AUCKLAND CHRISTIAN MANDARIN CHURCH TRUST BOARD V CANAM CONSTRUCTION (1955) LIMITED AND ORS HC AK CIV-2008-404-8526

AUCKLAND CHRISTIAN MANDARIN CHURCH TRUST BOARD V CANAM CONSTRUCTION (1955) LIMITED AND ORS HC AK CIV-2008-404-8526 25 June 2010IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV-2008-404-8526BETWEEN AUCKLAND CHRISTIAN MANDARIN CHURCH TRUST BOARD Plaintiff AND CANAM CONSTRUCTION (1955) LIMITED First Defendant AND THE WAITAKERE CITY COUNCIL Second Defendant AND GRAEME CAMERON Third Defendant Hearing: 8, 9 and 10 March 2010 Appearances: B J Spiers for the First Defendant G Brittain for the Third Defendant ACH Clemow and N P Tetzlaff for the Plaintiff Judgment: 25 June 2010RESERVED JUDGMENT OF PRIESTLEY J (On strike out and summary judgment applications)This judgment was delivered by me on Friday 25 June 2010 at 3.00 pm pursuant to Rule 11.5 of the High Court Rules. Registrar/Deputy Registrar Date:.Counsel/Solicitors: B J Spiers, Simpson Grierson, Private Bag 92518, Wellesley Street, Auckland 1141. Fax: 09 307 -331. Email: info@simpsongrierson.com G Brittain, P O Box 13473, Tauranga Central 3141. Fax: 07 578 5165. Email: brittaing@xtra.co.nz ACH Clemow, Gaze Burt, P O Box 91345, Victoria Street West, Auckland 1142. Fax: 09 309 3114 Email: law@gazeburt.co.nzTABLE OF CONTENTSParagraph The substantive proceeding 1 Relevant causes of action 7 Relevant background 13 Strike out and summary judgment applications 35 Discussion 39First cause of action - Breach of contract claim against Canam 41Negligence claim against Canam alleging failure to exercise reasonable care and skill (second cause of action) 57Negligent repairs and negligent misstatement by Canam (seventh cause of action). Negligent repairs and negligent misstatement against Mr Cameron (sixth cause of action). 76Negligence claim against Mr Cameron in respect of supervision and control of design and construction and remedial work in his capacity as a director of Canam (fifth cause of action). 95 Result 102 Costs 108The substantive proceeding[1] The plaintiff is a Board constituted under the Charitable Trusts Act 1957 which governs the Auckland Christian Mandarin Church. [2] In November 1997 the plaintiff and the first defendant (Canam) entered into a contract for the design and construction of a church building on a site at Central Park Drive, Henderson. [3] The third defendant (Mr Cameron) was at that time a director of Canam. He was a practising Christian and, unremarkably, was empathetic to the plaintiff's general mission and its project. [4] Construction of the church was (in general terms) completed in the second half of 1998. The Waitakere City Council (the relevant local authority and the second defendant against whom the plaintiff has discontinued) completed its final inspection of the building works on 12 October 1998 and issued a Code Compliance Certificate on 7 January 1999. [5] Unfortunately, between 2000 and early 2003 water leakage problems were discovered. Initially these were addressed by minor repairs. Not until April 2005 did the plaintiff, having received expert advice, appreciate that water leakage occurring in the church building was serious and would need extensive remedial work. The plaintiff, however, may well on the evidence have been aware of the leaky building phenomenon before that. [6] The plaintiff did not file this proceeding against Canam and Mr Cameron until 19 December 2008.Relevant causes of action[7] The plaintiff's statement of claim pleads eight causes of action. Five of those are relevant to the current applications being:a) Breach of contract against Canam for failure to construct the church in accordance with good building trade practice, or the building consent and/or the Building Act 1991 and the Building Code (first cause of action). b) Negligence by Canam and breach of an alleged duty of care it had to the plaintiff in respect to the design and construction of the church (second cause of action). c) Negligent repairs and negligent misstatement by Canam arising out of advice and repairs carried out by Canam when problems with the church building became apparent (seventh cause of action). d) Negligence against Mr Cameron whom, it is alleged, owed the plaintiff a duty of care as a developer or a person acting as supervisor. The alleged duty of care extends across both the design and construction of the church (fifth cause of action). e) Negligent repairs and negligent misstatement against Mr Cameron personally in respect of repairs and advice when the leaks first manifested themselves, the particulars in this cause of action essentially mirroring the seventh cause of action against Canam (sixth cause of action). [8] Both Canam and Mr Cameron have applied for the plaintiff's respective causes of action against them to be struck out. In the alternative summary judgment is sought. [9] In broad summary, Canam submits that the first and third causes of action, grounded in contract and tort, are time-barred by both s 4 of the Limitation Act 1950 and s 91(2) of the Building Act 1991. As an alternative ground in respect of the negligence claim, Canam submits it should be struck out because it never owed the plaintiff a duty of care.[10] With regard to the seventh cause of action (negligent misstatement and negligence in respect of repairs) Canam submits this too should be struck out because incorrect advice was not given to the plaintiff, nor did the plaintiff suffer any damage. [11] Mr Cameron in summary submits that the fifth cause of action (negligence) must fail because he, as director of Canam, never assumed personal responsibility; there was no proximity; and that the alleged duty of care is in any event novel and should not be imposed in respect of a non-residential or commercial property. So far as the sixth cause of action is concerned, Mr Cameron submits that again he assumed no personal responsibility and in any event the plaintiff neither accepted nor followed his advice so suffered no loss. [12] Both Canam and Mr Cameron rely, across all causes of action, on the available limitation defences and in particular the s 91(2) Building Act "long stop" defence.Relevant background[13] All counsel, for the purposes of their respective arguments, relied on documents and affidavits contained in an agreed bundle. Certain factual matters are thus uncontested for the purposes of these applications. [14] Between June 1996 and March 1997 Canam and the plaintiff discussed the development of a church for the plaintiff. The initial contact seems to have been made by a representative of the