CAPITAL AND COAST DISTRICT HEALTH BOARD v BECA CARTER HOLLINGS & FERNER LIMITED [2018] NZHC 24

CAPITAL AND COAST DISTRICT HEALTH BOARD v BECA CARTER HOLLINGS & FERNER LIMITED[2018] NZHC 24 [26 January 2018]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYI TE KŌTI MATUA O AOTEAROATE WHANGANUI-Ā-TARA ROHECIV-2016-485-256[2018] NZHC 24BETWEEN CAPITAL AND COAST DISTRICTHEALTH BOARDPlaintiffAND BECA CARTER HOLLINGS & FERNERLIMITEDFirst DefendantBRUCE RAYMOND NEWTONSecond DefendantTHE FLETCHER CONSTRUCTIONCOMPANY LIMITEDThird DefendantANGUS WILLIAM SMITHFourth DefendantROGER PETER BELBINFifth DefendantCRANE ENFIELD METALS PTY.LIMITED trading as CRANE COPPERTUBESixth DefendantCRANE GROUP LIMITEDSeventh DefendantCRANE DISTRIBUTION LIMITEDEighth DefendantIPLEX PIPELINES AUSTRALIA PTY.LIMITEDNinth DefendantCREVET LIMITEDTenth DefendantCREVET PIPELINES PTY. LIMITEDEleventh DefendantKEY PLASTICS PTY LIMITEDTwelfth DefendantKINGSTON BRIDGE ENGINEERINGPTY LIMITEDThirteenth DefendantNORTHERN IRON AND BRASSFOUNDRY PTY LIMITEDFourteenth DefendantAUSTRAL BRONZE CRANE COPPERLIMITEDFifteenth DefendantHUDSON BUILDING SUPPLIES PTYLIMITEDSixteenth DefendantHearing: 17 October 2016 and 3 April 2017Counsel: I J Thain and E B Sweet for the PlaintiffD J Neutze for the First DefendantK W Fulton for the Third, Fourth and Sixth DefendantsJudgment: 26 January 2018JUDGMENT OF ASSOCIATE JUDGE SMITHIntroduction ........................................................................................................... [1]Background ........................................................................................................... [4]CCH's allegations against FCC, Mr Smith, CEM and Beca ............................... [18]FCC [18]Mr Smith [21]CEM [22]Beca [23]The Statements of Defence ................................................................................. [26]FCC [28]Mr Smith [29]CEM [29]Beca [31]CCH's claims against other defendants ............................................................... [32]The application for summary judgment or strike-out ......................................... [34]CCH's opposition ................................................................................................ [40]The position of Beca ........................................................................................... [45]Summary judgment applications by defendants – general principles ................. [51]Legal principles applicable on a defendant's strike-out application ................... [55]The issues to be determined ................................................................................ [57]Applications by Mr Smith [57]Applications by CEM [57](3)Applications by FCC [57](7)Seventh to sixteenth defendants [57](9)Mr Smith's evidence and submissions [62]Submissions for CCH on issues 1 and 2 [68]Discussion and conclusions on issues 1 and 2 [71]The manufacturing standard [84]Evidence in support of the application [87]CCH's evidence in opposition [96]The August 2016 reply evidence [103]Beca's evidence [115]Further affidavits from CCH [129]Second round of affidavits in reply from the applicants [132]Submissions for CEM [145]Submissions for CCH [154]Submissions for Beca [161]Discussion and conclusions [164]Submissions for CEM [180]Submissions for CCH [186]Submissions for Beca [189]Discussion and conclusions [191]FCC required to give guarantee by provisions of head contract [208]CCH's claim on the guarantee [217]Submissions for FCC [224]Submissions for CCH [229]Mr Fulton's reply submissions for FCC [232]Discussion and conclusion on the guarantee cause of action [234]Did FCC owe a duty of care to CCH? – applicable legal principles [254]The contractual matrix [264]Submissions for FCC [274]Submissions for CCH [288]Submissions for Beca [289]Discussion and conclusions on the FCC duty of care issue [291]The allegations of breach [319]The commissioning allegations [321]Submissions for FCC [330]Submissions for CCH [335]Submissions for Beca [340]Reply submission for FCC on the commissioning issue [342]Discussion and conclusions on the breach of duty issue [343]Issue (9): How should the Court deal with CCH's claims against the seventh tosixteenth defendants? ........................................................................................ [343]Result................................................................................................................. [368]Introduction[1] The third, fourth, and sixth defendants (collectively "the applicants") apply forsummary judgment on the claims made against them. In the alternative, they ask fororders striking the claims out.[2] If they are successful with the summary judgment applications, the thirddefendant (FCC) and the sixth defendant (CEM) also seek orders striking out a cross-claim made against them by the first defendant (Beca).[3] The other application before the Court is an application by CEM for ordersdismissing the claims by the plaintiff (CCH) against the seventh to sixteenthdefendants. CEM says that those defendants were improperly joined in theproceeding, and that CCH's claims against them cannot succeed.Background[4] CCH is a District Health Board. It owns and operates the Wellington RegionalHospital.[5] In or about December 2005, work began on a new (six-level) main building atthe hospital site in Newtown (the main building). A tender process was followed forthe work, with CCH issuing detailed documentation. The successful tenderer wasFCC.[6] The project was a major one, worth in excess of $140 million. There were overthree hundred pages of contract documents, which included the General Conditions ofContract NZS 3910:2003 (the General Conditions), supplemented and amended bySpecial Conditions of Contract, specifications and plans, and certain correspondencebetween the parties.[7] Construction on the project commenced in early December 2005, and theproject was completed in or around December 2008.[8] The fourth defendant, Mr Angus Smith (Mr Smith), was at the time of theconstruction work, the construction manager for FCC in Wellington.[9] The project included the design and installation of new copper piping for hotand cold water services throughout the main building. Beca designed and reviewedthe hot and cold water system, including the preparation of specifications for thematerial to be used in the construction of the system and its installation.[10] Beca was also engaged by CCH to carry out construction monitoring, initiallyto "level 4" but, from November 2006, to "level 5". Level 5 is the most intensive levelof monitoring Beca would undertake, and it required daily on-site presence by Beca.1[11] The head contract between FCC and CCH included provisions for the supplyand installation of the copper piping, but that particular part of the head contract wascarried out by a sub-contractor, a joint venture between Aquaheat Industries Ltd andthe Hastie Group, under a sub-contract dated 2 May 2006. For convenience, I willrefer to this sub-contractor as "Aquaheat". The appointment of Aquaheat wasexpressly approved by CCH.[12] Problems have arisen with the copper water pipes in the main building. Thepipes have developed "pin hole" – type leaks, which are sufficiently serious that CCHsays that the whole system now has to be replaced.[13] In its statement of claim dated 22 April 2016 (the statement of claim), CCHsays that the copper pipes are exhibiting early failure through pitting, corrosion1 The relevant Guideline on the Briefing and Engagement for Consulting Engineering Servicesrequired Beca to: maintain personnel on the site to constantly review work procedures, materials ofconstruction and components for compliance with the requirements of the plans andspecification and review completed work prior to enclosure or on completion asappropriate.impingement attack, and internal corrosion. The statement of claim identifies thefollowing alleged defects in the copper pipes:(1) leaks;(2) changes in cross-section and subsequent water turbulence resulting ingas bubbles forming in the water;(3) systemic presence of pitting;(4) pitting that is getting progressively worse;(5) the presence of deleterious film;(6) tubercles and malachite on the inside surface of the pipes;(7) extensive longitudinal deposits and artefacts on the inside of the pipes;(8) "axial die lines" on internal pipe surfaces; and(9) internal burrs on T joints.[14] The copper piping was manufactured in Australia by CEM.[15] At the time it manufactured the copper pipes, CEM had no connection withFCC, but it now shares a common ownership structure with FCC.[16] CCH alleges in the statement of claim that there were defects in both the designand the construction of the hot and cold water system in the main building. It pleadsa total of eight separate alleged design defects (e.g. "Copper Pipe is concealed in wallsand ducts") which it describes as "the Maintainability Defects". It also refers to analleged "Impingement Defect" (gas bubbles forming in the water being carriedthrough the pipes created by turbulence and changes in pressure, temperature andcross-section) as a "design defect".[17] While CCH does make a general allegation of negligence against FCC inrespect of the design defects, it is accepted that design aspects of the project weregenerally the responsibility of Beca.CCH's allegations against FCC, Mr Smith, CEM and BecaFCC[18] CCH pleads two causes of action against FCC. First, CCH alleges that FCCowed it a duty of care in carrying out the construction work. It says that FCC breachedits duty of care in a number of respects, and that the breaches have caused it loss.[19] The second cause of action against FCC alleges breach of a guarantee given byFCC. CCH says that the head contract provided for FCC to provide a blanketguarantee in the form of Schedule 13 to the General Conditions covering, inter-alia,hot and cold plumbing systems. CCH alleges that the terms of the blanket guaranteerequired FCC to guarantee the workmanship, goods, services or materials used in thecourse of the work, including guarantees that the materials used in the works wouldbe those required by the contract documents, and that all materials would be new andof good quality.[20] CCH pleads that, in breach of the guarantee, the hot and cold water system hadthe defects referred to at [13] of this judgment.Mr Smith[21] CCH alleges that Mr Smith was negligent in that he failed to exercisereasonable care and skill in issuing a Producer Statement for the construction work.Contrary to the Producer Statement (signed by Mr Smith), CCH contends that thecopper pipes do not comply with the Building Act or Building Code, do not complywith a New Zealand standard, NZS3501: 1976 (the Standard), and are subject to thedefects and the design defects. CCH says that it was reasonable for it to rely on theProducer Statement, and that it did rely on it.CEM[22] CCH pleads one cause of action against CEM. It alleges that CEM owed it (asan end user of the copper pipes) a duty of care to manufacture the copper pipes withreasonable care and skill and in accordance with the Standard. It claims that, in breachof those duties, CEM manufactured and/or supplied the copper pipes with the defects.Beca[23] CCH's first cause of action against Beca is for negligence in carrying out itsfunctions under its contract with CCH. Beca is said to have failed to exercisereasonable care and skill before issuing Producer Statements in respect of the works,including the copper pipes. It is also alleged to have failed to make reasonableenquiries to confirm that the copper pipes complied with the project specifications, theStandard, the Building Act and the Building Code.[24] CCH also alleges negligence by Beca in the design of the work, referring tothe so-called "impingement defects" and the "Maintainability Defects". It says thatthe copper pipes were not fit for purpose.[25] A third cause of action against Beca alleges breach of indemnity under thecontract between CCH and Beca.The Statements of DefenceFCC[26] FCC denies that it owed any duty of care in tort to CCH. And if any duty isheld to have been owed, it denies that it was guilty of any breach.[27] As for the guarantee claim, FCC says that the form set out in Schedule 13 wasvaried, limiting the guarantee to weathertightness. Specialist services (such as theservices involved in manufacturing the copper piping) were deleted from the scope ofFCC's obligations under the guarantee, and were instead the subject of directobligations between CCH and Aquaheat. In addition, FCC says that the guarantee waslimited to a two year period, which has long expired.Mr Smith[28] FCC and Mr Smith say that Mr Smith did not assume any personalresponsibility or liability to CCH when he signed the Producer Statement. TheProducer Statement was a document required to be issued by FCC under the headcontract, and it required no particular skill or qualification of the person signing. FCCand Mr Smith deny that the Producer Statement was relied upon by CCH to establishcompliance with the head contract. They further say that issuing the ProducerStatement was incapable of causing loss to CCH, and did not in fact cause it loss.CEM[29] In the statement of defence, CEM admits manufacturing the copper piping, andsays that it was supplied through other companies to a New Zealand distributor, CraneDistribution NZ Ltd. The copper pipes were then supplied to Aquaheat.[30] CEM denies that it owed any duty of care to CCH, and it denies the allegationsof breach. It says that none of the alleged defects are capable of being manufacturingdefects, save for the potential for deleterious film presence. CEM then says that itsmanufacturing processes could not have produced such films, which in any eventwould not have been detectable in 2015. Any such film, if it exists, is the result ofwater chemistry and composition.Beca[31] Beca generally denies the allegations against it.CCH's claims against other defendants[32] I am not concerned in this judgment with CCH's claims against the seconddefendant, Mr Newton (an employee of Beca who signed three Producer Statements).Nor am I concerned with CCH's claims against the fifth defendant, Mr Belbin, whowas employed by Aquaheat and who also signed a Producer Statement.[33] As for the seventh to sixteenth defendants, the statement of claim alleges thatall were involved in the manufacture and/or supply of the copper piping used in themain building. But none of them have been served, and CCH asks for leave todiscontinue its claims against them.2 However CEM does not consent to theproceeding being discontinued against those parties. It says that the appropriate courseis for the Court to dismiss or strike out CCH's claims against those parties.The application for summary judgment or strike-out[34] The applicants have each applied for summary judgment on the claims madeagainst them. In the alternative, they ask for orders striking out CCH's claims againstthem.[35] FCC contends that it did not owe CCH any duty of care as alleged. It says thatthe tort claim against it is, in effect, a claim that it owed a duty in tort to comply withthe head contract obligations. As such, it is unsustainable. And even if a duty of carewas owed, there are no grounds available to CCH to establish that FCC breached theduty. It says that the negligence claim against it cannot possibly succeed.[36] As for the claim on the guarantee, FCC says that the guarantee does not applyto the claims, and in any event the guarantee expired long before the proceeding wasissued.[37] Mr Smith says that the Producer Statement he signed was a document requiredby the head contract between CCH and FCC, and was to be issued by the headcontractor (not by an individual person). No special qualifications were called for orrequired of the person signing the Producer Statement.[38] Mr Smith also says there is no arguable basis that he was guilty of any lack ofcare in signing the Producer Statement, and that CCH did not rely on the ProducerStatement in any event. The Producer Statement had no status under the Building Act2004, and CCH did receive a Code Compliance Certificate. It was the Wellington CityCouncil, not CCH, who may have relied on the Producer Statement, and there is noallegation that the Code Compliance Certificate has been revoked, or that any otherdetrimental action has been taken by the Council.2 Where a plaintiff wishes to discontinue against one of several defendants, the plaintiff must obtainthe consent of the other defendants or the leave of the Court – High Court Rules, r 15.20(4).[39] CEM denies that it owed any duty of care to CCH. But even if it did, it saysthat CCH cannot establish any breach of duty. It says that only two of the allegeddefects could have arisen at the manufacturing stage (alleged deleterious film and axialdie lines), but neither could have resulted in the problems with the pipes.CCH's opposition[40] CCH contends that its claims against each of the applicants are reasonablyarguable. Specifically, it contends that it is reasonably arguable that each of theapplicants owed it a duty of care (whether a duty was in fact owed is a matter to bedetermined on examination of all of the evidence at trial).[41] As for its claim against FCC on the guarantee, CCH says that there is asubstantive factual dispute as to whether the guarantee alleged by it in the statementof claim was agreed to be provided, and that if the guarantee was provided as allegedit is at least arguable that it would apply in the current circumstances and would nothave expired.