O'Hagan v Body Corporate 189855

JurisdictionNew Zealand
CourtCourt of Appeal
JudgeWilliam Young P,Arnold,Baragwanath JJ
Judgment Date22 Mar 2010
Neutral Citation[2010] NZCA 65
Docket NumberCA506/2008

[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

Held: The non-issue of the code of compliance certificate was not fatal. Under s91(3) BA (limitation defences) it was obvious that Parliament intended that council liability would arise out of the issuing of a building consent or a code compliance certificate. In relation to residential apartments Hamlin imposed a duty of reasonable care when inspecting work that will be covered up and therefore impossible to inspect without the destruction of at least part of the fabric of the building, even before the issue of a code compliance certificate.

The effect of carelessness in the inspection phase locked in a defective condition which was not reasonably detectable by the purchasers, who were entitled to rely on the due performance of NSCC in its inspection function. That entitlement arose from the concept of general reliance. The notion of general reliance, which underpinned Hamlin, did not require the purchaser to know (or even believe) that a code compliance certificate had been issued. However, failure to obtain a LIM report which would have disclosed problems or failure to make inquires of the council or obtain body corporate minutes may go towards contributory negligence and may warrant a reduction in damages which might otherwise have been recoverable.

Awards for non-economic loss should not be made in favour of corporate owners. Failure of a lawyer retained by a purchaser to make appropriate inquires or obtain a LIM report could be attributed to a purchaser under the Contributory Negligence Act 1947. In relation to transactions after damage had manifested, it was unrealistic to treat the vendor as having been contributorily negligent in his or her different role as the guiding mind of the purchaser. Relevant knowledge of defects by purchasers who sold to corporate parties of which they were officers must be imputed along with any accompanying contributory negligence.

Under the Unit Titles Act 1972 the body corporate was entitled to sue for damage to common property as agent for unit holders where holders were entitled to sue subject proportionately to reductions for any contributory negligence by those holders, however the body corporate was not entitled to sue for economic or non-economic loss. Council'appeal dismissed. Cross-appeals by 2nd respondents against HC'findings of contributory negligence dismissed. Awards of general damages to purchasers varied between non-occupiers and occupiers.

JUDGMENT OF THE COURT

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.

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 Terraces1 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...

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