (based on the absence of authorities where liability had been claimed in respect of buildings other than homes) that any duty of care was limited to the owner-occupiers of low-cost individual residential dwellings. Sunset Terraces concerned units in large residential apartment blocks.

2 The present appeal concerns a 23 storey building in Byron Avenue, Takapuna, in which unit titles were purchased by individual owners for 249 hotel rooms and for 6 penthouse apartments. The owners of 219 units and the body corporate brought proceedings in the High Court claiming that the Council was in breach of duties of care owed to them when it passed as compliant with the building code the plans and construction of the building. 3 Their claims were struck out in the Court of Appeal and summary judgment entered for the Council on the basis that the duty of care recognised in Invercargill City Council v Hamlin is owed to the owners of wholly residential properties only. 4 The decision of the Supreme Court in Sunset Terraces had not been delivered when the Court of Appeal heard the present claim. 5 In deciding that a territorial authority owes duties of care in respect of inspection and

certification for building code compliance only in the case of residential properties, the Court of Appeal followed its earlier decisions in Te Mata Properties Ltd v Hastings District Council 6 and Queenstown Lakes District Council v Charterhall Trustees Ltd. 7 In those cases it was held that the tortious liability of territorial authorities in respect of building inspection and certification for building code compliance did not extend to claims in respect of buildings for commercial use, including the motel and lodge respectively in issue in those cases

3 This is the fifth case in which the Court has had occasion since 2008 to consider the principles on which liability in negligence arises against the background of statutory duties and following strike out or summary judgment for the defendant in the lower courts. 8 Three of the previous cases considered by the Supreme Court have been concerned with the inspection and building certification responsibilities of territorial authorities under the Building Act 1991. All three involved buildings which leaked, it is alleged because of failure to meet the performance standards of the building code.

4 Once again, it is necessary to point out that if the claim were indeed novel, as the Council maintains it is (on the basis that existing authority recognises liability in respect of residential buildings only), then application for strike out or summary judgment is appropriate only in cases where there is clear legal impediment to liability in negligence (in which case strike out is appropriate) or where there is a complete and incontrovertible answer on the facts (in which case summary judgment may be entered for the defendant). 9 It is not clear why the Court of Appeal entered summary judgment in the present case. The case was not one where incontrovertible facts able to be established on summary procedure negated the claim (as for example where the terms of a contract provide a complete answer to a claim). The Court of Appeal's conclusion that the claim could not succeed because no duty of care was

owed by the Council to the owners of the units, if correct, would at most justify strike out of the claim, not summary judgment. 10

5 I consider that it is not possible to be satisfied that the claim cannot succeed. Strike out should in my view have been declined. As Cooke P pointed out in the leading New Zealand case of South Pacific Manufacturing Co Ltd v New Zealand Security Consultants & Investigations Ltd, liability in novel cases turns on a “judgment”, not on “formulae”, requiring close consideration of the material facts and policy considerations. 11 It will be rare that such consideration can confidently be undertaken on the pleadings.

6 More fundamentally, I do not consider the claim to be novel. Sunset Terraces and the authorities upon which it is based establish that sufficient relationship to justify a duty of care exists between a Council (in the exercise of its functions under the Building Act 1991 to certify for code compliance) and an owner of a building certified to be compliant. As McGrath and Chambers JJ describe at [83]–[88] of their reasons (which I have had the advantage of reading in draft and with which I am in general agreement), the authorities which precede Te Mata Properties Ltd v Hastings District Council and Queenstown Lakes District Council v Charterhall Trustees Ltd do not purport to limit the duty of care recognised according to the type of building or its use. Nor, as they point out do the contemporary texts treat the duty of care owed by local authorities in relation to building construction as limited to residential buildings.

7 The judgments in the Court of Appeal in Hamlin, particularly that of Richardson J, drew on New Zealand home-owning social circumstances and habits of reliance upon regulatory protections as a reason why Murphy v Brentwood City Council 12 should not be followed in New Zealand. 13 The point being made supported the conclusion in that case that New Zealand law should continue in the

path set by Bowen v Paramount Builders (Hamilton) Ltd 14 and Mt Albert Borough Council v Johnson, 15 to meet the immediate challenge presented by the House of Lords change from Anns v Merton London Borough Council 16 in Murphy. I do not however read the judgments in the Court of Appeal in Hamlin as resiling from the more general statements of legal principle adopted in the earlier New Zealand authorities

8 I regard the approach taken in the Privy Council in Hamlin as supporting the view taken by the President in the Court of Appeal that the common law of New Zealand had legitimately taken a different path as a matter of what Sir Anthony Mason has described as “intellectual preference”. 17 The question for the Privy Council in Hamlin was “whether New Zealand law should now be changed so as to bring it into line with Murphy's case”. 18 The Board held that, since the New Zealand legislature had not chosen to make the change in the Building Act 1991 as a matter of policy, “it would hardly be appropriate for Their Lordships to do so by judicial decision”. 19 That reason applies equally to this Court although, as I indicate, I think that the reasons of the Privy Council if anything understate the impact of the 1991 Act. The legislature not only failed to take an opportunity to change the law developed in the courts, its enactment adopted tortious responsibility as an element of the system of assurance of code compliance which replaced the earlier and more open-ended, responsibilities of councils to regulate the construction of buildings.

9 No sufficient principled basis for drawing a distinction as a matter of law between home-owners and owners of other buildings passed by the Council as code-compliant is put forward. It is argued for the Council that its liability under Hamlin and under Sunset Terraces is anomalous and should be confined. I agree with Tipping J and Chambers J that there is no anomaly. Sunset Terraces affirms the approach taken in Bowen and Mt Albert Borough Council, themselves drawing on

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