Johnson v Auckland Council Hc Ak

• Jurisdiction: New Zealand
• Judge: WOODHOUSE J
• Judgment Date: 11 February 2013
• Neutral Citation: [2013] NZHC 165
• Docket Number: CIV-2010-404-837
• Court: High Court
• Date: 11 February 2013

BETWEEN

Ross Wayne Johnson, Linda Jean Johnson And First Investment Trust Limited

Plaintiffs

and

Auckland Council

Defendant

Stephen Roy Johnston

Third Party

[2013] NZHC 165

Woodhouse J

CIV-2010-404-837

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

Claim for damages in respect of a property purchased by plaintiffs in mortgagee sale (by tender) that was a leaky building — Council admitted it was negligent in failing to take reasonable steps to ensure defects in alteration work were rectified, alterations complied with Building Code, and in issuing code compliance certificate — Council contended plaintiffs, before committing to the purchase, failed to make enquiries and take other steps that reasonably prudent people would have taken (such as obtaining pre-purchase/building report) — whether there was contributory negligence by plaintiffs — what was the proper measure of damages (cost of repairs or difference between price plaintiffs paid and market value of property with house in its defective state) — quantum of loss

Counsel:

G B Lewis and L V Chapman for the Plaintiffs S A Thodey and K M Parker for the Defendant I J Thain and C Stacey for the Third Party

JUDGMENT OF WOODHOUSE J

This judgment was delivered by me on 11 February 2013 at 4:30 p.m. pursuant to r 11.5 of the High Court Rules 1985.

Registrar/Deputy Registrar

Table of Contents
	Para No.
Introduction	[1]
Contributory negligence: principles
The Contributory Negligence Act	[8]
Fault of the plaintiff	[11]
Causation	[12]
The standard of care	[13]
The plaintiffs' submissions	[18]
The evidence
1998–2004: building consent to code compliance certificate	[28]
Mr and Mrs Johnson's house hunting	[32]
2009: O'Neills Avenue mortgagee sale: terms of sale	[35]
Mr and Mrs Johnson's renewed interest in O'Neills Avenue	[38]
Evidence conflict: Mrs Johnson and Ms White	[43]
Mrs Johnson's discussions with Mrs Stevens	[49]
Mr Johnston's role and the third open home	[50]
The reasonably prudent purchaser: expert legal opinion	[60]
Mrs Johnson's tender: conclusion of agreement to purchase	[62]
Plaintiffs' investigations of weathertightness: chronology	[69]
What did visual inspection disclose?	[75]
The plaintiffs' original renovation intentions	[92]
The plaintiffs' interior renovations and remedial work: chronology: expenditure	[95]
Valuation evidence	[100]
The conflicts of evidence between the witnesses of fact	[104]
Mrs Johnson's recollection of events	[105]
The conflict of evidence between Mrs Johnson and Mr Johnston	[107]
The conflict of evidence between Mrs Johnson and Ms White	[122]
The conflicts of evidence in general	[126]
Contributory negligence: discussion and conclusion
Was there contributory negligence?	[127]
Apportionment of liability	[140]
Measure of damages
Principles	[146]
The plaintiffs' submissions	[161]
Conclusion on the measure	[172]
Quantum	[176]
Other claims of the plaintiffs	[185]
The Council's claim against Mr Johnston	[189]
Result	[190]

Introduction

1 In April 2009 the plaintiffs purchased a residential property to be occupied as the home of the first two plaintiffs, Mr and Mrs Johnson, and their children. 1

2 Substantial alterations to the house had been carried out before the property was purchased by the plaintiffs. It is not in issue that this work was defective and as a result the house was not weathertight. The plaintiffs now claim from the defendant Council $1.925 million for the cost of repairs and some other sums for consequential losses. The plaintiffs contend that the Council was negligent in carrying out functions under the Building Act 1991. The Council admits that it was negligent in failing to take reasonable steps to ensure that defects in the alteration work were rectified and that the alterations complied with the Building Code, and in issuing a code compliance certificate.

3 The principal issues that arise for determination between the plaintiffs and the Council are:

• (a) Was there contributory negligence by the plaintiffs?