plaintiff, Aaron Chan, in early June 1996. He sought assistance generally to find appropriate land in the Henderson area and advice on the development costs for the church. The plaintiff had been leasing, for approximately ten years, the Maclaurin Chapel at Auckland University. The congregation, however, had outgrown that facility. [15] The plaintiff sought a draft construction contract from Canam in March 1997 so that it could take professional advice. In June 1997 the plaintiff appointedMr E Aislabie of Aislabie and Associates to be its project manager. It is unnecessary, for the purposes of this judgment, to discuss the detail of Mr Aislabie's evidence who has sworn affidavits for both Canam and the plaintiff. Suffice to say, Mr Aislabie's contractual responsibilities with the plaintiff included analysing documentation; liaising with Canam over its construction programme; attending fortnightly site meetings and twice weekly site visits to monitor progress; evaluating progress claims; and preparing, at the end of the contract, a list of maintenance items. [16] Discussions continued between the plaintiff and Canam over the proposed building. In December 1996 Canam helped the plaintiff obtain resource consent. In the second half of 1997 the plaintiff expressed a preference for Harditex (a product which has featured in many leaking building claims) which ran somewhat counter to Canam's preferred cladding. [17] Significantly during this phase Mr Chan, in April 1997, made a detailed note of a telephone conversation he had with Mr Cameron. It records, in respect of the draft contract Canam was to send him:Despite the fact that the church development is only a $1.4 million contract, the Project Control Group has to be accountable to some 300 Church members and hence has to handle the project in a way similar to a multi- million project. The Church will seek professional advice such as solicitors and quantity surveyors. Unfortunately, this will cost money but can't help. (sic)[18] A Deacons' meeting of the plaintiff held the same evening recorded that Canam had been engaged to draw up plans; that competing quotes from two firms of solicitors were awaited; and that the plaintiff would employ a quantity surveyor (who turned out to be Mr Aislabie), and somebody to oversee the construction. [19] Canam provided two tenders in October 1997. The first was based on Duroplast as the external cladding. The second tender, to reduce price, was based on the use of Harditex. Canam provided a final tender on 13 November 1997 for just under $1.4 million. The next day, 14 November 1997, the plaintiff and Canam signed a construction contract, with construction beginning on the site immediately.[20] The plaintiff took possession of the building in June 1998. Mr Aislabie and Canam staff conducted a site inspection on 15 June 1998 to determine whether practical completion had been achieved. The next day, 16 June, Mr Aislabie provided a maintenance defect list which included various minor leaks. The first Sunday service was held in the plaintiff's church on 21 June 1998. [21] On 8 August 1998 practical completion of the building, in terms of the specific term of the construction contract, was achieved. A three month contractual maintenance period began. On the same date the church was officially opened. [22] The Waitakere City Council completed its final inspection of the building works on 12 October 1998. The building passed inspection, subject only to the owner obtaining certificates on minor issues relating to plumbing and drainage. Those identified items were attended to by Canam which wrote to the Council on 25 November 1998 advising completion and requesting that a Code Compliance Certificate be issued. Council records dated 14 December 1998 record that the outstanding Certificates had been completed. The record is notated "ok for final ccc". The Certificate was in fact issued on 7 January 1999. [23] Canam submitted its final account for $83,718 on 12 February 1999. An account for the higher figure of $87,093 was resubmitted and paid by the plaintiff on 17 May 1999. [24] The February account represented a concession. A letter dated 9 February 1999 on Canam letterhead signed by Mr Cameron to Mr Woo, the plaintiff's treasurer, referred to an earlier request by the plaintiff for a discount. The letter stated that Canam would be "pleased to gift back to the Church $15,000 off our final account" conditional on prompt payment and the plaintiff accepting that, apart from some ceiling water stains on an exterior entry canopy and ongoing maintenance, the building was "complete in every way".[25] In February 1999 the plaintiff identified some hairline cracks in various Harditex joints. Canam sought advice on this issue and the best method of repair. Repairs to the cracked joints, pursuant to the cladding warranty, were carried out in March/April 1999. [26] Between the completion of the contract in late 1999, and 2002, various problems and leaking or damp emerged, which resulted, on the plaintiff's evidence, in Canam sending workmen to the church between two and five times each year. Minor repairs effected included replacing damp areas on gib lining, skirting boards, roofing tiles, and sealing possible water entry points around ventilator units and roofing iron. The plaintiff's general approach was to contact Canam when these problems emerged. [27] Throughout 2002 and into early 2003 the plaintiff's Deacon Board became increasingly concerned. Moisture problems were detected. In March 2003 part of the gymnasium roof collapsed. [28] By 13 March 2003 the plaintiff was clearly aware that it had a leaky building and that the phenomenon of leaky buildings was widespread. The minutes of a Deacons' Board meeting on that date record as follows:Serious leakage, can consider registering with the Government; if not registered then we may have ongoing issues with the contractor. If we are going to register with the Government then we will need to have a qualified inspector to do the work. It may cost around $3,000. We may have an issue with the insurance of our building once inspected. Current insurance premiums of $6,000 per annum. If we inform our insurance company that our church building leaks then the premium might increase between $10,000 to $60,000 (for ordinary house). Resolved that Rev H W Cheng and Sherman Huang to look into: 1. the cost for the inspection is within $3,000, 2. if the insurance premium remains the same and that the cost is within $3,000 then proceed with the registration with the Government, otherwise another meeting is needed to decide.Despite that clear indication from the plaintiff that they had a problem with leaks in which they were not alone, five years and nine months was to elapse before a proceeding was filed.