MCCOLLAM AND ORS V D'ANVERS AND ORS HC AK CIV-2006-404-002000

MCCOLLAM AND ORS V D'ANVERS AND ORS HC AK CIV-2006-404-002000 16 March 2007IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV-2006-404-002000BETWEEN ALFRED BARRY MCCOLLAM DAVID GRAHAM SMITH JONATHAN PAUL STUART HISLOP as trustees of the A B McCollam Family Trust EMMA MCCOLLAM DAVID GRAHAM SMITH JONATHAN PAUL STUART HISLOP as trustees in a McCollam Family Trust Partnership Plaintiffs AND JOHN THORNTON REES D'ANVERS First Defendant AND CJ DESIGN & INTERIORS LIMITED Second Defendant AND EARL CLIFTON JONES Third Defendant AND NORTH SHORE CITY COUNCIL Fourth DefendantCIV-2006-404-002290AND BETWEEN GEORGE JES LILOA WILLARD Plaintiff AND EMMA MCCOLLAM DAVID GRAHAM SMITH JONATHAN PAUL STUART HISLOP as trustees in a McCollam Family Trust ALFRED BARRY MCCOLLAM DAVID GRAHAM SMITH JONATHAN PAUL STUART HISLOP First Defendants AND NORTH SHORE CITY COUNCIL Second Defendant Appearances: J Katz QC for McCollam Family Trusts G J Kohler for GJL Willard Judgment: 16 March 2007MCCOLLAM AND ORS V D'ANVERS AND ORS HC AK CIV-2006-404-002000 16 March 2007JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN[1] The McCollam Interests apply for these two proceedings, in which they are plaintiffs and defendants respectively, to be consolidated. They also seek leave to issue third party notices, to add defendants, and to issue a counterclaim against Mr Willard.Background[2] The McCollams' claim concerns issues arising out of the design and construction of a residential dwelling for them at Gibbons Road, Takapuna. Their claim is against: Mr D'Anvers, the architect in respect of design and supervision work; Mr Jones and/or his company, C J Design, relating to building construction work; and, North Shore City Council (NSCC) relating to issuance of the building consent or concerning building inspections. [3] Construction of the dwelling was completed about November 1998. NSCC had undertaken final inspection in May 1998. [4] The house is extremely large for a residential dwelling. It was of a complex and intricate design. [5] On 16 April 2004 the McCollams entered into an agreement for sale and purchase (ASP) with Mr Willard. The agreement permitted Mr Willard to enter into possession pending settlement scheduled for 9 September 2007. At that time Mr Willard is to pay the balance of $10,500,000 due under the contract, and theMcCollams are required to deliver up a building which meets the requirements of the building code. [6] With consent of the McCollams, Mr Willard carried out extensive alterations, renovations and extensions to the property. By letter dated 6 May 2004 his solicitors notified McCollams' solicitor that no Code Compliance Certificate (CCC) was ever issued for the dwelling. It was agreed the McCollams' solicitors would obtain the CCC. [7] By letter dated 3 June 2004, NSCC advised it would not issue a CCC as no final inspection was carried out, and because the monolithic cladding system may preclude its issue. [8] On 4 September 2004 Mr D'Anvers, on behalf of the McCollams, lodged an application for determination with the Department of Building and Housing (DBH) in respect of the decision of NSCC. On 10 February 2005 DBH's independent expert reported on the dwelling and advised the cladding system did not comply with the current building code, and confirmed NSCC's decision not to issue the CCC. [9] On 12 April 2006 the McCollams filed their proceeding, and on 28 April 2006 Mr Willard filed his proceeding. [10] Broadly, but perhaps not strictly accurately, the McCollams proceeding can be described as a leaky building matter, in that there are problems with ingress of water causing damage, and because of claims of unsatisfactory building work. [11] Mr Willard's proceeding invokes the Contractual Remedies Act and contract claims under the ASP, and it includes a separate claim against NSCC for negligence in approving the plans and specifications for the dwelling, carrying out of inspections, certification and failure to enforce the building code.Reasons in support of consolidation application.[12] Unquestionably there are significant defects associated with the construction of the subject dwelling. There are clear differences between what Mr Willard andhis advisors perceive is required to deal with those defects and what the McCollams and their expert, Mr Bayley, perceives to be required. As yet NSCC has not signalled what remedial work it requires for a CCC to issue. Those facts, assert the McCollams, explain why the Willard objections to consolidation, namely delay and the lack of commonality between the two proceedings, may be discounted. Part of the answer, submits Mr Katz, lies in an analysis of the Willard claim. That claim against the McCollams has four parts, namely: a) Pre-contractual misrepresentations, in particular a representation that the property was extremely well constructed – a top end of the market property, and that all necessary and required work for a residential dwelling had been properly and adequately done. That claim seeks declaratory relief and an inquiry into loss. It is a claim, Mr Katz submits, that is consistent only with the contract being on foot and with settlement of the ASP to take place, but which also