O'Hagan v Body Corporate 189855

• Jurisdiction: New Zealand
• Judge: William Young P,Arnold,Baragwanath JJ
• Judgment Date: 22 March 2010
• Neutral Citation: [2010] NZCA 65
• Docket Number: CA506/2008
• Court: Court of Appeal
• Date: 22 March 2010

[2010] NZCA 65

IN THE COURT OF APPEAL OF NEW ZEALAND

Court:

William Young P, Arnold and Baragwanath JJ

CA506/2008

CA507/2008

BETWEEN

Patrick James O'Hagan

Appellant

and

Body Corporate 189855

First Respondent

And

Pauline Louise Hough & Ors

Second Respondents

And

North Shore City Council

Third Respondent

And

Stephen Francis Smythe

Fourth Respondent

And

Centre of Attraction Limited (In Liquidation)

Fifth Respondent

And

Joseph Walden & Stack Nz Ltd

Sixth Respondent

And

Stack New Zealand Limited

Seventh Respondent

And

Andrew Plastering Co (1994) Ltd

Eighth Respondents

AND BETWEEN

North Shore City Counciil

Appellant

and

Body Corporate 189855

First Respondent

And

Pauline Louise Hough & Ors

Second Respondents

And

Patrick James O'Hagan

Third Respondent

And

Stephen Francis Smythe

Fourth Respondent

And

Centre of Attraction Limited (In Liquidation)

Fifth Respondent

And

Joseph Walden & Stack Nz Limited

Sixth Respondent

And

Stack New Zealand Limited

Seventh Respondent

And

Andrew Plastering Co (1994) Limited

Eighth Respondent

Counsel:

M E Casey QC for Appellant in CA506/2008

G B Lewis and M C Josephson for First Respondent in CA506/2008

D J Goddard QC, S A Thodey and S B Mitchell for Third Respondent in CA506/2008

M A Gilbert SC for Fourth Respondent in CA506/2008

H M Macfarlane for Sixth Respondent in CA506/2008

G Andrew for Seventh Respondent in CA506/2008

D J Goddard QC, S A Thodey and S B Mitchell for Appellant in CA507/2008

G B Lewis and M C Josephson for First Respondent in CA507/2008

M A Gilbert SC for Fourth Respondent in CA507/2008

H M Macfarlane for Sixth Respondent in CA507/2008

G Andrew for Eighth Respondent in CA507/2008

Appeal against High Court decision holding North Shore City Council liable for negligent inspection of a residential apartment development — whether a Council which had not issued a code compliance certificate could be sued — effect of contributory negligence on the part of the purchasers — effect of contributory negligence when buying an apartment with knowledge of defects — Extent of the Hamlin duty of care on a Council'duty of inspection — Judgment to be read in conjunction with Sunset Terraces [2010] NZCA 64

This judgment may be cited as Byron Avenue [2010] NZCA 65.

CA506/2008

The judgments against Mr O'Hagan are set aside and the appeal by him and cross-appeal against him are dismissed by consent.

CA507/2008

• A The Council'appeal is dismissed.

• B The cross-appeals by the second respondents against the trial Judge'finding of contributory negligence are dismissed.

• C The awards to the second respondents of general damages are varied as set out in the reasons for judgment at [127] — [129].

• D Leave to apply to this Court for further directions or clarifications is reserved in terms of [130] of the reasons for judgment.

• E Costs are reserved.

JUDGMENT OF THE COURT

REASONS

Baragwanath J	[1]
William Young P	[131]
Arnold J	[183]

BARAGWANATH J

Table of Contents

	Para No
Context of appeal	[4]
Factual setting	[7]
The individual claims	[13]
Mr and Mrs McConville unit 11	[14]
Mr Blackmore and Ms Sheehy — units 13 and 14	[16]
Mr Jupp — unit 4	[17]
Gydick Investments Ltd — unit 9	[18]
Mr Kennett and Ms Blakie — unit 3	[20]
Ms Hough — unit 1	[23]
Mr Wilson and Ms Stewart — unit 7	[26]
RCA Investments — unit 5	[36]
Sue Bradley Properties Ltd — unit 12	[40]
Ms Clark and the trustees of the Clark Family Trust — unit 8	[44]
Ms Kim — unit 10	[53]
Discussion
(f) May a council which has not issued a code compliance certificate be sued	[55]
(g) What is the appropriate outcome when there is fault on the part of purchasers, and what is the effect of the attribution of knowledge of problems to purchasers?	[64]
Mr and Mrs McConville — unit 11; Mr Blackmore and Ms Sheehy — units 13 and 14; Mr Jupp — unit 4; Gydick — unit 9; Ms Hough -unit 1	[69]
Mr Kennett and Ms Blakie — unit 3	[71]
Mr Wilson and Ms Stewart — unit 7	[72]
RCA — unit 5	[73]
Sue Bradley Properties Ltd — unit 12	[74]
Ms Kim — unit 10	[75]
(i) Unfamiliarity with New Zealand conditions	[76]
(ii) Vicarious fault	[81]
Discussion	[83]
(i) The Bernina rule	[88]
(ii) Sir Owen Dixon'approach	[92]
(iii) The policy approach	[93]
(iv) Extension of the Bernina rule	[94]
(v) Statutory support for Sir Owen Dixon'approach	[99]
(h) The claim by the Body Corporate	[101]
(i) The interpretation and effect of s 41 of the Local Government Official Information and Meetings Act 1987	[106]
Damages for non-economic loss	[110]
Conclusion	[130]

