Mcnamara and Ors v Auckland City Council

• Jurisdiction: New Zealand
• Judge: Elias CJ,Blanchard,McGrath,William Young JJ,Tipping J
• Judgment Date: 09 May 2012
• Neutral Citation: [2012] NZSC 34
• Docket Number: SC 85/2010
• Court: Supreme Court
• Date: 09 May 2012

Between

Peter Hardie Mcnamara and Patrick Sturgeon Mcnamara as Trustees of The P H Mcnamara Family Trust

Appellants

and

Auckland City Council

Respondent

[2012] NZSC 34

Court:

Elias CJ, Blanchard, Tipping, McGrath and William Young JJ

SC 85/2010

IN THE SUPREME COURT OF NEW ZEALAND

Appeal from Court of Appeal decision which struck out a claim against the respondent council for breach of duty of care in issuing a building consent — leaky home — developer employed private certifier to issue building certificate and compliance certificate — respondent issued building consent pursuant to s50 Building Act 1991 (“BA”) (establishing compliance with building code) — private certifier's certifying authority had been limited by Building Industry Authority, and not competent to certify compliance — whether respondent should have carried out its own inspection — whether a territorial authority had responsibility under the BA when a private certifier had been used — whether respondent had been negligent.

Counsel:

B O'Callahan and G S G Erskine for Appellants D J Goddard QC and M A Cavanaugh for Respondent

• A The appeal is dismissed.

• B The appellants are to pay the respondent costs of $25,000 and reasonable disbursements in connection with this appeal, as fixed by the Registrar if necessary.

JUDGMENT OF THE COURT

REASONS

Elias CJ	[1]
Blanchard, McGrath and William Young JJ	[110]
Tipping J	[172]

Elias CJ

1 The appeal arises from summary dismissal of a claim before trial. The claim was brought by the appellants, as purchasers of a new house in Arney Crescent, Remuera, against the Auckland City Council for breach of duties of care said to have been owed to them by the Council in relation to non-compliance with the building code in the construction of the house. The house failed to meet the weather-tightness standard of the building code, standard E2. It required expensive work to prevent leaks and remedy damage caused by moisture. The statutory duties which provide the background to the claimed duty of care are ones imposed upon territorial authorities by the Building Act 1991. The Act has now been repealed, 1 but was in effect at all material times and its provisions are the context in which the question of duty of care falls to be considered. 2

2 As the Act permitted, the developer of the property had chosen to use a private certifier authorised under the Act to certify that the plans and specifications conformed to the code, to inspect and certify building work as code compliant, and to provide a final certificate of code compliance on completion of the building work. In those circumstances, the territorial authority was relieved of the statutory responsibility of itself inspecting the property and certifying for code compliance (although if notified that a certifier could not carry out the functions of inspection and certification, it was required to take them over). The territorial authority was obliged to accept the certificate of the certifier that the work complied with the building code, and had immunity for liability for its own actions taken in reliance on such certificate.

3 The certifier engaged by the developer was Approved Building Certifiers Ltd, which is referred to throughout as “ABC”. It is not disputed that ABC was authorised under the Act to certify compliance with standard E2, the general weather-tightness standard under the code, when it certified in support of the application to the Council for a building consent that the house would comply with the code if constructed according to the plans and specifications which had been supplied to the Council. Under the Act, the Council was obliged to accept ABC's certificate and grant the building consent.

4 Between the granting of the building consent and before final code compliance certification, however, ABC's authority was limited by the Building Industry Authority. The limitation, which was noted on the publicly available register maintained by the Building Industry Authority and which was notified by newsletter to all territorial authorities, restricted ABC's ability to certify for compliance with standard E2 to a single acceptable solution, E2/AS1. For the purposes of the summary application it was accepted that the Council knew of the limitation. Indeed, after it was imposed by the Building Industry Authority, the Council was obliged to take over a large number of building works in which ABC was the certifier, perhaps several hundred.