[29] On 24 April 2003 Mr H W Cheng, the plaintiff's senior pastor, wrote to Mr Cameron at Canam in the following terms (sic):Dear Graeme: It's pleased to see you've got the project of the waitakere sports complex center and under construction which means your company is not only one of the best construction companies in N.Z. but also is the company which has both of the building ability and quality. As you know, we have faced the leaky problem of church building for a long period. It's frequently been asked and challenged whether our church building structure is strong enough and safe to stay especially since the roof board has fallen on Mar.11. Recently, I found that the timber under the main entrance inside of the church is getting wet with mildew. I am afraid whether the other timbers around our church building are in the same situation or all of them may have the same risky problems. I would like to meet with you and with our church deacon, the person in charge of the building and development, to discuss the following concerns: 1) Do you think the other places around the church could have invisible leaky problems? 2) Are there any potential risks or safety concerns especially for the people in the church? 3) Do you think leaky situation could be worse inside of the building? 4) How can we get the total solution of the leaky problems?Mr Cameron visited the site and subsequently several days were spent on site by an Alan Dickie. [30] On 23 June 2003 Mr Cameron wrote to Pastor Cheng. As I understand it, although Mr Cameron was still a director of Canam it had been decided (by whom and why is unclear) to try to place some distance between Canam and Mr Cameron who had become the plaintiff's point of contact. For this reason Mr Cameron's letter was written on the letterhead of a private entity of which he was a principal, Whitby Trust. The letter focuses in the main on the roof.This roof is long run steel. There are four penetrations for the four Air Vents. The last time we were there we sealed some of the zinc strip on the ridge of the upper roof because it was possible water was blowing back underneath that. However, it doesn't seem to have fixed the leak. We don't think wateris running over the top of the air vents and into the ceiling. We now think the water was getting in at the ridge flashing laps – so we have sealed these. While we were up there we noticed that the gutters were dirty so we have cleaned them out for you, and removed another ball from a rain water head. You now need to inspect your roof and gutters once a year and clean any debris that's dropped by sea gulls and grass that grows in the gutters from bird droppings and make sure the rainwater heads are clear also. We will also over flash the four blocks on the four corners of the high level roof as they are starting to show signs of weathering on top. As discussed you now need to be responsible for the future maintenance of this building. The sealant in the joints between your cladding will need an inspection every three months to ensure they are well maintained. It was agreed that you will get your carpenter to get in touch with our Alan Dickie (025 650 9151) who will meet on site and show your man how to repair a joint properly, but generally the repair is as follows: 1. Cut old material out of joint, without damaging the building paper at the rear. 2. Use a straight edge and a router (you will need several router bits). 3. Clean the joint sides i.e. The Harditex 4. Form an adhesion barrier at the rear (tape) the building paper. 5. Mask each side of joint 6. Prime sides of joint 7. Apply Uraflex 8. Clean off surplus Uraflex with a flat spatula and remove masking each side of joint.[31] But by October 2003 the plaintiff was clearly aware it had a substantial problem with the building and that Mr Cameron's 23 June 2003 advice was not a solution. On 25 October 2003 Pastor Cheng wrote to Mr Cameron, this time at Whitby Trust, to advise the plaintiff's position. The letter stated:1. The water leaking problem in the building has occurred on numerous locations at various times since the Church building completed in 1998. The Church accepts your suggestion to regularly inspect the roof and gutters. However on the other hand we are concerned on the workmanship of the roof and the quality of its construction. The Church trusts that Canam will be competent in resolving water leaks as it is a reputable company in quality construction.2. Water leaks have again reoccurred in areas previously identified and consequently repaired by your workman. The Church believes that the leaking problem as those we are experiencing is not simply a maintenance matter. The Church would therefore appreciate your urgent attention to these leaking problems as failure to do so might cause further damage to the ceiling and other structures. 3. Having communicated with the maintenance personnel of the church with regard to matters on the exterior cladding, he was unable to carry out the job due to the safety risk involved. Therefore the Church request if you could arrange necessary tradesman to carry out the work for us. Please advise the approximate time frame and cost for this maintenance exercise.[32] A minute of the Deacons' Board on 14 March 2004 records that Canam had carried out "fuller repairs but still could not solve the problems." The minute refers to leaks worsening, noted the possibility of structural and timber damage if not attended to promptly, and recommended the engagement of professionals to attend to the problem. [33] The plaintiff engaged an architectural consultant. As early as July 2006 Mr Cameron was denying any responsibility so far as Canam and himself were concerned and reminded the plaintiff that he had advised them against using Harditex. [34] Solicitors' involvement followed. There was an unsuccessful attempt to mediate a settlement in late 2007. This proceeding was, for some reason, not filed until 18 December 2008.Strike out and summary judgment applications[35] The principles which govern these applications are well established and counsel agreed on them. [36] So far as the strike out applications are concerned, the orthodox approach is to assume that the pleaded facts can be established.1 If a cause of action cannot, as1 Attorney-General v Prince [1998] 1 NZLR 262, 267 (CA); Couch v A-G [2008] NZSC at [33] and [45].pleaded, possibly succeed, it should be struck out. The party seeking the strike out has the onus of establishing that a cause of action is statute barred, Matai Industries Limited v Jensen. 