North Shore City Council v Body Corporate 188529 (Sunset Terraces)

JurisdictionNew Zealand
JudgeElias CJ,Blanchard,Tipping,McGrath,Anderson JJ,Tipping J
Judgment Date17 December 2010
Neutral Citation[2010] NZSC 158
Docket NumberSC 27/2010
CourtSupreme Court
Date17 December 2010
BETWEEN
North Shore City Council
Appellant
and
Body Corporate 188529 (Sunset Terraces)
First Respondent

AND

Stephen Robert Devlin & Others
Second Respondents

AND

Robert Henry Graham Barton and Kay Barton
Third Respondents

AND

R F Coughlan & Associates
Fourth Respondent
BETWEEN
North Shore City Council
Appellant
and
Body Corporate 189855 (Byron Avenue)
First Respondent

AND

Pauline Louise Hough & Others
Second Respondents

[2010] NZSC 158

Court:

Elias CJ, Blanchard Tipping McGrath and Anderson JJ

SC 27/2010

SC 28/2010

IN THE SUPREME COURT OF NEW ZEALAND

Appeal against a Court of Appeal decision which held the appellant Council liable in negligence in the discharge of its statutory duties regarding two multi-unit residential developments — whether Invercargill City Council v Hamlin should be followed — whether liability should be restricted according to the form of ownership or type of residence — whether a body corporate could sue for damage to common property — whether a duty was owed to successive owners where the cause of action had already accrued to the original owner — whether a duty was negated by the involvement of architects and other consultants — whether a duty of care was negated by the absence of a Code of Compliance Certificate — whether the Council's liability was negated by the opportunity for an intermediate inspection (LIM report).

Counsel:

D J Goddard QC, D J Heaney SC, S A Thodey and S B Mitchell for Appellant

J A Farmer QC, M C Josephson and G B Lewis for Respondents

S C Price and I J Stephenson for 7th and 8th Named Second Respondents in SC 27/2010

  • A The appeals are dismissed.

  • B The respondents represented by Mr Farmer QC are awarded costs against the appellant in the sum of $40,000; those represented by Mr Price in the sum of $15,000, plus disbursements in each case to be fixed if necessary by the Registrar.

JUDGMENT OF THE COURT
REASONS

Para No

Elias CJ

[1]

Blanchard, Tipping, McGrath and Anderson JJ

[13]

Elias CJ
1

Territorial authorities control building in New Zealand under statutory duties conferred for the protection of building users. 1 The North Shore City Council in effect invites the Court to hold that it owed no duty of care to building owners for discharge of its statutory responsibilities of inspection and approval in claims to recover loss in value of the building or the cost of repairs. The effect of such holding would be to depart from the 1996 Privy Council decision on appeal from New Zealand in Invercargill City Council v Hamlin. 2 It would overturn the line of authority 3 followed by New Zealand courts in respect of builders since Bowen v Paramount Builders (Hamilton) Ltd 4 in 1976 and in respect of the supervisory

responsibilities of territorial authorities since Mt Albert Borough Council v Johnson 5 in 1979, cases themselves building on the 1971 decision of the English Court of Appeal in Dutton v Bognor Regis Urban District Council. 6 If unsuccessful in the bolder argument, the appellant contends that any duty of care owed by territorial authorities to building owners in the discharge of statutory obligations is limited to the owner-occupiers of low-cost individual residential dwellings
2

The Council appeals from findings in the High Court, 7 affirmed on appeal by the Court of Appeal, 8 that it is liable to the owners of units in two residential apartment blocks, “Sunset Terraces” and “Byron Avenue”, for their losses due to water damage resulting from faulty construction which would have been identified had the Council performed its statutory duties of inspection and consent with reasonable care. Some of the owners bought from the developer of the complexes. Others purchased from the original purchaser. Some are owner-occupiers. Others have let the apartments, in some cases intending to take up occupancy themselves at a later stage, in other cases because they have bought the apartments as investments for letting rather than to occupy personally. In the “Byron Avenue” appeal, there is a claim by the Body Corporate for damage to common property.