seeks compensation or damages for breach. b) Mis-description. That claim too, he submitted, seeks an order for specific performance subject to an adjustment of the purchase price "due on settlement". c) Breach of warranty. That claim relies upon a clause of the contract that warrants the building work has been carried out in accordance with the building consent, and that a Code Compliance Certificate is issued. That claim too makes it clear that even if the warranties and the ASP are breached, Mr Willard must still settle subject to any rights at common law or in equity, or pursuant to the Contractual Remedies Act. In fact, Mr Katz submits, Mr Willard has by his proceeding elected to affirm the contract subject to seeking an adjustment of the purchase price. d) Failure to obtain a Code Compliance Certificate. Here Mr Willard seeks an order or declaration that he is entitled at his option either to void or cancel a contract, and if cancelled then to obtain relief underthe Contractual Remedies Act and an inquiry into loss. Mr Katz comments that this claim is misconceived because it is inconsistent with other claims by which ratification/affirmation of the contract is sought. Likely, he says, Mr Willard has foregone the right to cancel because of an earlier election he made to proceed with the contract after learning the McCollams sold the property without a CCC. [13] The remaining claim by Mr Willard concerns NSCC alone. It alleges negligence in the manner I have previously detailed. Mr Katz notes that those allegations are much the same as in the McCollams' claim against NSCC. Therefore, he submits, it must follow that in the Willard proceeding it was appropriate for the McCollams to issue a defendants' cross notice against NSCC seeking contribution or indemnity or determination of common issues. Further, it is appropriate for the McCollams to issue a third party notice and statement of claim against persons responsible for the actual defaults pleaded in Mr Willard's proceeding. As Mr Katz further submits: a) It was available to the McCollams to file a cross notice at any time prior to the proceeding being set down for trial. b) The propriety of exercising that right provides a buffer to the assertions of Mr Willard's advisors that Mr Willard's claims against NSCC may be discontinued. c) In any event, discontinuance is not available as of right but requires leave, and such leave, if applied for, would likely be refused because NSCC could, with leave, properly be joined by the McCollams as a third party for the same reasons as it was subject to the notice of cross claim. [14] In summary, it is Mr Katz' submission that the Willard claim is all about seeking compensation by way of a reduction in the purchase price due to defects in the dwelling, and whether or not NSCC maintained appropriate regulatory oversight of the process by which the building work was carried out. It is that summary ofmatters, he says, which highlights the compelling reasons to consolidate the two proceedings. Because the issues in both are almost if not in fact identical, centering around the building work and the issuance of building consent, it would be a pointless waste of resources both to the parties and to the Court for there to be two separate trials. Further, there would a risk of disconformity of findings in one proceeding and those in the other. Mr Willard could not proceed without evidence relating to the defective building unless he asserts a right to cancel the contract because of the failure to provide a CCC. If the latter course is chosen then, submits Mr Katz, Mr Willard has some difficulties because of his earlier conduct by which it may be deemed he has repudiated a right of cancellation. [15] However analysed, Mr Katz submits, the allegations of negligence in the McCollams' claim are broadly comparable with those in the Willard claim, in particular by reference to the Willard claim against NSCC. [16] Mr Katz reserves his strongest criticism for Mr Willard's allegation of delay by the McCollams in prosecuting their proceeding. He says those allegations ignore the obligations assumed by the McCollams to obtain a CCC prior to settlement. In the result, Mr Katz submits that it cannot be accepted that Mr Willard is able to keep his options open. Whatever Mr Willard's views are regarding the extent of proposed remedial work required to be carried out, no leave is reserved to him to intervene or to be heard on the issue. The fact is that that the McCollams have assumed the obligation to obtain a CCC and to provide that on settlement. He said those obligations are being adequately addressed and there can be no advantage for those to be delayed. [17] If there has been delay then the consequences may lie with Mr Willard, because fully 12 months before he issued his proceeding the BIA had issued its determination. Mr Willard must have been aware that NSCC had no capacity whatever to issue a CCC, at least until satisfactory remedial work had been carried out.Principles for consideration of consolidation application[18] These are governed by rr 382 and 383. In summary there should be consolidation where it appears some common question of law or fact arises in both or the rights to relief claimed arise out of the