  The Council contends that the plaintiffs, before committing themselves to the purchase, failed to make enquiries and take other steps that reasonably prudent people would have taken, generally and in the particular circumstances of this case, and this contributed significantly to any losses they have suffered. The plaintiffs' response, in considerable measure, is that the argument for the Council amounts to a proposition that the public can no longer rely on code compliance certificates issued by councils and that this is contrary to authority binding on this Court in respect of the obligations of councils in leaky homes cases.

• (b) What is the proper measure of damages?

  Are the plaintiffs entitled to the cost of the repairs or should damages be assessed as the difference between either the price paid or the market value unaffected by defective construction, and the market value taking account of the defective construction?

• (c) What is the quantum of the loss on the correct measure?

4 The third party, Mr Stephen Johnston, visited the house with Mrs Johnson on one occasion shortly before Mrs Johnston entered into an agreement to purchase the property. Mr Johnston had a business as a cost and project manager mainly for interior work. The plaintiffs say he was asked to advise on any problems with the house.

5 In a third party claim by the Council against Mr Johnston, the Council contends that Mr Johnston was in breach of a duty of care to the plaintiffs in that he failed to carry out an adequate inspection of the house, failed to identify a number of defects, and in consequence failed to give appropriate advice to Mrs Johnston. The Council claims that it is entitled to recover from Mr Johnston the whole or part of the sum for which the Council is liable to the plaintiffs. 2 The essence of Mr Johnston's response is that he was not engaged in any capacity which could give rise to any liability to the plaintiffs.

6 The central issues arising from the third party claim are ones of fact: the reasons why Mr Johnston visited the property with Mrs Johnson before purchase and what occurred on that visit, including what was said by Mrs Johnson and Mr Johnston to each other and what was said by others during the visit of Mrs Johnson and Mr Johnston. Although these and related questions arose out of the third party proceeding, they became matters of direct conflict between the plaintiffs, and Mrs Johnson in particular, and Mr Johnston. The Council did not withdraw its third party claim against Mr Johnston, but the Council supported Mr Johnston's contentions of fact in respect of a number of material conflicts of evidence between Mr Johnston

and Mrs Johnson. This is because the determinations of fact in this regard are relevant to the question of contributory negligence by the plaintiffs. Mrs Johnson said that she asked Mr Johnston to advise her if there were any weathertightness concerns with the house and that he positively told her there were not. Mr Johnston said that he was not asked to visit the property to advise on the structural integrity of the house at all, but that while he and Mrs Johnson were at the property there were indications of problems and he advised Mrs Johnson to consult an expert if she had concerns because Mr Johnston was not an expert

7 It is appropriate to consider the principles of law relating to contributory negligence before outlining the relevant evidence.

Contributory negligence: principles

The Contributory Negligence Act

8 Section 3(1) of the Contributory Negligence Act 1947 provides, so far as material:

3 Apportionment of liability in case of contributory negligence

• (1) Where any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons, a claim in respect of that damage shall not be defeated by reason of the fault of the person suffering the damage, but the damages recoverable in respect thereof shall be reduced to such extent as the Court thinks just and equitable having regard to the claimant's share in the responsibility for the damage:

  …

9 This is appropriately restated in terms relevant to this case: if the loss suffered by the plaintiffs has occurred partly as a result of the plaintiffs' own fault and partly as a result of the Council's negligence, the compensation payable by the Council to the plaintiffs for the plaintiffs' total loss is to be reduced by an amount representing the plaintiffs' share of responsibility for the loss.

10 The elements of contributory negligence and relevant principles are discussed in the following paragraphs.

Fault of the plaintiff

11 The plaintiff's fault does not require proof of the same elements of negligence that are required to be proved against a defendant. This is made clear by the definition of “fault” in s 2 of the 1947 Act. “Fault” is defined as: “negligence, breach of statutory duty, or other act or omission which gives rise to a liability in tort or would, apart from this Act, give rise to the defence of contributory negligence”. Acts or omissions — that is “conduct” — that would have given rise to the defence of contributory negligence before the 1947 Act was passed included conduct which would not have been sufficient to result in liability for negligence on the part of the defendant. As stated in Fleming: 3

[The plaintiff's “negligence”] does not necessarily connote conduct that is fraught with undue risk to others, but rather a failure on the part of the plaintiff to take reasonable care of him or herself for his or her own interests 4

…

[It] is well established...