Coughlan and Anor v Abernethy and Ors

JurisdictionNew Zealand
CourtHigh Court
JudgeWhite J
Judgment Date20 October 2010
Neutral Citation[2010] NZHC 2180
Date20 October 2010
Docket NumberCIV-2009-004-2374

[2010] NZHC 2180




Under The Weathertight Homes Resolution Services Act 2006

In the Matter of an appeal against a decision of the Weathertight Homes Tribunal

R Coughlan
First Appellant


T Humphrey
Second Appellant
V E Abernethy and A R Abernethy
First Respondents


The North Shore City Council
Second Respondent


Stockdale Investments Auckland Limited
Third Respondent


C I Beazley
Fourth Respondent

A Maclean for First and Second Appellants

M C Josephson and S E Mitchell for First Respondents

No appearances for Second, Third and Fourth Respondents

Appeal against a Weathertight Homes Tribunal decision which held the appellants liable as the architectural designer and project manager in respect of leaky building constructed in 1994 — respondents were subsequent purchasers of the leaky building in 2003 — initial building report identified problems but respondents continued with the purchase at a reduced price — respondents liability held to be 10% for contributorily negligence and failure to mitigate their loss — whether a duty of care should be imposed when the respondents had received pre-purchase inspections disclosing significant defects — whether a duty of care could be placed on the project manager given he was not engaged as site manager and had not undertaken responsibility for the quality of the work — whether the Tribunal had erred with regard to apportionment under s72(2) Weathertight Homes Resolution Services Act 2006 (“WHRSA”) (liability of any respondent) or s17(2) Law Reform Act 1936 (“LRA”) (proceedings against, and contribution between, joint and several tortfeasors) — whether general damages of $12,500 for a non occupier was unreasonable.

Held: An opportunity to inspect a property before purchase to discover a hidden defect did not abrogate liability for breach of the duty of care unless there was a sufficiently strong expectation of such inspection. In the present case there was no suggestion of any sufficiently strong expectation on the part of C and H in 1994 that a subsequent purchaser of the property would in 2003 obtain a pre-purchase report or that any such report would or should have identified the problems. There was no expectation of pre-purchase inspections in the early 1990s. It was not disputed that designers and project managers owed duties to use reasonable care to prevent damage to persons who they should reasonably expect to be affected by their work, including subsequent purchasers. The question became, whether the A's knowledge and acceptance of the risk on receipt of the pre-purchase report from B meant they had made a voluntary assumption of risk.

A person will not have voluntarily assumed a risk unless it was shown that they had full knowledge of the nature and extent of that risk and with that full knowledge incurred it. B's reports had not suggested that the A's would have been made fully aware of the nature and extent of their leaky home. The reports had not identified all defects and the A's had been left with the impression that problems would be overcome with repairs of around $10,000 rather than $200,000 figure given by the Weathertight Homes Service assessor. The A's knowledge at the time did not alter any duty of care that C and H owed them as prospective purchasers and their duty of care was not negated by the defence of voluntary assumption of risk.

There was sufficient evidence to find that C was negligent as the designer in failing to leave vents out of the drawings when they should have been included. It was no defence that the plans had been accepted by the Council,; C was not entitled to rely on the Council's inspections as a Council did not owe a duty to an architect or designer. C was not entitled to rely on the tradesmen involved or Stockdale to supervise the construction and to ensure compliance with relevant manufacturer's specifications. An architect or designer like C owed a duty of care to subsequent purchaser to ensure that plans were drawn with due skill and care to avoid foreseeable losses arising out of their work. C could not shift responsibility to a labour-only builder for failing to build something that was not detailed in the plans or where the manufacturer's technical information had not been referred to.

The fact that Stockdale had engaged contractors and not an independent supervisor did not mean that H, as project manager, was not personally responsible for ensuring that the work was performed with reasonable care and skill. The negligence of the inadequately supervised builders had contributed to the defects.