2 In a leaky buildings context the strike out application may extend to causes of action which are novel. 3[37] So far as summary judgment applications by defendants are concerned, the position is governed by r 12.2(2) of the High Court Rules which provides:The court may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff's statement of claim can succeed.The relevant principles have been set out by the Court of Appeal in Westpac Banking Corp v M M Kembla New Zealand Ltd.4 The defendant must discharge the civil onus that the plaintiff cannot succeed; as with all summary judgments material facts should not be in dispute; the summary procedure would be inappropriate if the judgment can only properly be reached after hearing all the evidence at trial or if there are developing points of law which may require added context and perspective available in a full trial. [38] In general terms, in a case such as this, the strike out mechanism would be appropriate where it is clear that limitation defences are an insuperable obstacle to the plaintiff. The summary judgment procedure might not be suitable in a situation where the context of advice proffered by a party and the advisor's capacity are at issue.Discussion[39] In this section of my judgment I intend to review the issues which arise out of the applications of Canam and Mr Cameron under the subheadings of each relevant cause of action.2 Matai Industries Limited v Jensen [1989] 1 NZLR 5253 Kerikeri Village Trust v Nicholas HC Auckland CIV-2006-404-5110, 27 November 2008, Andrews J; Mt Albert Grammar School v Auckland City Council HC Auckland CIV 2007-404-4090, 25 June 2009, Asher J; Board of Trustees Glen Innes Primary School v Ahead Buildings HC Auckland CIV 2006-404-1884, 21 June 2009 Keane J.4 Westpac Banking Corp v M M Kembla New Zealand Ltd [2001] 2 NZLR 314 at [58]-[68].[40] I do not intend to deal extensively with the detailed and capable submissions advanced to me by counsel. Nonetheless they have been fully considered.First cause of action – Breach of contract claim against Canam[41] Section 4(1) of the Limitation Act 1950 provides:4 Limitation of actions of contract and tort, and certain other actions(1) Except as otherwise provided in this Act or in subpart 3 of Part 2 of the Prisoners' and Victims' Claims Act 2005, the following actions shall not be brought after the expiration of 6 years from the date on which the cause of action accrued, that is to say,— (a) Actions founded on simple contract or on tort: [42] Highly relevant in claims arising out of building contracts is the then operative but now consolidated s 91(2) of the Building Act 1991 which provides:91 Limitation defences (2) Civil proceedings relating to any building work may not be brought against any person 10 years or more after the date of the act or omission on which the proceedings are based.[43] Given the filing date of this proceeding, s 4(1) would operate as a statutory defence in respect to any alleged breaches of contract before 18 December 2002. Section 91(2) would provide a statutory defence for any of Canam's acts or omissions which occurred before 18 December 1998. [44] The plaintiff's claim against Canam for breach of contract alleges general non-conformity with good trade practice in codes of practice, mainly in the construction of the church and in part in the area of design details (supra [7](a)).[45] It is established that reasonable discoverability, which may apply to latent defects in the area of tort, has no applicability in the area of contract, Murray v Morel & Co Ltd. 5[46] Mr Spiers submitted, that on the date of practical completition – 8 August 1998, the substance of Canam's contractual obligations came to an end. That date coincided with the plaintiff taking possession of the church and also began, in terms of clause 6.17 of the parties' contract, a defects liability period. In terms of that clause Canam was obliged only to rectify notified defective or incomplete work at no cost to the owner. [47] The fact that Canam revisited the site to carry out certain remedial work to the cladding in March/April 1999 was of no assistance to the plaintiff. Canam was contractually obliged to provide a two year guarantee for the cladding and rectify any notified defects. In any event the February/March 1999 rectification work is not pleaded by the plaintiff nor relied on to establish its cause of action in contract. [48] Even if the date of practical completion did not fix the date on which Canam's contractual obligations came to an end, they had certainly ceased by 25 November 1998 when Canam advised the Council of completion, or by 14 December 1998, when it was clear from the Waitakere City Council records that a Code Compliance Certificate should issue. The fact that another 3½ weeks passed before the Certificate actually issued on 7 January 1999 was immaterial. Thus the s 91(2) long-stop provision prevented absolutely any claim against Canam in contract. [49] Mr Clemow's limitation argument was that first, the 10 year provision did not run until the Code Compliance Certificate issued on 7 January 1999 and secondly, the six year limitation period did not begin until 2003 when Canam, or Mr Cameron, had carried out the last repairs on the church. Alternatively it was submitted the 10 year period might not have begun to run until the date of the final payment under the contract, 17 May 1999.5 Murray v Morel & Co Ltd [2007] 3 NZLR 721, at 69 (CA).