[42] In respect of the claim against Mr Smith, CCH says that the issue of whetheror not he assumed personal responsibility for the Producer Statement cannot bedetermined in the absence of an examination of all of the evidence. Similarly, thequestion of whether he failed to exercise reasonable care in making the ProducerStatement cannot be determined without an examination of all of the evidence. CCHsays further that it is at least arguable that it relied on the Producer Statement inallowing the construction project to proceed to certification of practical completion,and in accepting the completed building.[43] With respect to its claim against CEM, CCH says that it is reasonably arguablethat manufacturing defects (including leaving deleterious film on the inside surface ofthe copper pipes, and causing axial die marks to remain on the inside surface of copperpipes) caused or contributed to the failure of the pipes. Mr Thain also made asubmission at the hearing that CCH would be entitled to make a claim (not yetformulated) against CEM under the Consumer Guarantees Act 1993.[44] Insofar as the application asks for orders for summary judgment or striking outin favour of the seventh to sixteenth defendants, CCH points out that there is noapplication by those parties for such orders. It also says that the orders areunnecessary, because it will discontinue against any of those parties if it is establishedthat they did not manufacture or supply the pipes.The position of Beca[45] Very shortly before the October 2016 hearing of the applications by theapplicants for summary judgment or strike-out, Beca filed a cross-claim against FCCand CEM claiming contribution or indemnity under s 17 of the Law Reform Act 1936(in the event that it should be found liable to CCH). Beca did not file any formal noticeof opposition to the application by the applicants, but Mr Neutze appeared at theOctober 2016 hearing and confirmed that Beca's cross-claim is in part reliant on acontention that FCC and CEM did owe duties of care to CCH. As that same duty ofcare was denied by FCC and CEM, it was apparent that there could be a risk ofconflicting judgments if FCC or CEM were to succeed with their summary judgmentapplication against CCH on the basis that they did not owe CCH a duty of care, butdifferent evidence on Beca's cross-claim later established that such a duty was owed.[46] In the event, the one day allocated for the hearing on 17 October 2016 provedto be insufficient, and I allowed Mr Fulton time to file written submissions in reply. Ialso allowed further time to FCC and CEM to consider their position, to see whetherthey wished to apply to strike-out the cross-claim filed by Beca. I directed that anyapplication by FCC or CEM to strike-out Beca's cross-claim was to be filed and servedby 26 October 2016.[47] On 25 October 2016, FCC and CEM applied for orders that, in the event ofthem obtaining summary judgment dismissing CCH's claims against them, Beca'scross-claim would be struck out.[48] I subsequently convened a telephone conference, and received memorandafrom counsel. Mr Fulton submitted that Beca was effectively seeking an extension oftime to file notice of opposition to the applicants' summary judgment application, andto file evidence and make submissions in opposition to that application. In reply, MrNeutze submitted that there would or could be significant prejudice to Beca if it werenot allowed to be heard in opposition to the applicants' applications. All partiesaccepted that if Beca were now allowed to oppose the applicants' application the onlyprejudice to the applicants would be in terms of time and cost. That prejudice couldbe removed, or substantially mitigated, by an award of costs if that was appropriate.[49] On 19 December 2016 I granted leave to Beca to file a notice of opposition tothe applicants' application. I gave timetable directions for the filing of the notice ofopposition, supporting affidavits and submissions by Beca, and made provision forCCH and the applicants to file affidavits and submissions in reply.[50] Further affidavits and written submissions were then filed by all parties. Iheard further oral argument from counsel on 3 April 2017.Summary judgment applications by defendants – general principles[51] Rule 12.2(2) of the High Court Rules provides:12.2 Judgment when there is no defence or when no cause of action cansucceed(2) The court may give judgment against a plaintiff if the defendantsatisfies the court that none of the causes of action in the plaintiff'sstatement of claim can succeed.[52] Summary judgment for a defendant will not be appropriate where it is possiblefor the plaintiff to amend its claim so as to remedy the defects relied upon by thedefendant. Secondly, summary judgment should be used by a defendant only wherethe defendant has a clear answer to the plaintiff which cannot be contradicted.3Thirdly, the Court will not normally resolve conflicts between experts in a summaryjudgment context.43 Westpac Banking Corporation v M M Kembla NZ Ltd, [2001] 2 NZLR 298 (CA);Attorney-General v Jones [2004] 1 NZLR 433 (PC).4 MacLean v Stewart (1997) 11 PRNZ 66 (CA).[53] In Westpac Banking Corporation v M M Kembla NZ Ltd, the Court of Appealobserved:5It is not necessary for the plaintiff [responding to a defendant's summaryjudgment application] to put up evidence at all although, if the defendantsupplies evidence which would satisfy the Court that the claim cannotsucceed, a plaintiff will usually have to respond with credible evidence of itsown.[54] In Krukziener v Hanover Finance Ltd, the Court of Appeal said:6The Court will not normally resolve material conflicts of evidence or assessthe credibility of deponents. But it need not accept uncritically evidence thatis inherently lacking in credibility, as for example where the evidence isinconsistent with undisputed contemporary documents or other statements bythe same deponent, or is inherently improbable: Eng Mee Yong vLetchumanan [1980] AC 331 (PC) at 341. In the end the Court's assessmentof the evidence is a matter of judgment. The Court may take a robust andrealistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel(1987) 1 PRNZ 84 (CA).Legal principles applicable on a defendant's strike-out application[55] Rule 15.1 of the High Court Rules provides that the Court may strike out all orpart of a pleading if it discloses no reasonably arguable cause of action, or caseappropriate to the nature of a pleading, or is likely to cause prejudice or delay.[56] The following principles have been established by the Supreme Court:7(1) the jurisdiction to strike out a cause of action is one which is exercisedrarely and only where the cause of action is clearly untenable (i.e. hasno prospect of success);(2) a strike-out application proceeds on the basis that the facts pleadedagainst the applicant are true;5 Westpac Banking Corporation v M M Kembla NZ Ltd, above n 3, at [64].6 Krukziener v Hanover Finance [2008] NZCA 187, [2010] NZAR 307 at [26].7 Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725.(3) the Court should be particularly slow to strike out a claim in anydeveloping area of the law, particularly where a duty of care is allegedin a new situation;(4) developments in negligence need to be based on proved rather thanhypothetical facts; and(5) if a pleading may be saved by amendment, that amendment should beallowed.8The issues to be determined[57] The following issues fall to be determined:Applications by Mr Smith(1) Has Mr Smith shown that it is clear that the claim against him cannotsucceed, so that an order for summary judgment in his favour isappropriate?(2) If not, and assuming the facts pleaded by CCH against Mr Smith are true,has he shown that, as a matter of law, the claims against him are sountenable that they should be struck out?Applications by CEM(3) Has CEM shown that it is clear that it did not owe any duty of care toCCH, such that it is entitled to summary judgment on the claims against it(and to an order striking out Beca's cross-claim against it)?(4) If the answer to Issue (3) is "no", has CEM shown that it is clear that it didnot breach any duty of care it may have owed to CCH, and that it is entitledto summary judgment (and an order striking out Beca's cross-claim) onthat account?8 Kupenga v Registrar-General of Lands HC Auckland A1523/84, 4 February 1986.(5) [If neither of Issues (3) and (4) is answered "yes"], assuming the factspleaded by CCH against CEM are true, has CEM shown that, as a matterof law, the claims against it are so untenable that they should be struckout?(6) Has CEM shown that it is clear that CCH could have no claim against itunder the Consumer Guarantees Act 1993?Applications by FCC(7) Has FCC shown that, as a matter of law, the claims against it are sountenable that they should be struck out?(8) Has FCC shown that the facts are such that it is clear that neither of thecauses of action against it can succeed, so that orders for summaryjudgment in its favour on CCH's claim, and an order striking out Beca'scross-claim against it, are appropriate?Seventh to sixteenth defendants(9) How should the Court deal with CCH's claims against the seventh tosixteenth defendants?[58] I will address the issues in the order set out above.Issue (1) Has Mr Smith shown that it is clear that the claim against himcannot succeed, so that an order for summary judgment in hisfavour is appropriate?Issue (2) If not, and assuming the facts pleaded by CCH against Mr Smithare true, has he shown that, as a matter of law, the claims againsthim are so untenable that they should be struck out?[59] It will be convenient to deal with these two issues together.[60] The Producer Statement signed by Mr Smith was in the following terms:PRODUCER STATEMENTBUILDING CONSTRUCTION – PS3ISSUED BY Fletcher ConstructionTO: Capital Coast District Health BoardIN RESPECT OF: Wellington Regional Hospital NRH20-300Building Consent No. SR137004AT: Main Building, Riddiford Street, Newtown, WellingtonLot 1 – DP 6013 – City of WellingtonI, Angus William Smith, a duly authorised representative of FletcherConstruction believe on reasonable grounds that Fletcher Construction hasbuilt the works in accordance with the plans, specifications and instructionsof the principal in accordance with the contract.[Signature of Mr Smith] 5/3/09. Signature of Authorised Agent on Behalf of Date[61] The claim against Mr Smith is in the tort of negligent mis-statement.Mr Smith's evidence and submissions[62] In his evidence, Mr Smith stated that he holds a New Zealand Certificate inBuilding, but does not hold any professional qualifications. He has extensiveconstruction knowledge and experience. He was in charge of managing theconstruction delivery side of things for the main building construction work, andinitially he was the project director (before another FCC employee took on that role).He attended regular monthly management meetings during the course of theconstruction work, but he was not involved in day-to-day site attendances, and did notphysically carry out any construction work or inspections.[63] Mr Smith said that within FCC Wellington any Producer Statements, for anyjob, had to be signed by the Construction Manager. In this case, providing theProducer Statement in question was an obligation imposed on FCC by cl 10.4.5(a) ofthe General Conditions of the head contract. The form of the Producer Statement wasset out in the sixth schedule to the General Conditions, and the form provided that theProducer Statement was to be "Issued By" the head contractor.[64] Mr Smith stated that, through its representatives on the site, CCH knew thatMr Smith did not carry out a "hands on" role throughout the course of the work: hecarried out a management role only.[65] Mr Smith also stated that, before he signed the Producer Statement, he wasaware of the rigorous checking and verification process which had taken place,including testing and commissioning work carried out by sub-trades who themselvesprovided Producer Statements to FCC. He was also aware that the copper pipingsystem had been pressure and flush tested, and that the commissioning process hadinvolved CCH as well as other parties. He said that he was aware that Beca had beenmonitoring the build, and that it had signed off on the commissioning results.[66] Mr Smith's evidence on these matters was not challenged in any material wayin the affidavits filed by CCH and Beca.[67] In his submissions, Mr Fulton submitted that Mr Smith did not assumeresponsibility to CCH for the Producer Statement, and that it was not relied on in anydetrimental way by CCH.Submissions for CCH on issues 1 and 2[68] For CCH, Mr Thain submits that the Producer Statement was on its face astatement written by Mr Smith personally. It was expressed in the first person, and itset out Mr Smith's belief. Whether or not Mr Smith believed that he was assumingpersonal responsibility for the correctness of the Producer Statement is not the point.Assumption of responsibility is not voluntary but deemed.9 Mr Thain further submitsthat it is not correct to say that the head contract required FCC to "issue" the ProducerStatement: FCC was only required to "provide" the Producer Statement (as opposedto making the statement itself).9 Citing Attorney-General v Carter [2003] 2 NZLR 160 (CA) at [22]-[32].[69] In response to Mr Smith's evidence that he was not "hands on" on the projectthroughout, Mr Thain points out that Mr Smith was FCC's construction manager, andwas in charge of the construction work for FCC.[70] On the question of breach of any duty Mr Smith may be held to have owed, MrThain submits that at this stage the Court only has broad assertions about Mr Smith'sclaimed performance of the duty, and it is not yet possible to determine whether whathe has said about the care taken in signing the Producer Statement is correct. Mr Thainsubmits that the cause of action against Mr Smith is arguable, and that his applicationfor summary judgment should be dismissed.Discussion and conclusions on issues 1 and 2[71] In Rolls-Royce New Zealand Ltd v Carter Holt Harvey Ltd, the Court of Appealnoted that, where negligent mis-statement is at issue, the normal proximity enquirywhich is required when the Court considers whether it would be fair, just andreasonable to impose a duty of care on the defendant, generally focuses on theinterdependent concepts of assumption of responsibility by a person with special skill,and foreseeable and reasonable reliance by the plaintiff.10[72] The Court of Appeal also observed in Rolls-Royce that assumption ofresponsibility for a statement or task does not usually entail voluntary assumption oflegal responsibility to a plaintiff, except in cases where the defendant is found to haveundertaken to exercise reasonable care in circumstances which are analogous to, butshort of, contract, and it is foreseeable that the plaintiff will rely on that undertaking.If those circumstances are present then, subject to any countervailing policy factors, aduty of care will arise. In other cases, the law will deem the defendant to have assumedresponsibility where it is fair, just and reasonable to do so (citing Attorney-General vCarter at [23]-[27]). Whether it is fair, just and reasonable to deem an assumption ofresponsibility, and then a duty of care, will depend on a combination of factors,including the assumption of responsibility for the task, any vulnerability of theplaintiff, any special skill of the defendant, the need for deterrence and promotion of10 Rolls-Royce New Zealand Ltd v Carter Holt Harvey Ltd [2005] 1 NZLR 324 (CA) at [97], citingAttorney-General v Carter, above n 9, at 168, [22].professional standards, lack of alternative means of protection and so on. Wider policyfactors will also need to be taken into account.11[73] In Trevor Ivory v Anderson, the Court of Appeal noted, in the context of anegligent mis-statement case, that the test as to whether an officer or servant of acompany is liable for acts carried out by him or her in the name of the company iswhether the officer or servant has assumed a duty of care to the recipient of the advice,whether actual or imputed. Liability was said to depend on the facts on the degree ofimplicit assumption of personal responsibility, and on a balancing of policyconsiderations.12[74] In Body Corporate 202254 v Taylor,13 the Court of Appeal accepted that theremust be assumption of responsibility, whether actual or imputed, for personal liabilityto arise in the case of a director or employee. William Young P, delivering the jointjudgment of himself and Arnold J, noted that the Courts have been very reluctant toconfer rights to sue in negligence which are inconsistent with (perhaps just in the senseof going beyond) the rights for which plaintiffs have bargained. "As well, to besuccessful a plaintiff will usually have to show an assumption of personalresponsibility by the defendant to the plaintiff which is akin to acceptance of acontractual obligation".14[75] In North Shore City Council v Wightman, McKenzie J considered that, at leastin negligent mis-statement cases, it is not enough to establish only that the employeehas carried out the work for which the employer has assumed responsibility. Whatmust be shown are circumstances on which the claimant could reasonably rely as anassumption of personal responsibility by the employee who performed the services onbehalf of the employer.1511 At [99].12 Trevor Ivory v Anderson [1992] 2 NZLR 517 (CA).13 Body Corporate 202254 v Taylor [2008] NZCA 317, [2009] 2 NZLR 17.14 At [16].15 North Shore City Council v Wightman HC Auckland CIV-2010-404-003942, 30 November 2010at [28]. (A decision to which I referred in Weaver v HML Nominees Ltd and Ors [2014] NZHC2073).