Lee v Auckland Council and Others

• Jurisdiction: New Zealand
• Judgment Date: 29 May 2015
• Neutral Citation: [2015] NZHC 1196
• Docket Number: CIV-2015-404-556
• Date: 29 May 2015
• Court: High Court

[2015] NZHC 1196

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-556

Between

Bu-rye Lee and Jeom-Youl Lee

Appellants

and

Auckland Council

First Respondent

and

Goodland Investments Limited

Second Respondent

Lai Fook Choy

Third Respondent

Appearances::

GR Grant for Appellants

SB Knight and SB Fellows for First Respondent

No appearance for Second Respondent

No appearance by or for Third Respondent

Appeal against the decision of the Weathertight Homes Tribunal that the respondent council be removed from the proceedings pursuant to s112 Weathertight Homes Resolution Services Act 2006 (WHRSA) (Removal of party from proceedings) — leaky building litigation — after a building inspection, the council had noted that a non-consented cladding system was being installed — did not halt the work or require the developer to apply for an amendment to the building consent and lodge amended drawings showing the cladding system which was being installed — the council failed the house on three separate occasions when it was presented for final inspection, but none of the failures raised any deficiencies with the cladding installation — appellants said that the council breached its duty to them by not having in place an adequate system of inspection to ensure that the cladding installed complied with the approved plans and specifications and with building code requirements; by failing to stop any further work until an application to amend the consent was lodged; and by failing in the course of inspections to note deficiencies the installation of the cladding — Tribunal said that the council had not been negligent but even if it had, the real cause of the loss was the appellants' failure to obtain a LIM on purchase — whether the Tribunal had correctly exercised its discretion under s112 WHRSA — whether it was arguable that the council had been negligent.

The issue was: whether the Tribunal had correctly exercised its discretion under s112 WHRSA; and, whether it was arguable that the council had been negligent

Held: The appeal was to be determined in accordance with part 20 High Court Rules and was therefore by way of re-hearing. The principles in Austin, Nichols & Co Inc v Stichting Lodestar applied: the Court had to make its own assessment of the facts and substitute its own findings if appropriate. The onus was on the appellant to show that the Tribunal was wrong.

Section 112 WHRSA provided a wider strike out jurisdiction than the High Court Rules' (HCR) strike out power. The Tribunal might be better informed as to the relevant facts than a Court was when hearing an application to strike-out. Nevertheless the principles applicable to strike-outs in the High Court and in the District Court, could assist in considering applications to remove a party from proceedings.

The Tribunal had a gate-keeping role to ensure that adjudication proceedings progressed in an expeditious and cost effective way ( Yun v Waitakere City Council). However the Court had to be alive to the risk of injustice if a party was too readily removed from proceedings. The discretion conferred by s112 WHRSA needed to be exercised with caution. The consequences of a removal order could be catastrophic for a claimant, and, if there was any doubt, the discretion should be exercised in a claimant's favour.

It was arguable that the Council was negligent in processing and approving the amended plans. It could be arguable that if detailed drawings and installation details had been sought, inspectors might have been able to more readily identify deficiencies in the cladding installation. It may also have been more obvious that the cladding ultimately installed was not the cladding consented to, either initially or following the October 2002 amendment to the building consent.

The Council inspectors either failed to identify that the cladding which was being installed did not match the cladding which had been approved in the amended building consent, or, if they noticed the difference, failed to do anything about it. If the Council's inspectors failed to observe the mismatch between the cladding being installed and the cladding approved, then arguably the Council was negligent and that negligence contributed to cladding being installed which should never have been installed. If the inspectors knew that the building work on the house was non-compliant, then the Council was required to then issue a notice to rectify under the Building Act 1991 (BA91). It did not do so. Further if the Council knew that the house did not comply with the building code, then it should have immediately issued a notice to rectify under the BA91requiring the consent holder to rectify the non-compliance. Again it did not do so.

Each of the alleged failings by the Ls against the Council was supported in the evidence. The Tribunal erred when it concluded, on the limited materials before it, that the Council was not negligent. There was a tenable case of negligence. That issue should not have been decided prematurely in the context of hearing a s112 WHRSA application, without all available evidence being heard, tested and considered in full.