[50] Counsel relied on clause 6.04 of the contract headed "Care of contract works", which provides;The builder shall also take full responsibility for the care of work deferred for completion after the issue of any certificate of practical completion or after occupation and work required to rectify defects under clause 6.17.Clause 6.17, for its part obliges the builder to rectify defects to the owner's satisfaction within a reasonable time. [51] Finally counsel relied on a dictum of Tipping J in Johnson v Watson 6 to the effect that: where [an owner] could not be expected to point to an exact day on which the acts or omission took place, there may be an argument for saying that where original building work is faulty the builder is under a continuing duty to remedy it right through until the date of completion, and there is a continuing omission until that date.In a more recent authority, O'Callaghan v Drummond,7 French J suggested that, although the concept of a continuing duty was novel, it was tenable. [52] The plaintiff's argument based on clause 6.04 of the contract is untenable. The clause is a standard clause designed to ensure a builder takes full responsibility for the care of building work. Similarly, clause 6.17 relates specifically to the defects liability period stipulated in the contract. It does not create an open-ended or ongoing obligation to rectify defects. I uphold Mr Spiers' submission that the contractual obligations of the builder are limited to rectifying notified defects once occupation of the building had passed to the plaintiff in terms of the contract's practical completion. [53] I consider Canam had completed its contractual obligations by 8 August 1998, and certainly by the time Waitakere City Council completed its final inspection on 12 October 1998. The three month maintenance period under the contract had expired by 8 November 1998. By 28 November 1998 Canam had6 Johnson v Watson [2003] 1 NZLR 626, 633.7 O'Callaghan v Drummond (HC Christchurch CIV 2007-409-1441 21 October 2008 at [17]).provided the Council with all the additional information it had requested on its final inspection to clear the way for the issue of the Completion Compliance Certificate. [54] November 28 would, in my view, have been the latest date to which Canam's contractual obligations could possibly run. The best possible construction for the plaintiff would have been 14 December 1998, the date on which the Waitakere City Council's records record that the final certificate can be issued. [55] The fact that the Code Compliance Certificate did not issue until 7 January 1999 is not a matter which can be laid at Canam's door and certainly does not alter the factual reality of Canam's performance and completion of its building obligations. [56] For all these reasons, therefore, I conclude that both s 4.1 of the Limitation Act 1950 and s 91(2) of the Building Act 1991 provide a statutory defence for Canam against the plaintiff's first cause of action. Accordingly it is struck out.Negligence claim against Canam alleging failure to exercise reasonable care and skill (second cause of action)[57] The plaintiff's argument under this head is subtle. At its core is the submission that, given the overall vulnerability of the plaintiff, a duty of care should be imposed on Canam in respect of the construction of the church. [58] With regard to limitation periods Mr Clemow accepted the 10 year limitation period imposed by the Building Act was identical in its application to both the first and second causes of action. However, with regard to the six year limitation period in tort, the "reasonable discoverability" principle fixed the time limit, which did not begin to run until the very earliest in 2003 when the plaintiff engaged Canam or Mr Cameron to organise repairs. [59] The major points developed by Mr Clemow were as follows:• It is well established that there can be concurrent liability in tort and contract. (R M Turton & Co Ltd (in liq) v Kerslake & Partners.)8• Clause 9.3 of the parties' building contract stipulated that no payment absolved the builder from liability for loss or damage arising out of (inter alia) negligence. Thus the tort of negligence was expressly preserved.• The plaintiff relied on Canam to exercise due care and skill in the building work and was thus vulnerable to Canam if it failed to exercise such care and skill. Canam was aware of the plaintiff's reliance and vulnerability, and thus a duty arose.• There was no direct authority for the proposition that a builder's duty of care was limited to residential buildings. It would thus be wrong in principle and policy to hold that no duty of care attaches to a builder in a commercial construction context.• With reference to the issue of nexus in cases against local councils, it would be "fundamentally wrong" to say that imposing a duty in tort on a builder for its acts and omissions amounted to converting builders into insurers for commercial property defects.• In considering whether a duty of care should be imposed on Canam, regard should be had to the dictum of Glazebrook J in Rolls Royce New Zealand Ltd v Carter Holt Harvey Ltd.9 An inquiry was required first into the degree of proximity or relationship between the parties and secondly into "the wider policy considerations that tend to negative, restrict or strengthen the existence of a duty in the particular class of the case".• Unlike the parties in Rolls Royce New Zealand Ltd v Carter Holt Harvey Ltd,the plaintiff was not a sophisticated commercial party. It had little ability to protect itself.8 R M Turton & Co Ltd (in liq) v Kerslake & Partners [2000] 3 NZLR 406, [8] – [9] (CA).9 Rolls Royce New Zealand Ltd v Carter Holt Harvey Ltd [2005] 1 NZLR 324 [58] (CA).• Although lack of vulnerability in tort does not exclude a duty of care, the plaintiff was definitely vulnerable. Dicta by Keane J in The Board of Trustees Glen Innes Primary School v Ahead Buildings10 might assist.• The supervisory role of Mr Aislabie was limited to general monitoring and progress payments. It did not focus on technical construction matters.• The plaintiff, as a church, had no other methods available to it to protect itself.• The tort of negligence enabled recovery of economic loss (this proposition not being in dispute). [60] The clause 9.3 argument can be rejected rapidly. The clause in its context merely ensures that payment to a builder does not constitute a waiver of the contractual protection against negligent performance. The clause does not in itself create a right to claim in tort. [61] Ranged against the plaintiff's submissions were those of counsel for Canam and Mr Cameron. Mr Brittain's submissions, of course, addressed the negligence claim against Mr Cameron. Mr Spiers for his part relied on Mr Brittain's submissions on the absence of a duty of care. [62] Both counsel submitted that New Zealand law did not recognise a duty of care imposed on a builder for the construction of commercial buildings or non- residential properties. [63] Reference was made to Bowen v Paramount Builders (Hamilton) Ltd11 andInvercargill City Council v Hamlin. 12 Mr Brittain correctly observed that the limit of the Hamlin duty has been considered in a number of recent decisions. In respect of local authorities, the duty has been limited to domestic buildings. Whether or not the10 The Board of Trustees Glen Innes Primary School v Ahead Buildings (HC Auckland CIV 2006-404-1884, 21 December 2009, at [49]).11 Bowen v Paramount Builders (Hamilton) Ltd [1977] 1 NZLR 294 (CA).12 Invercargill City Council v Hamlin [1996] 1 NZLR 513 (PC).duty in tort similarly applies to builders has not been specifically decided. Todd at [64.03(4)] states:The Hamlin remedy rests heavily on the vulnerability of members of the public in acquiring homes, whereas parties to commercial dealings have better means of protecting themselves. 