5 The limitation imposed on ABC seems to have been against a background of developing anxiety about failure to achieve standard E2 when monolithic cladding was fixed to untreated timber (the method of construction used in the Arney Crescent property). Such failure has come to be seen as entailing systemic regulatory defect. It has led to substantial litigation on an unprecedented scale. It is not clear what was known of the problem at the time of the events giving rise to the present proceedings. The knowledge of the Council might well be a circumstance to be investigated at trial, since appreciation of risk may be a pointer to the existence of a duty of care because “risk imports relation”. 3

6 It is accepted that the design of the house did not permit conformity to acceptable solution E2/AS1 and that the final code compliance certificate was beyond the certifying authority of ABC when given and when received by the Council under the provisions of the Act. (It is not clear whether further certificates or inspection reports were provided to the Council by ABC after its authority was limited, but the claim extends to any such as well as to the final certificate of code compliance.)

7 The claimed duties of care in the present case do not arise out of inspection or certification of code compliance undertaken by the Council itself as was the case in Invercargill City Council v Hamlin 4 and North Shore City Council v Body Corporate 188529. 5

Rather, they are based upon the Council's wider responsibilities under the Building Act. They are said to give rise to sufficient relationship of proximity between the Council and owners to cast upon the Council a duty of care to accept and act only on certificates which were within the authority specified for the certifier in the public register maintained by the Building Industry Authority. In addition, it is claimed that the Council's advice to the appellant's solicitors that a code compliance certificate had been issued amounted to negligent misstatement

8 Reversing the High Court, 6 the Court of Appeal struck out the claims and entered summary judgment for the Council. It considered that the Council did not owe the claimed duties of care to the owners because, having elected to use a private certifier instead of the Council to certify for code compliance, they could not “enliven” the statutory responsibilities of the Council (and its derivative duty of care in application of the approach in Hamlin) without giving notification to the Council under's 57 of the Act that the certifier was no longer able to act. 7 The Court of Appeal allowed that the policy of notification might be sufficiently served to revive the obligations of the territorial authority under the Act if the Council “well knew” that the certificates provided exceeded the authority of the certifier, but thought there was no such suggestion here (despite a pleading that the Council “knew or ought to have known” that the certificates exceeded authority).

9 Without notice under's 57 (or equivalent knowledge sufficient for the purposes of s 57 to revive the Council's direct responsibilities of inspection and verification), the Court of Appeal considered that the effect of imposing a duty of care would be to make the Council a “long-stop guarantor” of the liability of the certifier, an outcome it thought contrary to the Act. 8 It also considered that the effect of accepting the claim would be to “create a liability for damages in public law” for failure to fulfil the “limited … functions” of the Council under the Building Act. 9

10 The claim based on negligent misstatement (which has not yet been pleaded but was foreshadowed in the Court of Appeal) was only addressed obliquely in that Court. It seems to have considered that any negligence by the Council was not actionable because of the effect of s 41 of the Local Government Official Information and Meetings Act 1987. 10 If so, such conclusion would be inconsistent with Marlborough District Council v Altimarloch Joint Venture Ltd. 11

11 On appeal, the other members of the Court would uphold the decision of the Court of Appeal on the first basis of claim, essentially for the reasons given by that Court. I differ from that conclusion. In my view the scheme of the legislation was to impose significant supervisory responsibilities on the territorial authority to ensure that the code was complied with, even where a private certifier was engaged. A point of distinction is that, unlike the Court of Appeal and the majority in this Court, I do not think that there was a fork in the regulatory road, which, if taken by the owner, removed the Council from having any responsibility except when given notice under's 57. Although by s 50 of the Act a territorial authority was not required or even entitled to question the substantive assessment of code compliance by an approved certifier (and had immunity from suit where it acted in reliance on such a certificate in good faith), I consider that its continuing statutory responsibilities are consistent with the claimed duty of care to check that a certificate was within the scope approved for the certifier. The Council's liability for any breach of its own duties of care does not make it a guarantor for certifiers. It is responsible for its own carelessness in discharging its distinct duties of care.

12 Other members of the Court take the...