[76] I am satisfied in this case that there is nothing which would justify a findingthat Mr Smith assumed personal responsibility to CCH when he signed the ProducerStatement. First, the Producer Statement was stated to be issued by "FletcherConstruction", and Mr Smith clearly signed the document as "Agent on behalf of".Further, the contractual obligation to provide the Producer Statement was not imposedon Mr Smith personally, but on FCC.[77] If CCH had expected FCC's construction manager to assume personalresponsibility for the Producer Statement, to the point where Mr Smith would betaking on something akin to (but short of) a contractual responsibility, one would haveexpected to see some express provision in the head contract to that effect. No suchprovision was included.[78] Apart from the wording of the Producer Statement, CCH would have knownthrough its site representatives and agents that Mr Smith did not attend to theconstruction work or inspections himself, and that he had no particular expertise in themanufacture or installation of copper piping systems. CCH was certainly not in avulnerable position vis-a-vis Mr Smith; indeed, it would have had greater expertresources available to it, particularly by way of the monitoring of the project workcarried out by Beca. All that occurred in this case is that Mr Smith, to the knowledgeof CCH, signed a document on behalf of his employer which the employer wasrequired by the head contract to provide.[79] This was a very complex and substantial building contract, entered intobetween large and experienced commercial parties, with CCH advised by one of NewZealand's leading engineering firms. In those circumstances, CCH could not havereasonably believed that Mr Smith had elected to assume personal responsibility whenhe signed the Producer Statement. The very idea has an air of unreality about it. Norare there any reasons for the Court to conclude that Mr Smith should be deemed tohave assumed such a responsibility. The circumstances were not in my view"analogous to, but short of, contract", at least as far as Mr Smith was concerned. Itwould not be fair, just, or reasonable to impose a duty of care on Mr Smith incircumstances such as these, where sophisticated commercial parties have negotiateda detailed and complex commercial contract covering all aspects of the project, andCCH could not have been expecting to receive from FCC a Producer Statement forwhich one of FCC's employees had assumed personal liability. That was not whatCCH had bargained for.[80] I conclude that CCH's claim that Mr Smith owed it a duty of care when hesigned the Producer Statement clearly cannot succeed.[81] This is not a situation where there is any realistic prospect that further evidencemay be produced by CCH at trial which might affect the duty of care issue as far asMr Smith is concerned. That being so, the correct course is to enter summaryjudgment in Mr Smith's favour on the claims against him.[82] On that basis, there is no need to consider Mr Smith's strike-out application.Issue (3) Has CEM shown that it is clear that it did not owe any duty of careto CCH, such that it is entitled to summary judgment on the claimsagainst it (and to an order striking out Beca's cross-claim againstit)?Issue (4) If the answer to Issue (3) is "no", has CEM shown that it is clearthat it did not breach any duty of care it may have owed to CCH,and that it is entitled to summary judgment (and an order strikingout Beca's cross-claim) on that account?[83] It will be convenient to deal with these two issues together.The manufacturing standard[84] The manufacture of the pipes was governed by the Standard. Clause 5.1 of theStandard provided:5.1 The tubes shall be straight, round, clean, smooth, free from harmfuldefects and free from deleterious films in the bore.[85] Under the Standard, all tubes which were said to be Standard-compliant wererequired to be marked with "NZS 3501" (or the letter "S" stamped on the pipes),16 theappropriate table number, and the manufacturer's name or identification mark.[86] There is no definition of "deleterious film" in the Standard.Evidence in support of the application[87] In support of the application, the applicants relied on affidavits from Mr PhilNichols, a metallurgist at the University of Wollongong in Australia with some 15years' industry experience in the manufacture of copper piping, and Dr JonathanSmith, a New Zealand metallurgist specialising in materials consulting, includingcorrosion prevention services.[88] Neither Mr Nichols nor Dr Smith had visited the site and inspected the pipeswhen they swore their June 2016 affidavits.[89] Mr Nichols noted that, as a broad proposition, problems with copper pipingtypically arise from the chemical composition of the water – it is very unusual forproblems with the pipes to arise from manufacturing issues. That view was shared byDr Smith. In his first affidavit sworn on 29 June 2016 Dr Smith expressed the viewthat the primary cause of failure of the copper piping was the chemistry of the water.[90] Only two of the alleged design and manufacturing defects are manufacturingdefects. First, CCH alleges that the presence of deleterious film on the insides of thepipe surfaces has contributed to the corrosion and leaking problems. Both Mr Nicholsand Dr Smith discounted this as a potential contributor to the problems.[91] Mr Nichols said that, over the last 20 years, manufacturing processes havedeveloped to the point where such "film" defects are largely now only theoreticalproblems.16 Mr Jenkins, a witness for CCH, noted that an "S mark" indicates compliance with a manufacturingsystem of supervised control and testing, which has been designed to ensure general compliance.However, this does not provide an assurance that a particular piece of copper pipe fully complieswith the Standard.[92] While the expression "deleterious film" is not defined in the Standard, in MrNichols' opinion the Standard could only have been referring to carbonaceous films.But modern manufacturing techniques (including, to Mr Nichols' knowledge, thetechniques adopted by CEM) have evolved processes to ensure that carbonaceousfilms are not present (primarily achieved by using clean-burning synthetic lubricantsthat do not leave behind any harmful carbon-based residue). Mr Nichols said that hismost recent inquiries of CEM confirmed that no carbonaceous films had been detectedin its routine testing, and he expressed confidence that no such film would have beenpresent at the manufacture of the pipes in issue in this case. But even if film of thatsort had been present, it would have entirely lost any causative properties (i.e.causative of corrosion) on installation.[93] Dr Smith noted in his first affidavit that the presence of deleterious film mostcommonly arises after installation, as a by-product of water flowing through thesystem and adverse water chemistry. It is not normally a manufacturing issue. It ispossible for deleterious film to be left by the manufacturing process, but qualitycontrol systems used by manufacturers could be expected to detect any such issues.Further, if the film is still present after many years' use, a problem with the waterchemistry is indicated, not a problem with the pipes themselves.[94] The second alleged defect which Mr Nichols and Dr Smith identified as onewhich CCH might be relying on as a defect in the manufacture of the pipes, was thepresence on the inside surfaces of the pipes of "axial die lines". These were describedby Mr Nichols as tiny lines on the inside surfaces of the pipes which are a normalproduct of the "drawing" process used in the manufacture of the pipes. He said thatthe drawing process can leave very minor draw lines (axial die lines), usually with amaximum depth of no more than 0.02 millimetres. They are normally not visible tothe naked eye. In Mr Nichols' view, they are not "defects" for the purposes of cl 5.1of the Standard, and they would have had no influence on the reported corrosion ofthe pipes.[95] Dr Smith agreed that axial die lines are normal, and have never been classifiedas manufacturing defects. He also noted that axial die lines tend to be "microscopicfeatures".CCH's evidence in opposition[96] Affidavits were provided for CCH for the first hearing by Mr Simon Cox, ametallurgist and forensic consultant from South Australia, and Mr Stephen Jenkins, aconsulting engineer. Both had attended the site on a number of occasions, and Mr Coxcollected some samples for testing from both the hot and cold water systems. He alsoobtained a piece of piping supplied by CEM which had not been installed (sample 15).[97] Mr Cox examined the internal surface of sample 15, and found evidence ofpitting corrosion, notwithstanding that sample 15 had not been exposed to water at thehospital. He also noted visible axial die lines on the internal surface of the pipe.[98] Mr Cox also looked at a section of replacement piping supplied by anothermanufacturer (sample 74). The internal surface of the replacement pipe was smooth,and uniformly coated with a tan-coloured oxide layer. Mr Cox saw no evidence ofcorrosion or axial die lines.[99] Mr Cox concluded that the axial die lines must have been present when thepipes were installed. He referred to "laps" and "folds" along the axial die lines, andexpressed the opinion that they would have acted as initiation sites for pitting andcorrosion in both hot and cold water systems.[100] Mr Cox considered that the internal surface of the pipes supplied by CEM hadbeen contaminated with a substance which was aggressive to copper, such ashydrochloric acid. He suggested that a possible source of this contaminant might havebeen the pickling solution used by copper pipe manufacturers in the manufacturingprocess. He expressed the opinion that there were manufacturing defects in the pipes,in the form of both axial die lines and a deleterious substance. In combination, thesehad caused the corrosion.[101] In his affidavit, Mr Jenkins said that he had observed leaks in the piping systemin both the hot and cold systems. He referred to two possible failure mechanisms insuch cases: first, "pitting corrosion", and secondly "erosion corrosion", or "flowaccelerated corrosion". Mr Jenkins noted that the axial die lines were visible to thenaked eye, and corrosion was occurring along the axial die lines. He added that in hisexperience the axial die lines in this case were unusual – he did not recall seeing axialdie lines visible to the naked eye before.[102] On the allegation of deleterious film on the internal surfaces of the pipes, MrJenkins expressed the view that this issue is not limited to carbonaceous films, as MrNichols suggested (although carbonaceous films are the most prevalent cause ofpitting). Mr Jenkins suggested that the presence of harmful film in the pipes may havebeen attributable to the pickling process used in the manufacture. He referred to hisexperience with electroplating processes, noting that the pickling process used in thatcontext involves the use of hydrochloric acid. He suggested that a cause of the pittingmight have been a failure to properly flush the pipes after the use of the hydrochloricacid in the manufacturing process. The pickling process could leave spots on theinside of the pipe, where there would be a high concentration of chloride ions. Thatwould qualify as a harmful defect in terms of the Standard.The August 2016 reply evidence[103] Mr David Crowe, an engineer who had been general manager, engineering andbusiness development, for the Crane Metals Group, which included CEM, providedan affidavit in reply. Mr Crowe said that CEM had a longstanding process for themanufacture of copper tubing, and that it used specialist testing procedures. He statedthat CEM did not use a pickling process, and did not use hydrochloric acid, when itmade the pipes. If there was any presence of hydrochloric acid or chlorine in the pipes,it must have come from the water (if a used pipe) or the storage conditions (if unused).[104] On the axial die lines, Mr Crowe said "the manufacturing process will leavesome level of axial lines", but this would not be a defect in the product unless it wasof such significance as to compromise mechanical strength. He also noted that in theearly 1990s CEM had been approved for "S" mark accreditation by an independentparty.[105] Mr Nichols also confirmed in a reply affidavit that, to his knowledge, CEMnever used hydrochloric acid in its manufacturing processes at the relevant time. Heexpressed the view that any presence of chlorine in the pipes had to have come fromthe site conditions themselves, and likely the storage conditions. The presence ofchlorine does not provide any proof of a manufacturing issue.[106] In his reply affidavit, Dr Smith challenged the analyses of Mr Cox and MrJenkins as "flawed". He noted that Mr Jenkins is not a metallurgist, and suggestedthat he does not have significant manufacturing knowledge and experience. To theextent that there may have been a film on the inside surfaces of the CEM pipes, DrSmith said that there is nothing wrong with having a "passive oxide film" on theinsides of the pipes. Indeed, it is critical to providing corrosion protection to the tubes.[107] Dr Smith referred in his reply affidavit to a purchase he had made of sampleCEM copper pipes and Kembla pipes. Both had fine axial die lines on both the exteriorand interior surfaces. The interior axial die lines were visible when the pipe was cutopen, but you would not have noticed them looking only at the end of the pipe.[108] Dr Smith expressed the view that high levels of chlorine could only have comeat or after installation, from exposure to the water. He referred to "under-saturatedwater" having a tendency not to form coatings of "protective copper carbonate" on thepipes, and a propensity to induce corrosion. He said that the majority of water suppliedfrom the various Wellington regional water sites would have been under-saturatedwater.[109] Dr Smith challenged the conclusions of Mr Cox and Mr Jenkins, expressingthe view that it was inappropriate to suggest that this is one of the rare cases wherepitting/corrosion in copper pipes has not been caused by the water, without a clearbasis for that opinion. Without a foundation in the facts, Dr Smith suggested that theevidence of Mr Cox and Mr Jenkins was no more than an unproved hypothesis.[110] Dr Smith noted that the scope of the work Mr Cox said he had undertaken wasvery limited, and was not adequate given the breadth of the issues in this case. Whatwas required was:(1) a comprehensive water analysis;(2) microbiological testing of the water, and swabbing of bore samples;(3) testing copper samples to determine chemical composition, hardness,and mechanical properties;(4) micro-section and metallographic presentation to identify the form ofcorrosion and the corrosion mechanisms; and(5) an EDS analysis of the corrosion product cross-section to identify thechemical composition through the cross-section.[111] As for the presence of residual chlorine, Dr Smith suggested that it is likely tohave arisen from the handling or storage of the product – it could not have been causedby the manufacture, and could not have been present at the time of installation.[112] Dr Smith disputed that the die lines on the pipe samples, photographs of whichwere produced by Mr Cox with his affidavit, would have been visible to the nakedeye. He described them as "so minor they are irrelevant in terms of the causationfailure of the copper tubes".[113] Dr Smith also challenged Mr Cox's evidence about the "laps and folds" alongthe die line acting as initiation sites for pitting corrosion. If a pipe is corroding forother reasons, the fact that the pipe has axial die lines means only that the corrosionand the axial die lines happen to co-exist – it does not mean that the axial die lineshave caused the corrosion. Dr Smith said that only one of Mr Cox's photographsshowed the die lines, and it was highly magnified (and not even from an installedsample). Other photographs taken by Mr Cox did not show the die lines.[114] Dr Smith noted that neither Mr Cox nor Mr Jenkins had referred to any relevantacademic research. He said that he would simply discount any axial die lines if hesaw them.Beca's evidence[115] Leave was given to Beca to file affidavits in opposition, and Mr TrevorRowlands, an Australian materials engineer, provided an affidavit. A second affidavitwas provided by Mr Jonathan Williams, who had been project director for Beca on thehospital project.[116] Mr Rowlands' opinions were based on a review of the documents supplied tohim, including the affidavits of Mr Crowe, Mr Nichols, and Dr Smith for theapplicants, and Mr Cox and Mr Jenkins for CCH.[117] Mr Rowlands accepted that at least some of the axial die lines could havecreated laps and folds, which would be sites for the initiation of pitting corrosion. Henoted that other witnesses had referred to other possibilities, such as the waterchemistry, oxidation of inside surfaces causing deleterious film, and the presence ofhydrochloric acid in a pickling process used at manufacture. Mr Rowlands added afurther hypothesis – the absence of any filtration system to remove silt may haveresulted in deposits of mineral clays in the pipes, resulting in the formation of under-film, or under-deposit, corrosion.