13[64] Shortly after the hearing, the Court of Appeal released its judgment in Sunset Terraces. 14 That case involved a local authority, North Shore City Council. There are no dicta directly on the issue of whether the Hamlin duty of care should extend to builders constructing commercial or non-residential buildings. However, I consider the policy of Hamlin as it applies to residences has been reaffirmed in leaky building cases. [65] At [21] Baragwanath J distinguished leaky residential buildings from commercial buildings. He saw a leaky building "used as a private habitation" as being different in kind from other interests. New Zealand common law had emphasised the importance of "habitation as a primary interest to be recognised". [66] At [56] Baragwanath J expressed the policy in terms of New Zealanders' expectations who set high store on homes as their central asset. His Honour saw the 50 year lifespan required by the Building Code as emphasising the expectation that New Zealanders' habitations would be sound and for a long term. [67] The Court declined to read down Hamlin as not applying to substantial residential developments. At [170] Young P stated he favoured a "simple bright line approach"; the Hamlin duty applies in relation to residential developments. [68] Although Sunset Terraces does not specifically say anything either way on whether the tort of negligence should be extended to builders in respect of non- commercial buildings, I consider the emphasis on residential properties has been re- inforced by the recent Court of Appeal judgments. There is thus an element of novelty about the plaintiff's claim.13 Stephen Todd (ed) Law of Torts in New Zealand (5 th ed, Brookers, 2009) at [64.03(4p)].14 Sunset Terraces [2010] NZCA 64[69] I appreciate that a church, in Christian terms, might not easily be labelled as a commercial building. Some regard a church as being the House of God. The plaintiff's complex has a multitude of uses (including offices, a gymnasium, meeting rooms, as well as the church itself). Passages in the Christian gospels suggest that Christ took a dim view of places of worship being places of commerce. 15 But despite the quintessential non-commercial use of the plaintiff's church, a church is still a public building, serving public needs of worship and in other areas. In that regard it resembles a library, a hall, or a sports centre. It is qualitatively very different from a residence. [70] I do not consider that New Zealand law currently permits a cause of action in negligence against a builder for an alleged breach of duty of care to the owner of a commercial building or to a church owner. Given the difficulties presented with limitation and other arguments in this proceeding, I do not consider this is an appropriate case to allow the opportunity to develop such a novel argument. It would be unfair to the defendant Canam. For that reason I consider the second cause of action should be struck out. [71] In reaching this conclusion I have been mindful of the caution correctly expressed by the minority in Couch v Attorney-General16 to the effect that particular care should be exercised in areas where the law is confused or developing and that there are risks in the context of strike out and summary judgment applications for novel negligence claims. [72] Even if I were wrong in that assessment, for the same reasons which I have developed in the previous subsection of this judgment, I consider the long-stop provision of s 91(2) of the Building Act rules out, through its 10 year provision, the claim in negligence based as it must be on an alleged "act or omission" of Canam. For that reason too I would strike out the plaintiff's second cause of action.15 Matthew 21:12; Mark 11:15; Luke 19:45; John 2:15.16 Couch v Attorney-General [2010] NZSC27 at [33] – [35] per Elias CJ and Anderson J.[73] The submission of Mr Clemow as it relates to Canam's actions at the stage that repairs were carried out in 2003 gives rise to different considerations which I examine in the next subsection.Negligent repairs and negligent misstatement by Canam (seventh cause of action). Negligent repairs and negligent misstatement against Mr Cameron (sixth cause of action).[74] The plaintiff alleges (para 39 of its amended statement of claim) that when defects and damage to the church "first started to become apparent" Canam, through Mr Cameron, investigated, conducted repairs, and provided advice to the plaintiff. In particular it is alleged Canam arranged to repair and reseal damaged joints and carried out other remedial work; indicated that there was a joint problem which would be corrected by periodic maintenance of the building; and gave general advice about future maintenance to prevent re-occurrence of leaks. [75] The plaintiff alleges that Canam owed a duty of care in these areas and that it breached that duty, particularly in the area of the advice it gave. [76] The seventh cause of action largely parallels the plaintiff's sixth cause of action so far as negligent misstatement is concerned. But, as basically pleaded, it additionally focuses on negligent repairs. Its negligent misstatement aspect pleads essentially the same matters as the plaintiff's sixth cause of action against Mr Cameron. [77] Although both causes of action are headed "negligent repairs and negligent misstatement", and although it is pleaded that the plaintiff arranged for both defendants to "repair and reseal damaged joints and conduct . other miscellaneous and minor remedial work", the particulars given in both (identical) causes of action refer solely to advice and statements. [78] Mr Clemow's written submissions refer to these allegations, but fall short of advancing any argument that negligent conduct of repairs in June 2003 constitute a separate cause of action.