3

I have had the advantage of reading in draft the reasons of Tipping J, which allows me to summarise my reasons for reaching the same conclusions. I, too, consider that the New Zealand authority confirmed in Hamlin is correct and should continue to be followed. Liability to home-owners for loss of value or repair costs in respect of faulty building work, negligently passed by Council inspectors, has been imposed on territorial authorities with statutory responsibilities to supervise building for more than thirty years. Such liability fits within the wider framework of responsibility in negligence described in South Pacific Manufacturing Co Ltd v5Mount Albert Borough Council v Johnson[1979] 2 NZLR 234(CA).6Dutton v Bognor Regis Urban District Council[1972] 1 QB 373 (CA).7Body Corporate 188529 v North Shore City Council[2008] 3 NZLR 479 (HC); Body Corporate No 189855 v North Shore City Council HC Auckland, CIV-2005-404-5561, 25 July 2008.8North Shore City Council v Body Corporate 188529 [Sunset Terraces][2010] NZCA 64, [2010] 3 NZLR 486; O'Hagan v Body Corporate 189855 [Byron Avenue][2010] NZCA 65, [2010] 3 NZLR 445.New Zealand Security Consultants & Investigations Ltd 9 and applied in relation to duties arising out of a background of statutory responsibility by this Court in Couch v Attorney-General. 10 In addition, recognition of such liability to successive owners (whether for negligent inspection or for the negligent construction itself by the builder) is consistent with the questioning of a requirement of privity in cases where successive ownership of apparently durable constructions or products is usual. 11

4

The position taken in New Zealand in relation to both aspects (liability of territorial authorities and liability to successive owners) is similar to that reached in Canada. 12 It is also consistent with the approach to negligence taken by the English Court of Appeal in Dutton and by the House of Lords in Anns v Merton London Borough Council 13 In respect of the liability to successive owners, it is comparable with the liability of builders in some jurisdictions of the United States, arrived at in part by adaptation of the law of product liability. 14

5

In the United Kingdom and in Australia a more restricted view of liability in negligence for loss of value or the cost of repairs has been taken in more recent decades. In the United Kingdom, liability for such loss has been rejected in relation to both builders and territorial authorities. 15 In Australia, the liability of builders

such loss is recognised, 16 but not the liability of territorial authorities in relation to inspection and approvals. 17 In part, these differences turn on different legislative and social conditions. 18 And in Hamlin, it was recognised that the policy considerations behind the development of the common law inevitably and validly lead to different outcomes or emphasis in different jurisdictions. 19 The Privy Council was not prepared to differ from the assessment of the Court of Appeal, which stressed the reliance placed in New Zealand circumstances by purchasers of houses on Council inspection to prevent defects often otherwise very difficult to discover after completion of construction. 20
6

The decision in Hamlin itself is likely to have settled and confirmed such expectations in the fifteen years since it approved the pre-existing New Zealand case law. The liability of the Council to the plaintiffs in these appeals entails no extension of established principle. Nor do the changes to the legislation governing building provide justification for revisiting the New Zealand case law. The Building Act 1991 was considered by the Court of Appeal and the Privy Council, although not applicable to the case in issue. I agree with the assessment by those Courts that the Act is not inconsistent with continued common law liability when territorial authorities are negligent in carrying out their responsibilities of inspection and control.

7

In agreement with Tipping J, I do not consider it would be principled to introduce restrictions on the liability of territorial authorities according to the form of ownership, the type of residence, or the value of the building. While in Hamlin in the Court of Appeal, Cooke P in describing the facts of the case referred to the property in issue as “a comparatively modest one-storey suburban house”, 21 the reasoning in the Court of Appeal and the Privy Council does not suggest any limitation upon the principle of liability according to these circumstances. Indeed,

Bowen v Paramount Builders and Mt Albert Borough Council v Johnson were both concerned with attached units which were part of larger buildings. A limitation of liability to owner-occupiers moreover is contrary to the policy of the legislation, which is concerned with protecting all users of buildings. 22 And if claims by non-occupier owners have not been distinctly considered in New Zealand (although their availability was assumed in Bowen 23), there is no basis in the authorities for limitation of the general principle of liability
8

It was suggested in argument in this appeal that in larger developments it may be expected that architects, engineers, and other consultants are likely to be engaged and that purchasers are more likely to rely on such experts than on the inspection and controls under the Building Act. That there may be overlapping duties of care owed by different potential defendants, including architects and engineers, is however no answer to the Council's liability for its own negligence. Apportionment of responsibility may be sought where available. And in some cases questions of reliance may bear on whether any breach was causative of loss in fact.

9

In relation to questions of the scope of the duty of care and the effect of...

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