same event/s or transaction/s, or a combination of both. Otherwise it may be ordered if for other reasons it is desirable to do so. Even if consolidation is not desirable, the Court can order the separate proceedings to be tried at the same time or immediately after one another. The advantage is that evidence heard in one proceeding is admissible in the other. Efficiency and cost savings are prime considerations. [19] Of importance is the orderly and effective disposal of cases. Obviously each case situation requires separate consideration. The requirement of Courts to consider what is "desirable" confers a wide discretion. Repetitious legal submission should be avoided if it is expeditious and economical to do so, in particular if it will reduce the risk of inconsistent decisions through separate hearings. There is, however, a need to avoid the risk of injustice as a result of a search for economy. [20] In this case Mr Katz submits that there is a risk of findings being made in Mr Willard's claim in absence of hearing the evidence of defendants in the McCollams' claim. It is not, he says, simply a case about the absence of a CCC, for Mr Willard's proceeding is not limited in that way. Otherwise he would have pleaded his case on a much more limited basis about whether or not he was entitled to cancel the ASP. He would not have pleaded in great detail the alleged defects, and would not be asking the Court to make findings in relation to them. Instead, says Mr Katz, there is a remarkable similarity in the pleadings identifying building defects. Such pleading could not, as Mr Willard claims, be determined within a hearing confined to a trial time of three days, as it is claimed it would be. [21] Any additional cost occasioned to Mr Willard by consolidation and a longer trial could be compensated by an appropriate costs order. Further, Mr Willard's concerns are, submits Mr Katz, misconceived. This is because: a) Within time the McCollams signalled an intention to join third parties.b) Although the initial deadline for filing third party notices and statements of claim was not met, the matter was adjourned for six weeks for further consideration, and after that for a further 17 days for the filing of appropriate applications. Although that timeframe was not met, filing was completed within 11 days thereafter. [22] Further, it is claimed the affidavits of Mr Bayley provide proper perspective to claims of delay. The DBH report provided a preliminary overview only and did not establish the full extent or causes of water ingress. Mr Willard's expert report suggests less than comprehensive testing, nor did it identify precise details or apportion responsibility. By contrast Mr Bayley has carried out very extensive invasive testing. In contrast to those other reports he was required to identify fault, attribute responsibility, identify the party responsible and recommend a solution – this against a background of difficulty in sourcing relevant historical data. In the result there is a very real dispute between experts about whether or not remedial work requires virtually a complete re-cladding as opposed to targeted remediation – as recommended by Mr Bayley. [23] By his second affidavit Mr Bayley has identified a timetable within which building consents could be obtained and remedial work then carried out. Mr Bayley suggests this could be done before the end of September 2007. But if it is not then it is no fault of the McCollams. Mr Katz submits that this could be dealt with by an extension of time for settlement, as proposed already by the McCollams.Mr Willard's notice of opposition to application for consolidation[24] Mr Willard claims that the issues in the two proceedings do not relate to the same event, transaction, or series of events or transactions. Further, there will be delay and additional expense should the proceedings be consolidated, such that it would be unjust to order consolidation. [25] Mr Willard's affidavit in opposition avers: He obtained a building inspection report when he became aware of the problems with the house, and provided a copy of it to the McCollams. The McCollams have been slow in responding to Court timetable directions. In issue between he and the McCollams is a simple and straightforward matter concerning a requirement that a Code of Compliance Certificate be obtained by settlement. It is not disputed the house has substantial defects that will require substantial remedial work, and in consequence the CCC will not be available when settlement is due in September this year. Concerning the proposed counterclaim against alleging damage to the dwelling due to neglect of proper care, he says those claims are without merit because all proper care was carried out. [26] By his submissions, Mr Kohler adds consolidation would result in no less than five additional parties being added to Mr Willard's proceeding. That will cause significant additional cost to him. Mr Willard's issue should occupy no more than two or three days of trial, whilst matters surrounding the McCollams' claim could take three weeks of hearing.Considerations[27] I am far from convinced of claims of commonality between the two sets of proceedings. In essence the proceeding of Mr Willard is concerned