1 This judgment on appeal from a decision of Venning J concerns leaky apartments in the Byron development at 45 Byron Avenue Takapuna and is a counterpart of the Sunset Terraces 1 decision also delivered today. The principal appeal, CA507/2008 by the North Shore City Council (the Council), is against a judgment against it in favour of the first respondent, Body Corporate 189855 (the Body Corporate) and the second respondents who bought apartments in the

development. It raises the same question of liability of a council for careless performance of its duties under the Building Act 1991 in respect of residential apartments, which we have answered in Sunset Terraces.

2 Employing the numbering in the Sunset Terraces decision at [6] further questions include:

• (f) May a council which has not issued a code compliance certificate be sued?

• (g) What is the appropriate outcome when there is fault on the part of purchasers, and what is the effect of the attribution of knowledge of problems to purchasers?

• (h) May a body corporate under the Unit Titles Act 1972 sue?

• (i) What is the effect on claims of the Local Government Official Information and Meetings Act 1987?

3 An appeal CA506/2008 by Mr O'Hagan, the principal of Centre of Attraction Ltd which designed and performed restorative work on the apartments, against a personal judgment against him by the Body Corporate and the purchasers was settled before the hearing in this Court began. So too was an appeal against him by the Council in CA507/2008. The judgments against Mr O'Hagan are set aside and the appeal and cross-appeals against him are dismissed by consent.

Context of appeal

4 The Council issued a building consent on 13 January 1998 and Council officers inspected the development at various stages of its construction and approved aspects of it. But it declined to issue a code compliance certificate for the development.

5 Venning J found that the Council was not relevantly negligent in issuing the building consent even though the plans lacked detail. That was because it was entitled to expect that the builder would comply with the specifications which required compliance with manufacturers' specifications and with the Building Code. But the Judge found that the less the detail required at the consent stage the greater the onus was on the Council to ensure compliance at the inspection stage. He held that, in failing to notice and respond to deficiencies requiring attention the Council'inspector had breached a duty of care owed to purchasers of apartments. Judgment was entered against the Council in favour of ten purchasers of 11 apartments. The Council appeals against that judgment.

6 The Council does not challenge on appeal the finding of carelessness on the part of its inspector or the further conclusion that carelessness on the inspector'part was causative of the need to reclad the development. In Sunset Terraces we have rejected the Council'primary argument. But the further issues remain.

Factual setting

7 Stephen Smythe, an architect and developer, was a shareholder and director of two companies. One, Couldrey Properties Ltd (formerly Byron Developments Ltd), retained the other, Smythe Grant Architects Ltd, and later Mr Smythe personally, to design a 14 unit block of residential apartments to be built on Couldrey'land at 45 Byron Avenue, Takapuna, Auckland.

8 On 13 January 1998 the Council, acting under s 43 of the Building Act, issued a building permit to Couldrey. Couldrey engaged Bracewell Construction Ltd to construct the development and Stack New Zealand Ltd as an architectural representative and later as project manager.

9 On 30 January 1998 the Council began its process of inspection, which entailed nearly 100 visits in all. The Judge found that there was carelessness in inspection during these visits.

10 On 2 December 1999 and 30 November 2000 Prendos Ltd, experts who had been engaged to investigate water ingress into the building, reported to Couldrey identifying a number of defects and recommending recladding. Venning J later found that a full reclad was required to deal with the results of entry of water into the units.

11 Venning J held that the Council had “largely approved the construction of work at 45 Byron Avenue and was at the point of issuing a code compliance certificate” when on 19 March 2002 Mr Smythe wrote to it on behalf of Couldrey drawing attention to:

… clear evidence of efflorescence on the exterior plaster cladding. Prendos have confirmed that this is caused by water ingress around the windows.

12 The Council contends that in the absence of a code compliance certificate there was no basis for the conclusion underlying the judgment that the owners had relied upon it.

The individual claims

13 I consider the claims in the sequence of the purchases or salient later events.

Mr and Mrs McConville — unit 11

14 Mr and Mrs McConville contracted in March 1997 to buy unit 11 off the plans. The agreement provided for payment of a deposit of $5000 on execution of the agreement, a further $25,000 after pouring of the foundations and the balance, $219,000, upon issue by...