[118] Before any definitive conclusions could be reached, Mr Rowlands consideredthat an audit of CEM's quality control records should be undertaken, to determine ifany patterns could be established by comparing the copper pipes which have displayedpitting corrosion, with those that have not.[119] Subject to that qualification, Mr Rowlands expressed the view that thepreponderance of the axial die lines would have been benign, because they wererelatively smooth in profile and did not disrupt or breach the surface. But some of the"gouges" shown in Mr Cox's photographs were "sharp tears producing jagged lapsand folds", and the laps and folds created a microscopic crevice environment, with thelap in close proximity to the underlying parent material. Crevice environmentsbecome depleted in oxygen due to stagnant water dwelling in the sites, and in the caseof the copper piping, this results in its inability to re-form its protectiveoxide/carbonate layer. Once pitting corrosion was present, perforation failure wasinevitable. Mr Rowlands described the corrosion as an "intense localised form ofcorrosion normally associated with a stagnant electrolyte, aggressive agents such aschlorine, and the presence of discontinuities in the surface of the metal".[120] Mr Rowlands referred to previous experience he had had with pitting corrosionin stainless steel pipes where the pitting was located at longitudinal linear defects(gouges). The gouge lines had been produced in the manufacturing process. MrRowlands considered that the extrusion process used in the manufacture of the copperpipes in this case had produced similar gouge lines. The mechanisms of pittingcorrosion would be the same in both stainless steel and copper alloy.[121] Mr Rowlands said:Because the discontinuities in the copper pipes are the source of the failures,I consider them to be defects caused by a faulty manufacturing process. Thereis no doubt in my mind that there is a direct correlation with the presence ofthese linear defects and the pitting corrosion occurring.[122] Mr Rowlands considered Dr Smith's view that the corrosion has been causedby the chemical composition of the water. He noted an email from FCC to Mr Belbinof Aquaheat dated 17 December 2006 which referred to discolouration in the water insome of the hot water outlets when the water was first turned on, and he looked at theevidence of iron and manganese levels in the water (acceptable for the cold watersystem, but relatively high in the hot water system). He referred to a report from HillLaboratories dated 22 December 2008, which referred to "significantly increasedundissolved iron and manganese levels in the hot water supply." Mr Rowlandsexpressed the view that an investigation should be undertaken to confirm if a ferrous-based material in the hot water system could account for the higher amounts ofundissolved iron and manganese.[123] On the information presently available, however, Mr Rowlands doubted thatthe water quality, or the presence of the mineral film which has developed in some ofthe hot water piping, has played any significant role in the pipe failures. He said thatthe pitting corrosion failures have been observed in both horizontal and vertical hotand cold water piping, and there was evidence of pitting underneath the black (cuprousoxide and copper carbonate) mineral deposits in the hot water pipes. Because theblack layer forms a protective scale, this suggests that the factors for pitting corrosionto occur were already present prior to the formation of this layer.[124] Mr Rowlands disagreed with Dr Smith's view that copper pipe failures aremostly associated with water composition, noting that there are a number of otherpossible causes of failures in copper pipes. He could not give a firm view on whetherthe absence of a filtration system, filtering silt from the water entering the system, mayhave caused the deposit of mineral clays and the formation of under-deposit corrosion.He considered that that might be a possible explanation in some cases, but it could notcompletely explain what had occurred in this case.[125] On other issues raised by Mr Cox and Mr Jenkins for CCH, Mr Rowlandsgenerally agreed with Mr Nichols and Dr Smith. Oxidation film on the inside surfacesof the pipes was a normal part of the manufacturing process, which helped protect themetal from corroding. Such deposits are not regarded as detrimental. Similarly, MrRowlands discounted the theory that hydrochloric acid had been used in a picklingprocess at manufacture. He said that pickling had long been abandoned bymanufacturers.[126] Mr Jonathan Williams is a senior technical director for Beca, with 22 years'experience with the company. He was the project director on the hospital project.[127] Mr Williams said that Beca has not had the opportunity to inspect, investigate,or test the copper pipes.[128] Mr Williams produced a report from MIC dated 6 April 2013, which referredto unusually fast copper pipe degradation and leaks in the piping system. The reportsuggested that the degradation might have been attributed to poor water quality arisingdirectly from the lack of a filtration system on incoming mains. Mr Williamsconfirmed that he had provided a copy of this MIC report to Mr Rowlands.Further affidavits from CCH[129] Three further affidavits were produced for the April hearing by CCH.Affidavits were provided by Dr Roger O'Halloran, who has a PhD degree in analyticalelectrochemistry, and Dr David Nicholas, a principal in a corrosion consultingcompany in Australia. The third affidavit was from Mr Peter Angus, who providesmanagement services to CCH on a contract basis.[130] These affidavits were said to be in response to the affidavits of MessrsRowlands and Williams filed for Beca, but in fact they appear to have been directedto a new potential cause of the corrosion – failure to properly commission the copperpipe system.[131] As CEM was not involved in the commissioning process, I need not refer tothese affidavits any further in my consideration of the claims against CEM.Second round of affidavits in reply from the applicants[132] The applicants filed no fewer than four further affidavits in reply. There werefurther affidavits from Messrs Nichols, Crowe, and Smith, and also a second affidavitfrom Dr Jonathan Smith.[133] Mr Nichols pointed to the MIC report, which Mr Williams had produced, assupporting the applicants' contention that the likely cause of the pitting/corrosion wasthe water composition. He noted also that neither Dr O'Halloran nor Dr Nicholas hadprovided any support for the axial die lines causal theory, notwithstanding that heconsidered both Dr O'Halloran and Dr Nicholas were better qualified than either MrCox or Mr Jenkins to comment on that issue.[134] Mr Nichols was unable to make anything of the unused CEM pipe sample,noting only that the storage conditions had not been explained by CCH. The unusedsample could not be considered reliable evidence supporting the conclusions reachedby Mr Rowlands. Mr Nichols also rejected Mr Rowlands' reference to his previousexperience with stainless steel pipes. Stainless steel and copper are different materialswith different characteristics, and stainless steel is manufactured in a totally differentway.[135] Mr Nichols noted that, in the final stages of manufacture, every piece of copperpiping goes through a quality test. Contaminants are extremely rare, and in MrNichols' view could not have existed in a large volume of copper such as this. If MrRowlands were correct, every single piece of copper tube would develop crevice-corrosion, and the fact that that apparently has not occurred means Mr Rowlands'conclusion must be wrong.[136] As for the audit process proposed by Mr Rowlands, Mr Nichols noted MrCrowe's evidence that such a process would be futile. The copper pipes were notmanufactured or marked in any way that would allow an audit of the kind proposedby Mr Rowlands to be carried out.[137] That was confirmed in Mr Crowe's second affidavit. Furthermore, CEM is nolonger trading, and there would be no relevant records. Most of CEM's productionrecords would have been disposed of when its plant was shut down. There were nomarkings of batch number or the like on the tubes, and it would not be possible to linkany piece of copper tubing to a batch or coil of tube, or to link a coil to any particulardrawing die or drawing plug. Nor would it be possible to trace a piece of tubing takenfrom the main building to a date of manufacture, or to other more detailed informationsuch as individual tooling dies or plugs used. Some copper tubes, manufactured forsome standards, would have been marked with the year of manufacture, but therewould have been no more definitive marking than that.[138] Mr Crowe said that any deterioration in the dies used in the manufacture wouldhave been immediately obvious to CEM, who had personnel continually looking forany scratching on the tubes. CEM had modern machinery, processes and systems, andany such faults would either not have occurred at all or would have been detected atthe time of manufacture.[139] In his second (and final) affidavit, Dr Jonathan Smith noted that the April 2013MIC report tended to support his theory of contamination in the water in the form ofsilt. Deposits from the silt could have promoted premature corrosion of the pipes. DrSmith noted that the hospital has a sand filter on the water supply to the old part of thehospital, where no corrosion problems have been encountered, but there is no similarfilter on the supply to the main building.[140] Dr Smith generally agreed with Mr Rowlands on the presence of iron in thewater, referring to a Tonkin and Taylor memorandum of 16 December 2008 whichnoted that, under conditions of fine particulate of iron in contact with copper, therewould be a high likely source of corrosion pitting. However, Dr Smith stronglydisagreed with Mr Rowlands on the distinction he made between vertical andhorizontal pipes. He described Mr Rowlands' view that the presence of mineral films(or silt) had not contributed to the corrosion problem, as "wildly speculative", and notsupported by evidence or scientific analysis.[141] Dr Smith described Mr Rowlands' view of the corrosion allegedly beingcaused by "gouge marks" on the inner surfaces of the pipes as erroneous. He rejectedMr Rowlands' view that the axial die lines have contributed to premature corrosion,again describing it as speculative and not supported by the physical evidence. DrSmith said that Mr Rowlands: has ignored the effects of build-up of iron-rich particulate matter in thecopper piping that are the likely cause of the pitting corrosion. He does notoutline experience or knowledge of copper failure or copper pipemanufacturing processes, so his opinions can be safely discounted in myopinion.[142] Dr Smith strongly rejected the view that the axial die lines were, or at leastsome of them were, manufacturing defects.[143] Dr Smith referred to the MIC report, stating that pitting corrosion has mostlikely resulted from under-deposit corrosion. Such deposits typically take the form ofwater-borne silt/downstream corrosion product which settles out on the pipe bore. Inslow-moving waters (i.e. where there is a relatively large diameter ring main) particledeposition occurs along the tube bottom. The deposits shield the underlying materialof oxygen which is required to maintain the protective oxide layer. An active pit siteis then developed due to formation of an oxygen differential concentration cell.[144] Dr Smith adhered to his view that it is highly likely that iron corrosionproducts, or iron and manganese from the water supply, have infiltrated the hot andcold systems, which do not have the sand filters which are installed at the older partof the hospital.Submissions for CEM[145] Mr Fulton submits that CEM did not owe any duty of care to CCH.[146] The contractual risk allocation in this case should be decisive against a dutybeing owed. The copper pipes passed through the hands of an importer before theywere acquired by Aquaheat, and CCH elected to take a guarantee from thesubcontractor, Aquaheat. CCH could have required a longer guarantee from Aquaheatif it had chosen to do so, and it should not obtain through a tort claim protection thatit elected not to negotiate when the matrix of contracts was established.[147] Further, copper piping is a "generic" product which is supplied to a very bigmarket. The range of potential plaintiffs is vast, and the use to which the product isput can substantially impact on its performance. If the duty of care contended for byCCH were upheld, there would be a real problem of indeterminate liability arising forCEM and others involved in the manufacture of similar products.[148] Mr Fulton acknowledges that at first sight the decision of the Supreme Courtin Carter Holt Harvey Ltd v Minister of Education17 appears helpful to CCH on theduty of care issue. Carter Holt was concerned with manufactured cladding sheets foruse in cladding systems on buildings. The sheets were sold only to the buildingcompanies, and not to the retail market. The cladding had been installed at a numberof schools by the building companies, who were contracted by the Ministry. Problemswere later encountered, which the Ministry contended were caused by defects in thecladding system. The Minister alleged negligence in relation to the design,manufacturing and supply of the cladding. Carter Holt moved to strike out the claim.[149] The Supreme Court held that it was arguable that there was sufficient proximitybetween the parties; neither the contractual matrix nor the statutory context necessarilyprecluded a proximity finding. While Carter Holt was not itself required to complywith the Building Act 2004 or the Building Code in manufacturing the cladding sheets,the fact that its products were being used by building practitioners who were requiredto comply with the standards in the Building Act and the Building Code meant that17 Carter Holt Harvey Ltd v Minister of Education [2016] NZSC 95, [2017] 1 NZLR 78.those standards were relevant to the issues of proximity and foreseeability of harm.The duty of care sought to be imposed was arguably no greater than that of whichCarter Holt would already have been aware because of the requirements of theBuilding Act and the Building Code.[150] The Supreme Court in Carter Holt considered that there was no policy reasonfor saying that a negligence claim against Carter Holt should be struck out. The effectof imposing a duty of care on the contractual relationships was a matter for explorationat trial, once the contractual relationships had been clearly established. And the extentto which the claims against Carter Holt raised health and safety issues, rather thanmere quality issues, was something which could not be evaluated in the absence offacts which would be established at trial (as was the effect of the relevant statutoryobligations).[151] Mr Fulton submits that Carter Holt can be distinguished, on the basis that whatwas in issue in that case was a system, comprising the cladding sheets and othercomponents, and there would be issues about how the product had been made relativeto such questions as installation abilities. The cladding sheets were unlike the copperpipes in this case, which are standard products which have been in the market for manyyears, and which are not inherently dangerous.[152] The absence of evidence of a developed contractual framework, consideredsignificant in Carter Holt, is another important distinguishing factor. The contractualarrangements between CEM, any supply companies, and Crane Distribution NZ Ltd,and between the latter company and Aquaheat, will not assist on the duty issue. Thatis because CCH had the opportunity to look for direct warranties from themanufacturer, and to require any warranties from the manufacturer to be passed on toit. It elected not to do that, instead opting for a direct materials guarantee from thesubcontractor supplier (Aquaheat). That was a risk allocation that CCH chose, and itshould not be able to alter the risk allocation it bargained for through the back doormechanism of a tort claim against the manufacturer.[153] Mr Fulton relies on the English Court of Appeal decision in Simaan GeneralContracting Co v Pilkington Glass Ltd, in support of the submission that no duty ofcare is owed by a mere supplier.18Submissions for CCH[154] Mr Thain submits that it is too early to determine that CCH's negligence causeof action against CEM has no prospect of success. CEM has not yet provideddiscovery and, for example, its contract for the supply of the copper piping has not yetbeen disclosed.[155] Further, CCH proposes to amend its pleading to include a claim under theConsumer Guarantees Act 1993.[156] Mr Thain notes that the existence of the extensive contractual arrangements inplace between CCH and FCC, the design and monitoring arrangements in placebetween CCH and Beca, and the relationships direct between CCH and somesubcontractors, while relevant to CCH's claims against FCC, cannot be relied upon byCEM (with whom CCH had no contract).