[79] It might, however, be possible for the plaintiff to assert that there were some aspects of the June 2003 repairs which were negligently performed and which might arguably (despite being carried out in respect of a church as opposed to a residence) give rise to a separate cause of action with some causal nexus between those June 2003 repairs and the plaintiff's overall economic loss. The basis of an independent cause of action of this type is discussed by the Court of Appeal in Johnson v Watson.17 However, repleading at this stage may give rise to limitation defences, depending on what time frame is involved. [80] I would be surprised if the plaintiff could sheet home a respectable cause of action in that regard. However, given the somewhat unsatisfactory state of the pleadings, I reserve leave to the plaintiff to amend that aspect of both the seventh and sixth causes of action (against Canam and Mr Cameron) within 20 working days of the release of this judgment. Any such amendment would have to be focused, with particulars and a clear pleading of any alleged nexus. An amended pleading might, on that negligent performance of repairs aspect, yet again face a strike out or summary judgment applications from the defendants. [81] In essence, I have insufficient information to resolve either the strike out application or the summary judgment application in respect of what I regard as a secondary and inadequately pleaded aspect of the two causes of action. [82] I now turn to the core allegation of the sixth and seventh cause of action, negligent misstatement. The submissions of both Canam and Mr Cameron can be summarised thus:• The plaintiff's allegations pointing to negligent misstatement are conflicting and unconvincing.• They are allegations, not of advice, but alleged failures to exclude matters, such as failure to advise that the defects and damage were not joint problems, or could not be addressed by maintenance, or that urgent remedial work was necessary.17 Johnson v Watson [2003] 1 NZLR 626 (CA).• Such advice as Canam or Mr Cameron gave was not incorrect.• The plaintiff did not rely on the advice in any event.• There was no consequential loss.• There was no assumption of responsibility. [83] The particulars pleaded by the plaintiff are the contents of the letter on Whitby Trust letterhead of 23 June 2003 and telephone advice from Mr Cameron to Pastor Cheng in the same month. [84] The genesis of the tort of negligent misstatement is the House of Lords decision in Hedley Byrne & Co Ltd v Heller & Partners Ltd. 18 A person may voluntarily assume responsibility for words or advice by choosing to speak without disclaiming liability. [85] The Court of Appeal in Boyd v Knight and Purdue19 derived some assistance from the earlier House of Lords decision of Caparo Industries v Dickman20 and various of the speeches contained therein. Lord Roskill in Caparo (at 633) expressed reservations about whether there could be any simple formulated test. Different factual situations had to be examined carefully " before it can be pragmatically determined whether a duty of care exists and, if so, what is the scope and extent of that duty". Blanchard J in Boyd v Knight (at 293) stressed the importance of some causal link. If inaccurate material (the case involved auditors' duties) had no influence on an investor, it could not be alleged that an investment loss was attributable to the inaccuracy. [86] Certainly the two causes of action cannot be struck out. The allegations, if true, are capable of establishing the tort of negligent misstatement.18 Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465.19 Boyd v Knight and Purdue [1999] 2 NZLR 278.20 Caparo Industries v Dickman [1990] 2 AC 605[87] But what of the summary judgment applications? Here the context of Mr Cameron's letter and subsequent verbal advice is critical. The following contextual factors are clear from the evidence so far: a) By 13 March 2003 the plaintiff was aware of the leaky building phenomenon to at least the extent some type of government involvement through registration and inspection was involved (supra [28]). b) After six years of what appears to have been a close and amicable working relationship with Canam in general and Mr Cameron in particular, the plaintiff wrote to both on 24 April 2003 specifically stating that it had faced a "leaky problem" of the church building for a lengthy period of time; raising concerns about structural and timber risks; and posing four issues to discuss, including whether there could be "invisible leaky problems", potential risks, whether the "leaky situation could be worse inside of the building" and how to get to a total solution. c) For some reason not immediately apparent from the evidence, Canam and Mr Cameron between themselves arranged for the reply to be on Whitby Trust rather than Canam letterhead. d) The advice and recommendations of Mr Cameron do not address the plaintiff's four stipulated concerns. Rather the letter suggests joint repairs, general maintenance, and roof and gutter inspections. e) Certainly the concerns of the plaintiff are not allayed by that advice. After some delays the plaintiff eventually decided to investigate other avenues. [88] Turning to the principles I need to apply as to whether summary judgment should be entered against the plaintiff, I fall short of being satisfied that these two causes of action cannot succeed.[89] I see difficulties in the plaintiff shooting home success, but I am not satisfied, on the balance of probabilities, that failure is inevitable. I reach that view because there are material facts which surround Mr Cameron's Whitby Trust letter and its aftermath which have not been tested or explored as would be the case at trial. What purpose lay behind the plaintiff's 24 April 2003 letter? Was it genuinely seeking advice from Canam and Mr Cameron because of trust and confidence arising out of their historic association with the plaintiff? What complementary advice was given by Mr Cameron when he attended the site? What exactly is said in telephone conversations of which the plaintiff has given particulars? Why was it decided, as between Canam and Mr Cameron, to interpose the Whitby Trust? What was the state of Mr Cameron's knowledge in mid 2003 (and indeed Canam's knowledge) about the leaky building syndrome? Did Mr Cameron by that stage know that Harditex, a product which he had not recommended in 1997, was featuring in leaky homes cases? Had Canam by that stage encountered problems similar to those being experienced by the plaintiff on other construction jobs? Was the plaintiff genuinely seeking advice on which it would rely? Was the plaintiff influenced by Mr Cameron's failure to answer its questions? [90] None of these issues, which I consider have significant relevance with these two causes of action, can be properly or fairly explored in a summary judgment context. [91] There may well be force in the submissions of Mr Spiers and Mr Brittain that the tort of negligent misstatement will not be made out because, on the evidence, the plaintiff did not follow Mr Cameron's advice. But that proposition cannot be asserted with absolute confidence until such time as the plaintiff's reaction to the advice and the steps it ultimately took are gauged. Mr Cameron's advice was that the serious leaking which the plaintiff was by that stage encountering would be satisfactorily addressed by regular maintenance, some sealing, and ensuring debris did not accumulate. That advice, given the specific issues which the plaintiff had raised in its 24 April letter, was clearly incorrect. Did the plaintiff follow that advice in general outline or did the plaintiff regard the advice as inadequate and ignore it?