with a determination of what rights he may have based upon the terms of the ASP. Mr Willard was an innocent purchaser of a house that is defective, and for which a CCC has to be provided upon settlement. His case is all about a purchase agreement and what he, as the purchaser, was informed about the quality of the house he was purchasing. By contrast, the McCollams' claims concern identifying those who were responsible for provision of the defective product. Clearly Mr Willard is not toblame for those defects, except to the extent encompassed by the prospective counterclaim. [28] Mr Kohler advised in submissions, and following discussions with NSCC's counsel, that it was "90 per cent certain" that Mr Willard's claim against NSCC would be discontinued. Even accepting, as Mr Katz submits, that it is open to the McCollams to serve cross claims against NSCC in Mr Willard's proceeding, the Court would hesitate to refuse leave to discontinue merely because the McCollams have served a cross notice upon NSCC, in particular when the former has its separate proceeding against the latter. It really depends on whether or not there is a discrete point of issue that is able to be decided in absence of the cross claim. [29] My view of Mr Willard's proceeding is that he wants to know whether he can cancel his contract with the McCollams or whether instead it is open for him to complete settlement subject to his right to claim compensation. In effect he wants to know what his options are, and if he wants to proceed with settlement and wants to seek compensation then he has the burden of proving what level of compensation is appropriate. Perhaps in the outcome he needs to justify whatever amount it is he considers should be withheld at time of settlement, but that is not necessarily a matter needed for determination upon the discrete issue upon which his own proceeding is presently advanced. That should ameliorate concerns about inconsistent judgments of the kind Mr Katz refers to. [30] I do not necessarily accept the claims of delay made on behalf of Mr Willard. I do accept those concerns are real if Mr Willard is further delayed in his objective to obtain some ruling upon his proceeding by the end of September 2007, even if a timely hearing of that claim may no longer be possible. Quite clearly, if there is consolidation then the claim of the McCollams will require substantial additional hearing time, and the likelihood of a hearing this year (or indeed within a year) in Auckland is very remote. Nor can the cost consequences for Mr Willard be so easily satisfied as Mr Katz contends. In commercial litigation of this kind orders for costs seldom provide adequate compensation for actual legal costs incurred.[31] I think it is not correct to describe Mr Willard's application for a declaration as involving considerations about who was responsible for the defective building works. Rather it is more concisely confined to an issue regarding whether or not Mr Willard is entitled to cancel his contract with the McCollams. It cannot, I think, be seriously contended that there was any element of fraud in the sale to Mr Willard, but then an action based upon misrepresentation need not assert such. Rather, this case concerns a discrete issue about whether or not there are options available to Mr Willard if the requisite CCC is not available when settlement is due. If Mr Willard has no option, or alternatively he proceeds to settle, then he is at risk to justify any amount he might withhold when tendering settlement. That might be the subject of a separate inquiry, but the extent of compensation claimed at that time is not necessarily the subject of an issue in Mr Willard's proceeding.Judgment[32] The application for consolidation is refused. In the event counsel cannot agree upon the issue of costs, I will determine those upon memoranda filed by counsel received within two weeks of the date of this judgment.Remaining applications[33] Largely these are determined by the outcome of the consolidation application. There is no requirement to further consider the application for leave to issue third party proceedings in Mr Willard's claim. [34] Independently there is no reason to refuse leave to add two further defendants as fifth and sixth defendants in the McCollams' proceeding. [35] Leave is granted to the McCollams to file and serve a counterclaim in Mr Willard's proceeding. As I perceive it from the evidence available, this claim concerns the manner in which Mr Willard has looked after the subject property while he has been in occupation of it. Subject to any issues arising regarding the extent of particulars provided in such counterclaim leave, should it be required, is granted to file same.Other orders concerning the Willard proceeding[36] I direct the Registrar allocate a three-day hearing. I request every effort be given to sourcing hearing time prior to the end of September 2007. Meanwhile I direct this matter be adjourned to a telephone conference at a time and on a date to be arranged by the Registrar before an Associate Judge in Auckland in order that pre-hearing obligations may be fixed.Solicitors: McVeagh Fleming, Auckland (Counsel: J Katz QC) Dyson Smythe & Gladwell, Warkworth (Counsel: G J Kohler, Auckland)