[157] Nor can it be said that CEM owed no duty of care because the copper pipeswere not going into residential homes. It is at least arguable that CEM owed a duty ofcare based on the Supreme Court decision in Body Corporate No 207624 v NorthShore City Council (Spencer on Byron), in which, on the issue of whether a duty ofcare was owed by the local authority to the Body Corporate and its members, theSupreme Court declined to recognise any distinction between residential andcommercial buildings.19[158] Mr Thain also notes that it was accepted by the manufacturer in Carter Holtthat where there is an indirect contractual relationship between plaintiff and defendant,and it is generally appropriate in such cases for the contracts entered into by the parties18 Simaan General Contracting Co v Pilkington Glass Ltd [1988] 1 QB 758 at 782G and 785D.19 Body Corporate No 207624 v North Shore City Council [Spencer on Byron] [2012] NZSC 83,[2013] 2 NZLR 297.to control the allocation of risk, the mere existence of a chain of contracts is not, ofitself, decisive on the issue of whether a duty of care is owed in tort.20[159] Mr Thain further submits that CCH is not here arguing that CEM owed a dutyof care to it to perform its contract with someone else (as was the case inRolls-Royce).21 The situation is the same as it was in Carter Holt.[160] Lastly, Mr Thain submits that, just as the cladding sheets and cladding systemproduced by Carter Holt Harvey were "building elements" to which certainrequirements of the Building Code applied, so here the copper pipes were buildingelements which were required to comply with the Building Code.Submissions for Beca[161] Beca's case was that it is at least arguable that CEM owed the pleaded duty toCCH, and that the claims by CCH against CEM should not be dismissed or struck out.If that is the position, it follows automatically that the application by CEM againstBeca to strike out Beca's cross-claim must be dismissed.[162] Mr Neutze submits that it is at the very least arguable that the manufacturer ofmaterial for use in the construction of buildings does owe a duty of care to the ownersof those buildings.22 And it is simply too early to determine that the cause of actionagainst CEM has no prospect of success.[163] In those circumstances, summary judgment or strike-out are not appropriate.Discussion and conclusions[164] In deciding whether a duty of care in tort should be recognised, the question iswhether, in light of all the circumstances of the case, it is fair, just and reasonable thatsuch a duty be imposed. There are two broad fields of inquiry. The first is the degreeof proximity, or relationship, between the parties. The second is whether there arepolicy considerations that tend to negate, restrict or strengthen the existence of a duty20 Carter Holt, above n 17, at [21].21 Rolls-Royce, above n 10.22 Referring to Carter Holt, above n 17.in the case under consideration.23 This approach has been described as a framework,rather than a straitjacket.24[165] Arguments over whether a novel duty exists should normally wait until trial.25However, if the claim depends on a question of law which is capable of decision onthe material before the Court, then the Court should determine that question.26[166] On the "screening" question of whether CEM should have reasonably foreseenthat any defects in the copper pipes would or might cause damage of the general kindsuffered by CCH, I think there is simply insufficient evidence to say that the loss wasnot foreseeable. It is not at this stage known what contact there may have beenbetween CEM and Aquaheat, and if (for example) CEM knew the pipes it wasmanufacturing were destined for a public hospital in Wellington. Uncertainty overthat issue may affect what I think was probably Mr Fulton's strongest argument,namely that the copper pipes are a "generic" product which has been in the market formany years, and that the risk of CEM being liable to an indeterminate number ofpeople for indeterminate amounts of money would be such that the Court should notrecognise a duty.[167] Certainly if CEM had been a manufacturer of, say, nails, selling millions ofthem with no knowledge as to where they might be used, I could see the obviousstrength of the floodgates argument that might be mounted. But the difficulty on apre-trial application such as this, where not all of the evidence is in, is that the Courtsimply does not know anything of the contractual relationships among Aquaheat,Crane Distribution NZ Ltd, and CEM (and between any parties in the contractual chainbetween CEM and Crane Distribution NZ Ltd). From CEM's perspective, was this asupply of "generic" product to the market generally, or a supply of a specific productfor a specific public facility?23 Rolls-Royce, above n 10, at [58]; Carter Holt, above n 17, at [14]; South Pacific ManufacturingCo Ltd v New Zealand Security Consultants and Investigations Ltd [1992] 2 NZLR 282 (CA) at305-306; and North Shore City Council v Attorney-General [2012] NZSC 49, [2012] 3 NZLR 341[The Grange] at [149]-[152] and [161].24 Carter Holt, above n 17, at [14].25 See Couch v Attorney-General, above n 7, at [32]-[33].26 South Pacific Manufacturing, above n 23, at 305.[168] At this summary judgment stage, I think the most that can safely be said is thatthe copper pipes, like the cladding in Carter Holt, were building products requiringspecialist knowledge and expertise in their manufacture.[169] The next point is that the fact that the alleged defects may have been latentdefects did not assist the manufacturer on the duty issue in Carter Holt. Nor does itassist CEM in this case. If anything, the very latency of any defects would increasethe vulnerability of end users of the product and point in favour of recognising a duty.[170] Mr Fulton submits that CCH had the ability to require a manufacturer'swarranty, but it did not do so. He points to the matrix of carefully consideredcontractual arrangements, which are said to tell against the recognition of a duty ofcare in tort. Whatever CEM's contractual arrangements may have been in thosecircumstances, they are said to be immaterial on the question of whether it owed aduty of care to CCH. But I think it would be dangerous to assume that that is so on asummary application such as this, where not all of the contractual arrangements arebefore the Court. In that respect, the following observation from the Supreme Courtin Carter Holt is apposite:27No doubt once the present case goes to trial there will be complete informationavailable to the trial Judge about the contractual arrangements between theparties in relation to each of the allegedly defective buildings which will allowthe trial Judge to make a more detailed comparison of the present case withRolls-Royce.[171] The "gaps" in the evidence on the contractual matrix make it difficult toconclude that CCH's proximity argument is clearly beyond reasonable argument.[172] The statutory context is also important. As was the case in Carter Holt, thefact that CEM as a manufacturer was not required to comply with the Building Act2004 and the Building Code is not determinative. CEM knew that its products werebeing used by building practitioners who were required to comply with the BuildingAct and the Building Code, and I think that is an important consideration on thequestion of foreseeability of harm and the broader issue of proximity.2827 Carter Holt, above n 17, at [26].28 Carter Holt, above n 17, at [39].[173] Turning to policy factors, any concern that recognising a duty of care in tortwould cut across carefully negotiated allocations of risk created by contract, is not asimportant a consideration on CEM's application as it is on FCC's application, whereCCH is arguing for concurrent liability in tort and contract in the context of anextensive and detailed contract for the construction of what was arguably acommercial building. By contrast, CEM had no contract with CCH. To the extent thatthis is a policy issue (as well as a proximity issue), I think it is unlikely to be decisiveon its own. It is best left to be explored at trial.[174] A further important policy consideration, weighing strongly against CEM, isthat this is a developing area of law, where counsel could not point to recent highauthority directly on point. In Spencer on Byron, the Supreme Court was prepared tofound the council's duty on its statutory obligations under the Building Act, and thatduty was held to be owed to residential and commercial owners alike. It would notseem to require a large step to conclude that all those engaged in "building work"under the Building Act (i.e. not just councils) owe duties not to breach the BuildingCode.29 And (as the Supreme Court noted in Carter Holt) those involved in themanufacture of "building elements" for use in the construction of buildings in NewZealand can be expected, as a general rule, to know that those using their products willbe required to meet the requirements of the Building Code. That seems to have beenthe case here, where CEM appears to have been well aware that the pipes were beingsupplied to the New Zealand market, and were required to comply with the Standard.[175] Mr Fulton relied on the decision of the Court of Appeal of England and Walesin Simaan General Contracting Co v Pilkington Glass Ltd (No 2),30 in support of theproposition that a mere supplier in the position of CEM owes no duty to the propertyowner. Simaan was a case where the respondent (Pilkington) had manufactured glassfor the construction of a building in Abu Dhabi. Simaan was the head contractor.When installed, the glass turned out to be not of uniform colour, and the building29 Indeed, the Supreme Court in Spencer on Byron appears to have assumed as much. For example,Tipping J said at [39] " those performing functions under the Act or within the scope of the Actowed statutory duties not to breach the Building Code," and Chambers and McGrath JJ noted at[187] that "if the cause of the non-compliance [with the Building Code] can be attributed to thenegligence of one or more of those responsible for the construction of the building, then it isappropriate they (including a council if responsible) should contribute to the cost of repair."30 Simaan General Contracting Co v Pilkington Glass Ltd, above n 18.owner withheld payment from Simaan. The Court of Appeal held that Pilkington hadnot voluntarily assumed direct responsibility to Simaan for the quality of the glass,and Simaan had not relied on Pilkington. Further, Simaan had the ability to make aclaim in contract against its subcontractor, who in turn could claim in contract againstPilkington. In those circumstances, Pilkington did not owe any duty of care in tort notto make Simaan's head contract less profitable.[176] I do not think Simaan is sufficient to tip the scales in favour of CEM on itssummary judgment application. First, the claim in Simaan related to a quality defectonly, with no apparent issue over damage being caused to persons or other property.That might not be the case here, where the evidence at trial might show that the leakingwater pipes in the hospital have caused damage to other property, or that repairs havebeen required to avoid adverse health consequences to patients or those working at thehospital.[177] Secondly, I do not think the law is sufficiently clear to justify the entry ofsummary judgment on the basis of the decision in Simaan. While the Court of Appealnoted in Rolls-Royce that Simaan had been widely approved both in New Zealand andin the United Kingdom,31 the Supreme Court noted in Carter Holt that the analysis ofthe Court of Appeal in Rolls-Royce would itself need to be considered further at trial,in light of the Supreme Court's decision in Spencer on Byron.32 And of course thecladding manufacturer in Carter Holt was (on one view) a "mere supplier" of a productused widely in the construction industry, but the Supreme Court declined to strike outthe claim.[178] Carter Holt seems to have left the door ajar on the issue of liability of suppliersof "building elements" to the New Zealand construction market, and while Iacknowledge Mr Fulton's careful argument that that case can be distinguished becausethe Supreme Court was there concerned with a "system", rather than a "generic"product which has been used for many years, I do not think that distinction is so clearlydecisive, whether on proximity or policy considerations, that I would be justified inentering summary judgment for CEM on the basis that no duty of care exists.31 Rolls-Royce, above n 10, at [84].32 Carter Holt, above n 17, footnote 26.[179] For the foregoing reasons, I find for CCH and Beca on Issue 3. CEM has notshown that it is clear that it did not owe any duty of care to CCH, such that it wouldbe entitled to summary judgment on the claims against it (and an order striking outBeca's cross-claim).Issue 4 If the answer to Issue (3) is "no", has CEM shown that it is clearthat it did not breach any duty of care it may have owed to CCH,and that it is entitled to summary judgment (and an order strikingout Beca's cross-claim) on that account?Submissions for CEM[180] Mr Fulton submits that even if CEM owed a duty of care, it could not be foundto have breached any duty. The evidence is now clear that the alleged defects comedown to only the two issues: deleterious film or axial die lines.[181] Mr Fulton challenges the reliability of Mr Jenkins' evidence and says it shouldbe ruled inadmissible. He says his evidence lacks expertise and scientific support. MrFulton submits the CEM evidence, by contrast, is given by two people with first-handknowledge of the processes used.[182] The CCH evidence on the deleterious film is driven by an alleged connectionbetween an identified chemical in the pipes that are said to be linked to CEMmanufacturing by a picking process. The evidence of Dr Smith, Mr Nichols and MrCrowe says that process was not undertaken. It is noted that most of the evidencebefore the Court makes the point that an oxide film cannot be a deleterious film, andcannot cause corrosion. Mr Jenkins, who says the oxide film can be a deleterious film,is alleged to be unqualified to give such evidence.[183] On the axial die lines, Mr Fulton notes the inconsistency in the evidencebetween Mr Jenkins and Mr Nichols as to whether or not the axial die lines werevisible. He highlights in his submissions a distinction between axial die lines, whichare normal, and axial die lines which are excessive. He says the CCH statements donot expand on this relevant distinction. Neither Mr Jenkins nor Mr Cox explains therelevant manufacturing process, and their evidence is lacking any proper foundation.[184] Mr Fulton acknowledges that "a resolution of [the axial die lines] issue is moredifficult" because CEM accepts the copper pipes likely do have axial die lines. Butthere can be no suggestion that axial die lines are specifically proscribed by theStandard.[185] It is accepted that showing CCH's claims are weak in the summary judgmentcontext is not enough, but the current situation is "unique" and a "robust approach"should be taken to find in favour of CEM.Submissions for CCH[186] Mr Thain submits it is arguable that CEM breached its duty. The axial die linesdetected by Mr Cox and Mr Jenkins, and the alleged connection with the corrosion, isparticularly relied on.[187] Mr Thain notes that despite the quality assurance systems CEM is said to havehad in place in manufacturing the copper piping, negligence might consist of a one-off failure of those systems.[188] It is "simply too early" to say that CEM's claims have no prospect of success.Submissions for Beca[189] Mr Neutze relies on the evidence of Mr Rowlands, submitting that thisevidence clearly establishes that there is in fact a prospect of the axial die lines (jaggedlongitudinal lines) being proven. He also notes that Mr Rowlands has expresseddisagreement with Dr Smith's view that water chemistry would be the primary causeof failure in 99.9% of all cases of copper pipe failures.[190] Mr Neutze says that Beca has not yet had the opportunity to inspect, investigateand/or test the system, including the copper pipes. He supports Mr Thain's submissionthat it is simply too early to determine that the cause of action against CEM has noprospect of success.Discussion and conclusions[191] In my view, this issue was never suitable for determination on a summaryjudgment application. While the applicants invite me to take a robust approach, anddiscount large parts of the evidence given for CCH and Beca, I think it would only bein rare circumstances that it would be appropriate for a Court to do that on a summaryjudgment application, where experts have expressed conflicting opinions on importantissues,33 without seeing the witnesses cross-examined, and before the parties have hadthe benefit of discovery.[192] Quite apart from the divergent views of the experts, the fact that there are nowapparently few if any manufacturing records available from CEM suggests that theCourt should be more cautious about entering summary judgment in a disputed factsituation, not less cautious. Evidence from those who were actually working at CEM'smanufacturing plant at the time the pipes were manufactured may be very importantin those circumstances, and no such evidence is presently before the Court.