The discontinuance of the claim against the Council meant that all cross-claims relating to the Council were discontinued as well; accordingly there was no jurisdiction to make any ruling on cross-claims for contribution concerning the Council. It was a prerequisite to the exercise of jurisdiction under s17(2) LRA and s72(2) WHRSA that the tortfeasor against whom the contribution was sought was a proceeding to the party. In the absence of B, the Council and Stockdale as parties to the appeal there was no basis to adjust their contribution.

In awarding half of the costs to remedy the defects, it had been open to the Tribunal to conclude that it was practicable to distinguish between the different part of the house, the cause of damage to them and the costs of repair, for the purpose of the compensable proportion.

The A's had acted reasonably in obtaining the pre-purchase reports and in negotiating a deduction in the purchase price to reflect part of the cost of the repair identified. At the same time, they proceeded with the purchase knowing that the full invasive tests recommended by B had not been carried out and they they were running some risk in doing so. They had taken various steps to mitigate their loss, however there were significant delays in carrying out the work recommended. Therefore the A's had not taken all reasonable steps to mitigate their loss. The 10% reduction was not wrong. The A's were entitled to damages for non-economic loss; as non-occupiers the award of general damages at $12,500.00 was not erroneous or outside the range of what was reasonable.





Factual background


Tribunal decision


The appeal and cross appeal


Approach to appeal


Duty of care


Voluntary assumption of risk


Liability of Mr Coughlan


Mr Humphrey's liability


The cross-appeal


Were Messrs Coughlan and Humphrey developers?




Remedial costs


Mitigation and contributory negligence


General damages





In this appeal under the Weathertight Homes Resolution Services Act 2006 Richard Coughlan and Trevor Humphrey (Messrs Coughlan and Humphrey) challenge on some eight grounds of law and fact the decision of the Weathertight Homes Tribunal holding them jointly and severally liable to pay Vanessa and Alan Abernethy (the Abernethys) damages of $60,310.86 in respect of the Abernethys' “leaky home”. The Abernethys cross-appeal challenging the Tribunal decision on some five grounds of law and fact.


Following the hearing of the appeal on 4 May 2010, the parties filed an agreed chronology and separate supplementary memoranda relating to a chronology of mitigation carried out by the Abernethys. Counsel for the Abernethys also filed a memorandum dated 16 June 2010 drawing the Court's attention to the supplementary judgment of the Court of Appeal in Byron Avenue1 relating to the awards of general damages for the leaky homes in that case.

Factual background

In 1994 Stockdale Investments Auckland Limited (Stockdale), a company owned at material times by Messrs Coughlan and Humphrey, obtained consent from the North Shore City Council to build a house on a property at 5/6 City View Terrace, Birkenhead, Auckland. Mr Coughlan designed the house and Mr Humphrey administered the project. When the house was completed in December 1994, the Council issued a code compliance certificate. Stockdale sold the property to a Korean family who occupied it for some nine years until they resold it to the Abernethys in 2003.


The original agreement for sale and purchase of the property for $446,000 dated 27 July 2003 was conditional on the Abernethys receiving a satisfactory building report from Futuresafe Building Inspections Limited. Mr Beazley, an employee of Futuresafe Building Inspections Limited, inspected the property and prepared two reports identifying a number of defects which he considered had arisen largely because the property had not been properly maintained and which were estimated to cost around $10,000 to remedy. On the basis of Mr Beazley's reports, the Abernethys negotiated a $3,000 reduction in the purchase price and settlement took place in September 2003. The Abernethys arranged for the repairs recommended by Mr Beazley to be carried out.


After noticing a new problem, bubbling paint inside near the front door, the Abernethys lodged a claim with the Weathertight Homes Resolution Service in late October 2003. The Weathertight Homes Resolution Service assessor, Mr Alan Light, carried out two investigations of the property. In his first report dated 28 July 2004, Mr Light found that the Abernethys' claim was eligible as a “leaky building” and estimated the cost of repair work at $10,597.50 over and above what the Abernethys had already spent doing the repairs recommended by

Mr Beazley. Although the Abernethys lived in the house on the...

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