[92] Counsel for Canam and Mr Cameron are also in a strong position when they submit the alleged negligent misstatement did not cause the plaintiff's loss. That submission too might be vindicated. But were the evidence to establish that the advice lulled the plaintiff into a sense of false security for some ascertainable period of time, during which period the deterioration of the building continued and the plaintiff's loss increased, then the required nexus might be established. [93] For these reasons I refuse the summary judgment applications for these two causes of action. [94] If the plaintiff wishes to pursue these two negligent misstatement claims it must replead within 20 working days of this judgment.Negligence claim against Mr Cameron in respect of supervision and control of design and construction and remedial work in his capacity as a director of Canam (fifth cause of action).[95] The plaintiff's amended statement of claim pleads that Mr Cameron, as a director of Canam, "exercised effective control and supervision of all elements of the building's development and construction" (para 28). Thus, it is pleaded (para 29) Mr Cameron was a developer exercising the role of and acting as a building supervisor with an obligation to exercise reasonable care and skill. [96] This judgment is not the place to expatiate on the conceptual difficulties which flow from the Court of Appeal's decision of Trevor Ivory v Anderson. 21[97] Leaky building litigation has led to a number of judgments in which the individual tortious liability of a director of a construction company have been examined. 22 In the final analysis, a claim in tort against a construction company's21 Trevor Ivory v Anderson [1992] 2 NZLR 517 (CA).22 Drillien v Tubberty (2005) 6 NZCPR 970; Hartley v Balemi HC Auckland CIV 2006-404- 2589, 29 March 2007; Body Corporate 188272 v Leuschke Group [2007] 8 NZCPR 914; Body Corporate 199348 v Nielsen HC Auckland CIV 2004-404-3989, 3 December 2008; Body Corporate 183523 v Tay HC Auckland CIV 2004-404-4824, 30 March 2009; Body Corporate 189855 v North Shore City Council HC Auckland CIV 2005-404-5561, 24 July 2008.[98] developer will depend on the unique facts of a particular case. I accept, however, Mr Brittain is on strong grounds when he submits that an analysis of the cases suggests that the personal liability of a director will be sheeted home when: a) The director has a financial interest in the development which provides motivation for the director to assume personal control and responsibility; b) Where the evidence demonstrates the director carried out "hands on" tasks and responsibility on the site and in particular has been directly involved in the building operation and the creation of the defects. [99] Although Mr Cameron may well have been empathetic with the plaintiff's Christian faith, the evidence which has been produced for summary judgment purposes falls well short of painting a picture of the direct personal involvement evident in say the Nielson23 or Byron Avenue. 24[100] Canam at the time was a substantial commercial construction company involved in 90 projects at any one time, four or five of which were major. Its turnover was in the vicinity of $20 million per annum. Mr Cameron had no direct financial interest in the construction of the church. Canam employed three quantity surveyors and four project managers. The church's construction involved both a foreman and a designated project manager. Mr Cameron was not involved in completing the design or work, nor did he have any structural engineering input. There is no evidence that Mr Cameron had any supervisory role. He was not responsible for quality control on site. Nor at a broad level, on the facts, could Mr Cameron's role as director be said to have the potential of causing harm. He was the director of a developer. He was not a developer in his personal capacity.23 Body Corporate 199348 v Nielsen HC Auckland CIV 2004-404-3989, 3 December 2008 (Heath J).24 Byron Avenue [2010] NZCA 65.[101] For these reasons, on the basis of the summary judgment affidavits, I have no hesitation over entering summary judgment in favour of Mr Cameron, the third defendant.Result[102] The plaintiff's first cause of action against the first defendant alleging breach of contract is struck out. [103] The plaintiff's second cause of action alleging negligence against the first defendant is struck out. [104] The first and third defendants' applications for strike out and summary judgment in respect of the plaintiff's sixth and seventh causes of action are refused. [105] In respect of the negligent misstatement aspects of those two causes of action the plaintiff is directed to replead within 20 working days. [106] In respect of the allegation (if one is seriously to be pursued) of negligent repairs against the first and third defendants in the sixth and seventh causes of action, the plaintiff is directed to replead within 20 working days. [107] In respect of the plaintiff's fifth cause of action in negligence against the third defendant summary, judgment is entered for the third defendant.Costs[108] I have no views over how best to award costs in this situation where the result is mixed. The first defendant has succeeded on two of its three applications. The third defendant has succeeded on one of its two. Both defendants remain exposed, (assuming the plaintiff does not appeal and is successful), but on a narrower front. [109] If there are any claims or cross-claims for costs I direct that they are to be lodged no later than 1 September 2010.[110] I fix that date at some distance partly to reflect the fact that the plaintiff may in the interim need to replead, but mainly to encourage the parties to explore the possibility of an overall settlement........................................ Priestley J