The affidavits disclosed that the Council did not, in fact, convey to the owner of the property that there were any problems with the cladding. The Tribunal erred when it dismissed that evidence, and held that there was no causative link between the Council's alleged actions or omissions and the Ls' loss

The Tribunal's conclusion that the failure to obtain a LIM might be determinative was a tentative conclusion. It was clear however that, albeit expressed in conditional terms, it played a part in the Tribunal's reasoning. The Tribunal did not have before it any evidence from an experienced property lawyer regarding the practice of obtaining LIM reports as at December 2004 when The Ls purchased the house. Further, and in any event, a failure to obtain a LIM report when purchasing a property did not provide an absolute defence to claims of this nature made against Councils ( Body Corporate No 189855 v North Shore City Council HC — Byron Avenue).

Whether in the circumstances of this case, the Ls' failure to obtain a LIM amounted to contributory negligence, or to a new and independent cause of their loss that broke any causative link which existed, was a question which could only be determined at trial.

The Tribunal was wrong when it concluded that this was not a case where further evidence might strengthen the Ls' claim against the Council. The Tribunal erred in fact and in law when it ordered the removal of the Council from these proceedings. The Ls had a tenable cause of action against the Council. The strength or weakness of their claim, and whether the Council's actions or omissions were causative, either in whole or in part for their loss, could only be determined following a full hearing.

Appeal allowed. The Council was reinstated as the first respondent in the proceedings before the Tribunal.

JUDGMENT OF WYLIE J

This judgment was delivered by Justice Wylie

On 29 May 2015 at 4.30pm

pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date:…………………

Introduction

1 The appellants, Mr and Mrs Lee, appeal a procedural decision of the Weathertight Homes Tribunal made on 16 February 2015. 1 The Tribunal ordered that the first respondent, Auckland Council, should be removed from the proceedings pursuant to s 112 of the Weathertight Homes Resolution Services Act 2006 (“the Act”).

2 Auckland Council supports the Tribunal's decision. The developer, Goodland Investments Limited (“GIL”) abides the decision of the Court. The third respondent, Mr Choy, was added to the proceedings by GIL. It is unclear whether he has yet been served. If he has been served, he has taken no steps to date and he did not appear.

Background

3 Mr and Mrs Lee own a residential property in Albany Heights. Their house leaks, and in September 2014 they commenced adjudication proceedings in the Weathertight Homes Tribunal against Auckland Council and GIL, seeking to recover the estimated cost of repairing the house — $344,228 – plus consequential losses and general damages.

4 The property was initially owned by GIL. On 24 December 2003 it was transferred by GIL to a Ms Ratcliffe. On the same day Ms Ratcliffe transferred the property to Jung Jin Kim, and, also on the same day, he transferred the property to Jong Ho Choi and Hyo Ja Woun. A little under a year later, on 15 December 2004, the property was transferred to Mr and Mrs Lee. The property was sold to Mr and Mrs Lee by private treaty. They knew the vendors.

5 Auckland Council's involvement in the construction of the house and the key events and dates are summarised as follows:

DATE	EVENT
21 March 2002	GIL applied to Auckland Council for building consent to build the house on the property.
28 March 2002	Auckland Council issued building consent. The cladding specified was 21mm solid plaster on battens.
May 2002	Building work started.
18 October 2002	Auckland Council carried out a pre-line inspection. The house failed the inspection for lack of insulation. The inspector noted that the exterior cladding had been changed from that shown on the approved building plans. He issued field memorandum 41222 which recorded that the owner was to provide amended drawings for the changed cladding for approval by Auckland Council.
25 October 2002	GIL lodged amended plans with Auckland Council showing a change to the cladding from solid plaster on battens to a product known as Insulclad. The change was a note added to the existing plans which read “wall cladding changed to Insulclad”. No further detail or drawings were provided. Auckland Council approved the amended plans on the same day.
31 October 2002	A cladding inspection was requested. An Auckland Council inspector attended the site but he declined to carry out the...