[193] While Mr Nichols referred in his evidence to recent enquiries made of CEMthat confirmed that no carbonaceous films had been detected in CEM's routine testing,evidence of that sort is hearsay evidence. The extent of Mr Crowe's regular, hands-oninvolvement when the pipes in question were manufactured is not clear from theevidence, and I do not think I can be certain in those circumstances that I have the fullpicture on what occurred during the manufacture, and whether any issues arose duringthe manufacture (and if so what they were).[194] I note also that the expert witnesses for the applicants have not attended thesite, whereas Mr Cox and Mr Jenkins have both attended the site on a number ofoccasions. That might not turn out to be very significant, but it is another factor whichgives the Court cause for pause in discounting the evidence of Mr Cox and Mr Jenkins,as the applicants would have me do.[195] I accept that on the evidence produced at this stage there appears to be nothingin the suggestion that the pitting corrosion is the result of a pickling process used in33 MacLean v Stewart, above n 4.the manufacture of the pipes. The possibility that a pickling process usinghydrochloric acid might have been used was suggested by Mr Cox and Mr Jenkins,but all other witnesses appear to accept that pickling has not been used in themanufacture of copper pipes for some years, and was not used by CEM in this case.CCH did not pursue the "pickling process cause" further in its affidavits.[196] However, the axial die lines cannot be discounted as a cause of the pittingcorrosion so readily. Mr Cox said in his evidence that he had obtained a piece ofpiping supplied by CEM which had not been installed (sample 15), and found in itevidence of pitting corrosion notwithstanding that sample 15 had not been exposed towater at the hospital. He referred to "laps" and "folds" along the axial die lines, andexpressed the view that the laps and folds would have acted as initiation sites forpitting corrosion. Mr Jenkins noted that the axial die lines were visible to the nakedeye, and that corrosion was occurring along the axial die lines.[197] Whatever the applicants might say about the qualifications and relevantexperience of Messrs Cox and Jenkins, I do not think this evidence can be dismissedor discounted (on the affidavit evidence alone) as irrelevant or mistaken. And at leastone expert witness (Mr Rowlands) supports the view that at least some of the axial dielines could have created laps and folds, which would have been sites for the initiationof pitting corrosion.[198] Mr Rowlands described some of the "gouges" shown in Mr Cox's photographsas "sharp tears producing jagged laps and folds", and in his opinion the laps and foldscreated a microscopic crevice environment. Crevice environments become depletedin oxygen due to stagnant water dwelling in the sites, and that results in the copperpiping being unable to re-form its protective oxide/carbonate layer, giving rise to thepossibility of pitting corrosion.[199] Mr Rowlands expressed the view that while most of the axial die lines wouldhave been benign, the gouge lines observed by Mr Cox and Mr Jenkins would havebeen produced in the manufacturing process. He stated unequivocally his view that"discontinuities" in the copper pipes have been the source of the failures, and thatthose discontinuities would have been caused by a faulty manufacturing process. Hesaid that he was in no doubt that there was a direct correlation between the presenceof these "linear defects" and the pitting corrosion which has occurred.[200] While Mr Nichols and Dr Smith disagreed with Mr Rowlands,34 andmaintained their view that the pitting corrosion has been caused by contaminants (suchas iron or manganese deposits) in the water supply to the hospital, I do not think itpossible on an application such as this to determine that Mr Rowlands, and Mr Jenkinsand Mr Cox, were so clearly wrong in their evidence that their opinions can bediscounted.[201] Mr Cox and Mr Jenkins have given evidence that one piece of CEM pipingthat had not been used did exhibit the gouge marks, with the laps and folds. While MrNichols complains that CCH has not provided evidence of the conditions in which thispiece of piping has been stored, I do not think a party responding to a summaryjudgment application can be expected to have its evidence in perfect, "trial-ready"form. If there were "gouges" in the internal surfaces of at least some of the pipes,pitting corrosion has occurred in a linear fashion along those gouges, and at least oneexpert considers the gouges must have arisen at the manufacturing stage, I think CCHhas produced enough on this issue to justify further investigation and inquiry, makingthe issue unsuitable for determination on a summary judgment application.[202] I am mindful, too, that the applicants should not be permitted to "force the caseon" in advance of more detailed technical and scientific investigation and analysis,and in advance of discovery, interrogatories, and any other pre-trial procedures CCHmight be entitled to utilise. While in some cases it may be the position that a plaintiffputting up purely speculative answers to a defendant's summary judgment applicationwill be held not to have put up enough, in my view this is not a sufficiently clear-cutcase to apply that approach.[203] In the end, I cannot say that it is sufficiently clear that CCH will not succeedwith its claim that there were manufacturing defects (particularly defects associatedwith axial die lines which may have been less than "benign", to borrow Mr Rowlands'34 For example, Dr Smith described Mr Rowlands' view of the corrosion being caused by the "gougemarks" on the inner surfaces of the pipes as "erroneous".expression), that the entry of summary judgment for CEM is justified. If there wereindeed "gouges", and/or "laps and folds", of the kind referred to by Messrs Cox,Jenkins, and Rowlands, I think it is at least arguable for CCH that those gouges, lapsand folds would have been "harmful defects" for the purposes of cl 5.1 of the Standard,and the manufacture of pipes with such defects would have been breaches of a duty ofcare arguably owed by CEM to CCH.[204] That finding is sufficient for me to conclude that CEM's application forsummary judgment cannot succeed. In those circumstances, there is no need for meto consider the other alleged manufacturing defect, namely the "deleterious film" inthe pipes.Issue 5 [If neither of Issues (3) and (4) is answered "yes"] assuming thefacts pleaded by CCH against CEM are true, has CEM shown that,as a matter of law, the claims against it are so untenable that theyshould be struck out?[205] The alternative application for an order striking out the claim against CEMcannot succeed. Once the Court has found, as it has, that the alleged duty of care isarguable, there is reduced scope for any strike-out order. Except in the case of agreedor non-contentious matters, the facts pleaded in a statement of claim must be assumedto be true for the purposes of a strike-out application. Approaching the application inthat way, it is clear that it cannot succeed. I accordingly find for CCH on issue (5).Issue (6) Has CEM shown that it is clear that CCH could have no claimagainst it under the Consumer Guarantees Act 1993?[206] As CEM's application for summary judgment has not succeeded on CCH'snegligence cause of action, there is no need to consider this issue in the context of thesummary judgment application.3535 Under r 12.2(2), a defendant's application for summary judgment can be granted only if thedefendant satisfies the court that none of the causes of action in the plaintiff's statement of claimcan succeed.[207] Nor do I think it is necessary or appropriate to consider this issue on CEM'sstrike-out application. As yet, there is no pleading under the Consumer GuaranteesAct, and it would be premature to deal with the argument on this issue in the absenceof a properly particularised pleading.Issue (7) Has FCC shown that, as a matter of law, the claims against it areso untenable that they should be struck out?(a) CCH's guarantee cause of actionFCC required to give guarantee by provisions of head contract[208] Clause 11.5 of the General Conditions provided at 11.5.1 that the headcontractor (FCC) was to provide the principal (CCH) with written guarantees whererequired by the special conditions of contract (the Special Conditions).[209] The Special Conditions formed the first schedule to the General Conditions,and they included specific requirements in respect of the provision of guarantees bythe head contractor. One of the required forms of guarantee was a "blanket guarantee",to be given by the contractor in the form set out in the Thirteenth Schedule to theGeneral Conditions. In addition, the contractor was to provide certain specialistguarantees, in the form set out in the Fourteenth Schedule.[210] Clause 11.5.1 of the Special Conditions provided:(11.5.1) The Contractor shall provide in duplicate its blanket guarantee for theweathertightness of the whole of the building envelope and for thecorrect functioning of all plumbing, underground, mechanical,electrical, electronic, hydraulic and fire protection services providedas part of the Contract Works for a period of two years, commencingon the date of the final Defects Liability Certificate.[211] The form of blanket guarantee provided for in the Thirteenth Schedulecontained the following provisions:36THIRTEENTH SCHEDULE DEED OF BLANKET GUARANTEEPARTIES36 Above paragraph [208].1. Capital & Coast District Health Board2. [FCC] the "Contractor"BACKGROUNDA. The Principal and the Contractor have entered into a construction contractto undertake the Main Building as part of the New Regional Hospital, andother works dated [7 December] 2005 ("the Contract")B. The Contract requires the Contractor to provide certain design input,supply, construct, complete and maintain the whole of the Contract Worksand things described in the Contract.C. Under the Contract the Contractor is also required to execute this Deed ofGuarantee confirming the Contractor's guarantee of specific aspects of theContract in addition to the Contractor's obligations set out in theremaining parts of the Contract.AGREEMENTBy this Deed and in consideration of the Contract Price payable by thePrincipal to the Contractor under the Contract the Contractor agrees with thePrincipal is as follows:1. Guarantee1.1 The Contractor guarantees to the Principal:a) The weather tightness of the whole of the building envelope,andb) The correct functioning of all plumbing, underground,mechanical, electrical, electronic, hydraulic, fire protectionand transportation services, provided as part of the ContractWorks for a period of 2 years following the date of the finalDefects Liability Certificate under the Contract.1.2 The Contractor warrants and covenants as follows:a) All materials supplied by the Contractor shall be new and ofgood quality in accordance with the provisions of theContract; andb) All work involving carrying out the Guaranteed Works shallbe carried out in good and workmanlike manner inaccordance with the provisions of the Contract.2. Making Good2.1 The Contractor will make good and/or repair at its own expense:(a) Any failure, defect, or insufficiency in the Guaranteed Work;and(b) Any damage to buildings, structures, or any other part of theContract Works or any part of the Principal's land atWellington hospital or damage or loss to third parties causedby any failure, defect or insufficiency in the GuaranteedWorks which shall arise within 2 years from the issue of thefinal Defects Liability Certificate under the Contract.3. Contractor's indemnity3.1 The Contractor will indemnify the Principal as to all losses ordamages incurred by the Principal arising out of the failure by theContractor to perform its obligations under this Deed.4. Principal's Right to Remedy4.1 The Principal may carry out any making good which the Contractorfails to complete within a reasonable time of receiving notificationunder clause 2.2.4.2 The Principal may recover the cost of making good from theContractor. Such costs shall include all incidental expenses and feesincluding consultant and adviser fees.4.3 The making good of any part of the Guaranteed Works under thisclause does not release the Contractor from any of its obligationsunder this Deed.5. Limitations on Contractor's Obligations5.1 The Contractor is not obliged to make good any failure, defect orliability under this Deed that is attributable to:(a) any willful act or negligence of the Principal, the Engineer orany person other than the Contractor, its Subcontractors,agents or persons under the Contractor's control; or(b) any failure to operate the relevant part of the GuaranteedWorks in accordance with the manuals provided under theContract; or(c) any of the Excepted Risks under the Contract; or(d) the failure of any Materials that have been specified by thePrincipal where the failure is due to the design choice only.The Contractor will be obligated to make good any failure,defect or liability under this deed that is attributable to failurein the quality of Materials.6. Work Covered by Insurance6.1 Any damage to the Contract Works occurring after the date of the finalDefects Liability Certificate under the Contract which is covered byinsurance under which the Principal is entitled to be indemnified(other than Professional Indemnity Insurance) to the full extent of thedamage or loss and for which the Principal receives full payment shallbe made good by the Principal to the standards set out in the Contract.6.2 Any such work carried out, whether by the Contractor on thePrincipal's behalf or by some other person shall not release theContractor from its obligations under this Deed.7. Contractor's Obligations in Addition to Contract7.1 The obligations of the Contractor under this Deed are in addition tothe Contractor's obligations under the Contract and do not substituteor diminish any of those obligations or the Contractor's obligationsand liability at law.8. Variations to Guaranteed Works8.1 If this Deed is completed by the Contractor prior to the date of thefinal Defects Liability Certificate under this Contract, no Variation ofthe contract Works entered into by the Principal and the Contractorsubsequent to the execution of this Guarantee and before the date ofthe final Defects Liability Certificate under the Contract will vary theliability of the Contractor under this Deed, neither shall it diminishthat liability or release the Contractor from its liability under thisDeed. All reference to the Guaranteed Works under this Deed shallinclude the Guaranteed Works as originally specified together with allrelevant Variations.10. Continuing Guarantee10.1 The Contractor's obligations under this Deed are continuingobligations.12. Deed Part of Contract12.1 This Deed forms part of and shall be read with the Contract.12.2 All capitalised expressions that are not defined in this Deed shall havethe meanings set out in the Contract.15. Interpretation15.1 In this Deed:"Guaranteed Work" means those parts of the Contract Works(including Materials) set out in clause 1.1 ofthis Deed."Defect" includes all defects, faults, omissions,shrinkages, undue deterioration and otherfaults which are due to Materials orworkmanship not being in accordance withthe Contract or the warranty contained inclause 1 of this Deed."Repair" includes renewal or replacement necessary toremedy defects.15.2 Terms in this Deed shall have the same meaning as set out in theContract other than where expressly modified or where inconsistentwith the context.[212] FCC submitted its tender for the contract works on 29 September 2005.Relevant to the guarantee issue, FCC said:Clause 11.5.1; Our tender is based on providing a two (2) yearblanket guarantee for the weather tightness of the building from thedate of Practical Completion. The correct functioning of the servicesguarantees as listed will be provided in the name of the specialist subcontractor. Our tender is based on the specialist guarantees beingbetween the Principal and the sub contractor only. [213] In respect of the guarantee forms set out in the thirteen and fourteenthschedules to the General Conditions, FCC said in its tender:Thirteenth ScheduleThis schedule may require amendment following the resolution of Clause11.5.1 Part A – Specific Conditions of Contract. Additionally we requireclause 3.1 to be amended to reflect that the Contractor will only indemnity thePrincipal against direct losses and damages Fourteenth ScheduleThis schedule will be amended to reflect our requirement for it to be in thename of a specialist sub contractor. Refer Clause 11.5.1 Part A SpecificConditions of Contract.[214] On 7 December 2005, CCH sent a letter to FCC accepting its tender, subject toan attached list of "tender clarifications" which had been negotiated between theparties. The 7 December 2005 letter was countersigned for FCC by its generalmanager, and it is common ground between the parties that the head contract wasentered into at this point.[215] The "tender clarifications" annexed to the 7 December 2005 letter included thefollowing:11.5.1 Accepted that the weathertightness guarantee will be for 2 years andwill apply from Practical Completion. Specialist Guarantees are to beconfirmed with the formation of the Future Works packages. These areaccepted to be in the name of the Specialist subcontractor.Thirteenth ScheduleAccepted.Fourteenth ScheduleAccepted.[216] The contract documents, in order of precedence, were:(1) the letter of acceptance dated 7 December 2005;(2) the tender clarification document;(3) FCC's tender dated 29 September 2005 (and attachments);(4) the Notices to Proposes Nos 1-6 and F1 and F2;(5) the Contract Document Volume 00; and(6) specifications and Drawings for Contract NRH 20-300.CCH's claim on the guarantee[217] Surprisingly, CCH was unable to identify the guarantee document on which itsues. It was only a few weeks before the October 2016 hearing that CCH located aform of guarantee in its records which had been signed by an authorised signatory ofFCC. A slightly different version of the same document, signed by the same signatoryon behalf of FCC, was produced by Mr Angus Smith in support of FCC's application.[218] The deed of guarantee produced by Mr Smith was in the form required by theThirteenth Schedule to the General Conditions, but with cl 1.1 amended as follows:1. Guarantee1.1 The Contractor guarantees to the Principal:a) The weather tightness of the whole of the buildingenvelope, andb) The correct functioning of all plumbing,underground, mechanical, electrical, electronic,hydraulic, fire protection and transportation services,provided as part of the Contract Works for a period of2 years following the date of the final DefectsLiability Certificate under the Contract.Practical Completion[219] The form of guarantee produced by Mr Angus was identical, except for thefollowing (slightly different) wording of cl 1.1:1. Guarantee1.1 The Contractor guarantees to the Principal:a) The weather tightness of the whole of the building envelope,andb) The correct functioning of all plumbing, underground,mechanical, electrical, electronic, hydraulic, fire protectionand transportation services, provided as part of the ContractWorks for a period of 2 years following the date of the finalDefects Liability Certificate under the Contract.Practical Completion[220] In its statement of claim, CCH pleads that the terms of the blanket guaranteeincluded that FCC would guarantee the workmanship, goods, services or materialsused in the course of the Contract Works, and that the terms of the general guaranteeincluded warranties by FCC that:(1) the materials used in the Contract Works would be those required bythe Contract documents; and(2) all materials would be new and of good quality.[221] CCH says that, in breach of this guarantee, the hot and cold water system hadthe pleaded defects.[222] In the alternative, CCH pleads that FCC "negligently failed to provide theblanket guarantee in breach of its duty to undertake the Project in accordance with [thehead contract]."[223] In its statement of defence, FCC pleads that the guarantee was limited toweathertightness, with specialist services (such as the copper piping) deleted from itsscope. The specialist services were instead to be the subject of direct obligationsbetween CCH and the subcontractor. It says that the guarantee was in any eventlimited as to time, and that time has expired.Submissions for FCC[224] Mr Fulton submits that the blanket guarantee given by FCC, as required by thehead contract, was limited to the weathertightness of the building envelope. Thealleged defects which are the subject of CCH's claim would all have come withincl 1.1(b), but whichever was the correct form of guarantee, cl 1.1(b) was deleted byFCC and the deletion was accepted by CCH. The minor differences between the twoforms of guarantee signed on behalf of FCC thus make no difference to thefundamental point that the alleged defects for which CCH now sues were not covered.[225] Mr Fulton submits that FCC's guarantee was confined to the "GuaranteedWork", which expression was defined in cl 15.1 of the FCC guarantee as including"Materials". "Materials" included the copper pipes. The same clause of the FCCguarantee (cl 15.1) made it clear that the "Guaranteed Work" was limited to those partsof the Contract Works set out in cl 1.1. The only "Contract Works" referred to in cl1.1 were works concerned with the weathertightness of the building envelope.[226] FCC says that its tender only priced risk for the weathertightness of thebuilding envelope, for a period of two years. That was clear in its tender, and it wasaccepted (in material respects) by CCH. There was express agreement between FCCand CCH that FCC's guarantee would not cover the correct functioning of theplumbing and hydraulic systems, including the copper piping – CCH would obtain aspecialist guarantee from Aquaheat covering the copper piping.[227] Addressing cl 1.2 of the FCC guarantee, Mr Fulton submits that the provision"All Materials supplied by [FCC] shall be new and of good quality in accordance withthe provisions of the Contract" was not intended to place any obligations on FCCrelating to the copper piping. Clause 1.2 was concerned only with Materials used inthe performance of the Guaranteed Work, and the Guaranteed Work was limited towork relating to weathertightness.[228] Finally, Mr Fulton submits that the FCC guarantee was only given for a periodof two years, and that period has long expired.Submissions for CCH[229] Mr Thain submits that the fact that two (slightly different) forms of guaranteehave been produced (with no (or no sufficient) explanation for the differences)suggests that the entry of summary judgment for FCC would not be appropriate.Secondly, he submits that it is at least arguable for CCH that its claims on the guaranteedo come within cl 1.2(a) of the form of the FCC guarantee – the copper pipingconstituted "Materials" supplied by FCC under cl 1.2(a), and those Materials were notof "good quality" in accordance with the provisions of the Contract.[230] Mr Thain emphasises that the copper pipes are clearly failing. The claim onthe FCC guarantee is arguable on the basis of the "good quality" requirement atcl 1.1(2)(a), and the summary judgment application should be rejected on that account.[231] On the question of whether the guarantee has expired, and/or whether the claimon the guarantee is out of time for a contract claim under s 4 of the Limitation Act1950, Mr Thain submits that the FCC guarantee was in the form of a deed, and thatthe limitation period for claims on a deed is 12 years.37Mr Fulton's reply submissions for FCC[232] In reply, Mr Fulton submits that the FCC guarantee was not executed as a deed.The signatory, who was an estimator for FCC, was not authorised by FCC to sign37 Limitation Act 1950, s 4(3).deeds. The FCC guarantee was effective only as a contract, and any claim on it is nowwell out of time.[233] On the interpretation of the FCC guarantee, Mr Fulton reiterated that the FCCguarantee was limited in its scope to the Guaranteed Work as defined, and did notextend to the copper piping.Discussion and conclusion on the guarantee cause of action(a) Principles of contract interpretation[234] I will proceed on the basis that the form of FCC guarantee produced by MrAngus, which was both signed on behalf of FCC and undeniably in the possession ofCCH, is the relevant form of FCC guarantee for the purposes of FCC's summaryjudgment and strike-out applications. Nothing turns on the slightly different wordingof the two forms of the FCC guarantee, and it is common ground that there was a formof guarantee signed on behalf of FCC, on which it was liable to CCH. I do not thinkCCH can have any complaint with that approach – it is the party suing on theguarantee, and it was clearly obliged to identify the document on which it was suing.That would have been a fundamental requirement of its initial disclosure under r 8.4of the High Court Rules, and it is not good enough for CCH to point to allegedconfusion over which is the correct document when it was itself under an obligationto identify the document relied upon.[235] The legal principles to be applied in the interpretation of written commercialcontracts have been considered in a number of Supreme Court decisions. I need onlyrefer to one of them. In their joint judgment in Firm PI Ltd v Zurich AustralianInsurance Ltd, Arnold, McGrath and Glazebrook JJ said:38[60] It is sufficient to say that the proper approach is an objective one,the aim being to ascertain "the meaning which the document would convey toa reasonable person having all the background knowledge which wouldreasonably have been available to the parties in the situation in which theywere at the time of the contract. This objective meaning is taken to be thatwhich the parties intended. While there is no conceptual limit on what can beregarded as "background", it has to be background that a reasonable person38 Firm P1 Ltd v Zurich Australian Insurance Ltd t/a Zurich New Zealand [2014] NZSC 147, [2015]1 NZLR 432 at [60], [61] and [63].would regard as relevant. Accordingly, the context provided by the contractas a whole and any relevant background informs meaning.[61] The requirement that the reasonable person have all the backgroundknowledge known or reasonably available to the parties is a reflection of thefact that contractual language, like all language, must be interpreted within itsoverall context, broadly viewed. Contextual interpretation of contracts has asignificant history in New Zealand, although for many years it was restrictedto situations of ambiguity. More recently, however it has been confirmed thata purposive or contextual interpretation is not dependent on there being anambiguity in the contractual language.[63] While context is a necessary element of the interpretive process andthe focus is on interpreting the document rather than particular words, the textremains centrally important. If the language at issue, construed in the contextof the contract as a whole, has an ordinary and natural meaning, that will be apowerful, albeit not conclusive, indicator of what the parties meant. But thewider context may point to some interpretation other than the most obviousone and may also assist in determining the meaning intended in cases ofambiguity or uncertainty. [Footnotes omitted.](b) Application of interpretation principles in this case[236] I am satisfied that FCC has shown that CCH's claim on the FCC guaranteeclearly cannot succeed. I have reached that view for the following reasons.[237] I think the starting point must be cl 11.5.1 of pt A the Special Conditions. Atthe time CCH was calling for tenders (based on the General Conditions, the SpecialConditions, and the other contract documents which were in existence at the time), theguarantee that CCH wanted the head contractor to provide would be limited to twothings:(1) the weathertightness of the building envelope; and(2) the correct functioning of certain services (which would include the hotand cold water piping services).[238] The form of guarantee that CCH was looking for, then, would not cover theentire Contract Works.[239] The next step was FCC's tender, submitted on 29 September 2005. FCC madeit clear in its tender that, of the two parts of the head contract works in respect of whichCCH was calling for a head contractor "blanket" guarantee, FCC was prepared toguarantee only one of them – the weathertightness of the building envelope. The"correct functioning of the services guarantees as listed" would be guaranteed by therelevant specialist subcontractors.[240] Consistent with that stance, FCC drew attention, under the headings"Thirteenth Schedule" and "Fourteenth Schedule", to the fact that the guarantee formsset out in those schedules would need to be amended to reflect the position FCC wastaking on the requirement for guarantees in cl 11.5.1 of pt A of the Special Conditions.[241] The next relevant document is the "tender clarifications" document annexed tothe 7 December 2005 letter. The tender clarifications specifically noted in respect ofcl 11.5.1 of pt A of the Special Conditions that the specialist guarantees would beaccepted in the names of the specialist subcontractors, and that FCC's tender "tags" inrespect of the Thirteenth and Fourteenth Schedules were both "accepted".[242] At the time the head contract was completed, then, FCC was obliged only toprovide a guarantee, for two years from the date of Practical Completion, in respect ofthe weathertightness of the building envelope. It was not required to provide aguarantee in respect of the specialist services "as listed" – these would be provided bythe relevant specialist subcontractor.[243] I think the expression "as listed" used by FCC in its tender could have referredonly to the particular services set out at cl 1.1(b) of the Thirteenth Schedule form ofblanket guarantee. The provision of the hot and cold water piping systems came withinthese listed services, under the heading "hydraulic services".[244] I conclude that at the time the head contract was completed FCC had noobligation to provide a blanket guarantee covering the correct functioning of the hotand cold water piping.[245] Consistent with that interpretation, cl 1.1(a) and (b) were amended by FCC inthe form of blanket guarantee it provided, as set out at [219] of this judgment. Takingaccount of the crossings out and the addition of the words "Practical Completion",FCC's guarantee was accordingly limited to:The weathertightness of the whole of the building envelope provided as partof the Contract Works for a period of 2 years following the date of PracticalCompletion under the Contract.[246] The definition of the expression "Guaranteed Work" in cl 15.1 of the blanketguarantee made it clear that the only "Work" within the definition would be theweathertightness work set out in cl 1.1.[247] I accept Mr Fulton's submission that cl 1.2(a) of the form of blanket guaranteewas not intended to extend the scope of the guarantee beyond the "Guaranteed Work"as defined in cls 15.1 and 1.1. First, Recital C in the "BACKGROUND" section ofthe blanket guarantee made it clear that the guarantee was intended to apply only inrespect of "specific aspects of the Contract" (i.e. not the whole contract). Also, theobligations in the guarantee were intended to be in addition to the Contractor'sobligation in other parts of the Contract.[248] Secondly, if cl 1.2(a) had been intended to apply to all "Materials", regardlessof whether they were supplied in the performance of the "Guaranteed Work", onewould have expected the provisions of the blanket guarantee providing for a remedyfor CCH to have reflected that interpretation. But they do not. The "make good"obligations at cl 2.1(a) of the blanket guarantee refer only to failures, defects, orinsufficiencies in the Guaranteed Work (emphasis added).[249] Thirdly, cl 1.2(b), in which the contractor warranted and covenanted that allwork would be carried out in a good and workmanlike manner in accordance with theprovisions of the Contract, applied only in respect of the Guaranteed Works as defined.I can see no sensible reason why the guarantee obligations in respect of the carryingout of work would be limited to the Guaranteed Work, while the obligations in respectof the supply of materials would extend to the entire Contract Works. Poor qualitywork and poor quality materials (being work or materials falling outside the definitionof the "Guaranteed Work") could both result in defects, and I think it commerciallyimprobable that one kind of default was intended to be caught by the blanket guarantee(poor quality materials) while the other (poor quality workmanship) was not.[250] Fourthly, I think the language of cl 8 of the form of blanket guarantee, whichwas concerned with "Variations to Guaranteed Works", was consistent with the viewthat the blanket guarantee was intended only to cover services performed and materialssupplied as part of the "Guaranteed Works". While cl 8.1 provided that no variationof the contract works would vary the liability of the contractor under the guarantee,the final sentence of the clause referred to "the Guaranteed Works", and "theGuaranteed Works as originally specified". The language used suggests that the"contract works" referred to in the clause were intended to be co-extensive with the"Guaranteed Work".[251] I accordingly conclude that all of cl 1 of the blanket guarantee (i.e. cl 1.2 aswell as cl 1.1) was intended to apply only in respect of weathertightness work i.e. the"Guaranteed Works" as defined in cl 15.1 and 1.1. In cl 1.1 the contractor wasguaranteeing particular "outcomes"; in cl 1.2 the contractor was providing warrantiesand covenants in respect of subsidiary matters, which would or might be essential tothe achievement of the outcomes guaranteed in cl 1.1.[252] Finally on the guarantee cause of action, I refer to CCH's alternative allegationthat FCC "negligently failed to provide the blanket guarantee in breach of its duty toundertake the Project in accordance with [the head contract]." There is nothing in this.First, FCC did provide the blanket guarantee. Secondly, FCC could not have beenunder any duty of care in tort to perform a contractual obligation.39 Thirdly, if FCCdid negligently fail to provide the guarantee as required, the agreed terms of theguarantee would not in any event have caught the alleged defects which are the subjectof this proceeding.[253] For the foregoing reasons, I accept Mr Fulton's submission that the defectsalleged in this case were not covered by the FCC guarantee. I do not consider thatfurther evidence might improve CCH's position on this issue, and the result must bethat CCH's cause of action based on the guarantee will be struck out. Whether or not39 Rolls-Royce, above n 10, at [66].FCC is entitled to summary judgment will depend on whether CCH's other cause ofaction, based in negligence, is clearly beyond reasonable argument for CCH. If it isbeyond reasonable argument, FCC will be entitled to summary judgment.(b) CCH's negligence cause of actionDid FCC owe a duty of care to CCH? – applicable legal principles[254] I have already discussed the Court's broad approach to the question of whethera duty of care should be recognised in a particular case.40[255] Central to FCC's duty of care argument in this case is the existence of a detailedcontractual matrix, which is said to be fatal to CCH's proximity argument. Thequestion is whether the contractual matrix reflects allocations of risk and responsibilitythat are inconsistent with the claimed tort duty.41[256] In Rolls-Royce,42 it was held that no duty of care was owed by Rolls-Royce toCarter Holt. Each of those parties had a contract with the Electricity Corporation ofNew Zealand Ltd (ECNZL) in relation to a commercial project (constructing acogeneration plant).43 Two key points may be drawn from the Court of Appeal'sdecision. First, there is no duty in tort to take reasonable care to perform a contract.At most, there is a duty to take reasonable care while performing the contract, whichis quite a different concept.44 Secondly, this was a commercial construction case andthe parties had chosen to clearly define their obligations by detailed contracts. Theparties were aware of the existence of "a contractual chain".45 The Court consideredthat it should not interfere in risk allocations negotiated and paid for by the parties,particularly in commercial contracts.40 See paragraph [164] and [165] of this judgment.41 RM Turton & Communication (in liquidation) v Kerslake & Partners [2000] 3 NZLR 406 (CA) at[9]. See also Frost and Sutcliffe v Tuiara [2004] 1 NZLR 782 (CA) at [22].42 Rolls-Royce, above n 10.43 Rolls-Royce had been contracted to design, construct and commission the plant (the turnkeycontract). Carter Holt and been contracted to procure the design, manufacture, construction,purchase and installation of the cogeneration plant (the cogeneration contract).44 At [66].45 At [44].[257] In Carter Holt,46 the Supreme Court distinguished Rolls-Royce. O'Regan J,writing for the majority, considered that the terms of supply applying between CarterHolt Harvey and the merchants, and between the merchants and building contractors,were not comparable with the carefully calibrated contractual regime that applied inRolls-Royce.47[258] In Spencer on Byron,48 where the Supreme Court was dealing with a strike-outapplication by the Council, the majority held that imposing a duty would not begenerally inconsistent with contractual obligations, essentially because the BuildingCode establishes a baseline, and no one can contract to erect a building that is notcode-compliant.49 The Court rejected any distinction between residential building andcommercial building owners in the context of deciding the extent of the duty of careowed by the Council.[259] The recent Supreme Court decision in Southland Indoor Leisure CentreCharitable Trust v Invercargill City Council50 overturned the Court of Appeal'sfindings that no duty of care was owed by the Council in relation to the building ofwhat was arguably a commercial project. The Trust had engaged an architect, engineerand contractors to carry out repairs to a stadium roof. The Council had issued a CodeCompliance Certificate relying on the advice of the Trust's professional advisors, butthe repairs failed. The Trust sued the Council, alleging negligence in the issue of theCode Compliance Certificate.[260] The case went to trial, and the Trust succeeded before Dunningham J. Onappeal, the Court of Appeal considered that the damage was caused by the plaintiff'sown contractors, and that as a matter of policy the negligent act or omission of abuilding professional engaged by a commissioning owner ought to be attributable tothe owner. The Supreme Court reversed those findings, holding that the Council wasnot entitled to rely on the roles undertaken by the Trust's contractors, nor on the notion46 Carter Holt, above n 17.47 At [26].48 Spencer on Byron, above n 19.49 At [39] per Tipping J and [193]-[194] per McGrath and Chambers JJ.50 Southland Indoor Leisure Centre Charitable Trust v Invercargill City Council [2017] NZSC 190,overturning (in part) Invercargill City Council v Indoor Leisure Centre Charitable Trust [2017]NZCA 68, [2017] 2 NZLR 650.that commissioning owners are in a different category from other applicants forbuilding consents. The majority considered that the Court of Appeal took insufficientaccount of the fact that the duty sprung from the Council's regulatory role under theBuilding Act 1991. On that basis the claim should have been considered as anegligence case, and not one of negligent mis-statement.51 The Supreme Court foundthat the Council owed a duty of care, and that the Court of Appeal was wrong todistinguish Spencer on Byron.[261] In Blain & Others v Evan Jones Construction Ltd,52 the issue was whetherEvans Jones Construction Ltd (EJCL) owed a duty of care to the Council in relationto the construction of an aquatic centre. The Court of Appeal noted that the SupremeCourt in Spencer on Byron had ruled that, in assessing whether a council owed a dutyof care to a building owner, there was no distinction between residential andcommercial properties.53 The Court of Appeal concluded that in the context of abuilder/owner dispute in relation to a commercial building, the builder may owe a dutyof care and the area of law "must now be regarded as unsettled".54 In saying that, theCourt of Appeal nevertheless accepted strong policy arguments against recognising aduty of care.[262] In Minister for Education v YQT Ltd,55 Venning J held that the defendant, thebuilder, owed a duty of care in relation to the construction of a building in a school.The defendant did not file a statement of defence, and the hearing proceeded as aformal proof hearing. Venning J held that a builder owes a non-delegable duty of carein tort to owners or subsequent owners of buildings to ensure that the buildings areconstructed free from defects. His Honour noted that the Supreme Court in Spenceron Byron had confirmed that there is no distinction between commercial buildings andother non-residential premises, and referred to Minister of Education v EconicorpHoldings Ltd, where the Court of Appeal declined to strike out a claim by the Ministeragainst the builder of a school.56 Venning J also referred the judgment of Asher J in51 At [87].52 Blain & others v Evan Jones Construction Ltd [2013] NZCA 680.53 Spencer on Byron, above n 19, at [108]-[135].54 Blain, above n 52, at [33].55 Minister for Education v YQT Ltd [2014] NZHC 2198.56 Minister of Education v Econicorp Holdings Ltd [2011] NZCA 450, [2012] 1 NZLR 36.Mt Albert Grammar School Board of Trustees v Auckland City Council,57 in holdingthat those responsible contractually for the design and building (including the builder)must be seen as those who have the most proximate relationship with (and consequentliability to) the building owners.58[263] In Minister of Education v Econicorp Holdings Ltd,59 the Minister had arguedthat Econicorp Holdings Ltd, trading as Ahead Buildings (Ahead), owed a duty of careto the Minister in respect of defects in a school hall built by Ahead. The Minister'sclaim was struck out in the High Court, but reinstated on appeal (Harrison Jdissenting). Although Ahead had contracted with the school's Board of Trustees,rather than with the Minister directly, the school land was owned by the Crown, andthe requirements for foreseeability and a causal nexus between Ahead's allegedlynegligent conduct and the loss suffered were met. In the view of the majority it wasnot possible on a strike-out application to say that the Minister's claim must fail onproximity or policy considerations.The contractual matrix[264] Mr Pritchard, who was between 2004 and 2008 the manager of FCC'sWellington business, described the construction contracting environment generally. Insummary, his evidence was that:(1) the industry is characterised by detailed contracting arrangements,extensive standard contract terms (NZS3910:2003), special conditionschanges to those standard clauses, professional advisers, tendering forthe awarding of contracts, risk assessment based on contractobligations, and significant competition for work;(2) the construction companies use specialist subcontractors and typically,as in this case, the construction companies do not carry out the actualbuilding of specialist elements;57 Mount Albert Grammar School Board of Trustees v Auckland City Council HC Auckland CIV-20007-404-4090, CIV-2008-404-6356, CIV-2009-404-1776, 25 June 2009.58 Minister for Education v YQT Ltd, above n 55, at [8]-[9].59 Minister of Education v Econicorp Holdings Ltd above n 56.(3) principals commonly engage specialist firms to carry out constructionmonitoring by a direct contractual relationship with the principal; and(4) the principals have significant market power, and any concessions acontractor gains on contract risk are hard fought.[265] Provision for a "defects liability period" is also commonplace in major projectssuch as this, and such a provision was contained in s 11 of the General Conditions. Byagreement between CCH and FCC the standard three month Defects Liability Periodwas extended to 12 months. During this period, FCC was required to remedy anydefects in workmanship or materials notified to it by the contract engineer. When thedefects were remedied a "Defects Liability Certificate" was to be issued to thecontractor – in this case, such a certificate was issued to FCC on 4 February 2010.[266] However, the issue of that certificate was not the end of the matter as far asFCC's liability for any defective workmanship or materials was concerned – cl 11.4.1of the General Conditions provided:11.4.1. Notwithstanding the issue of the Defects Liability Certificate, theContractor shall remain liable for the fulfilment of any obligation of theContractor under the Contract Documents which then remains unperformedor not properly performed.[267] The next aspect of the matrix of contracts to which I should refer was thespecialist guarantee provided by sub-contractors, such as Aquaheat to CCH under theFourteenth Schedule. This guarantee gave CCH direct rights against Aquaheat for alimited time period after the Defects Liability Period.[268] The form of subcontractor guarantee required by the Fourteenth Scheduleincluded the following:2.2 The subcontractor warrants and covenants as follows:(a) Subject to cl 6.1(d) of this Deed, Materials used in the GuaranteedWorks shall be fit for purpose for which they are intended by theContract;(b) All Materials supplied by the Subcontractor shall be new and of goodquality in accordance with the provisions of the Contract;(c) All work involving carrying out the Guaranteed Works shall be carriedout in a good and workmanlike manner in accordance with theprovisions of the Contract.[269] Other potentially relevant aspects of the various contractual relationshipswhich existed on the project included the oversight and administrative role of a"Project Management" team, the role of the Contract Engineer, and the design andmonitoring role of Beca.[270] The Contract Engineer had express powers in cl 6.4 of NZS3910:2003 toinspect and test materials prior to the expiry of the defects liability period. Undercl 6.5.1, the Engineer had the power to require FCC to "make good" any defects.[271] As is commonly the case with any major construction project, there was adetailed list of defects, and these were duly remedied by FCC or its subcontractors.But the defects list did not refer to the copper pipe issues.[272] FCC also relies on the significant role played by Beca, under Beca's contractwith CCH. Under its contract Beca agreed to exercise reasonable skill, care anddiligence in providing its services, which were outlined in a schedule to the contract.The contract referred to an "Indicative Responsibility Matrix", which set out theaspects of the project for which those involved in the construction work were expectedto assume a greater or lesser degree of responsibility. Beca had numerousresponsibilities under the Indicative Responsibility Matrix, while FCC had relativelyfew.[273] Beca was engaged by CCH to carry out construction monitoring, initially toLevel 4, and then (in November 2006), to Level 5. Level 5 is the most intensive levelof monitoring, and it requires daily on site presence by the monitoring firm. It isdesigned to ensure that the risk of non-compliance with the contract is very low. Becawas required, under the relevant Guideline on the Briefing and Engagement forConsulting Engineering Services, to: maintain personnel on the site to constantly review work procedures,materials of construction and components for compliance with therequirements of the plans and specifications and review completed work priorto enclosure or on completion as appropriate.Submissions for FCC[274] Mr Fulton submits that CCH's claim is in conflict with the contractual rights,obligations and risk allocations that CCH specifically bargained for, and that in thosecircumstances no duty of care should be recognised. The structure of the contract wasclear, and the obligation periods were defined and provided an agreed level ofcertainty. The contract was arrived at after a tender process and negotiations. Hesubmits that the duty of care issue can be dealt with on FCC's summary judgmentapplication, because of the detailed and specific nature of the arrangements made bythe parties for the allocation of risks, and because both sides have had the opportunityto put before the Court all material which might be relevant on the duty issue.[275] On the proximity analysis, Mr Fulton first acknowledges that the "screeningrequirement" of foreseeability of loss arising from any breach by FCC, is met. But inhis submission it is clear that the requirement of proximity is not met.[276] Mr Fulton refers to the professional legal and engineering advice obtained andrelied upon by CCH, the detailed and complex nature of the various contractualrelationships, the fact of the public tender and contestable bidding process, and theclear and deliberate allocation of the various risks (including the limitation of FCC'sguarantee to a two year period, in respect of weathertightness only). He also notes theextensive monitoring role played by Beca, and the contract engineer's extensive rightto inspect and test materials to be used in the construction.[277] Mr Fulton also refers to the defects liability period provided in the headcontract, which provided for a specific and limited period (long expired) within whichFCC was required to fix defects notified to it. FCC had back-to-back agreements withits subcontractors, under which it was entitled to require them to fix notified defectswithin agreed timeframes.[278] Finally on the issue of proximity, Mr Fulton referred to the status of CCH asprincipal under a contract based on the General Conditions – such principals cannotbe considered vulnerable as a class. The General Conditions is an industry-developedset of norms which is routinely used in the construction industry; it does not requiresupplementation by the addition of duties in tort.[279] On the policy analysis, Mr Fulton refers to the "sanctity" of the contract riskallocations as a "decisive factor" against the recognition of a duty. He points to theheavy reliance on specialist subcontractors in this case, and the ability of principalcontractors under the General Conditions to manage those actually doing the work (asoccurred with Aquaheat's work in this case). Contractors should not be maderesponsible for the work of specialist subcontractors in those circumstances.[280] Mr Fulton submits that CCH's claims are quality claims, made in respect ofproducts not manufactured by FCC. FCC should not to be required to provide, throughthe mechanism of a duty in tort, what would in effect be a warranty of the quality ofthe copper pipes. The guarantees required by cl 11.5.1, pt A of the Special Conditionsand the Thirteenth and Fourteenth Schedules were designed for that purpose, and tortdoes not need to provide an additional remedy.[281] Mr Fulton points to the requirements in the General Conditions and the SpecialConditions that subcontractors provide direct warranties and guarantees to theprincipal. He notes that CCH had the right to approve or reject the use of particularsubcontractors, and that the specialist subcontractors could be expected to know moreabout their subcontract works than the contractor could be expected to know. And thesubcontractors could (and were required to) arrange insurance.[282] Mr Fulton next submits that it would be bad policy to create an environmentwhere builders would feel the need to undertake an audit of the claim to compliancewith the Standard that was evidenced by the "S" stamped on the copper pipes.[283] Mr Fulton draws a distinction between residential and commercial/ industrialbuilding works. He submits that there is no reason why a builder in the commercialsector should assume liability in tort for commercial buildings.60[284] Mr Fulton submits that FCC's argument is supported by Rolls-Royce and SouthPacific Manufacturing Co, and that the basis on which those cases were distinguishedin Carter Holt is not available in this case. The detailed evidence of the contracts inthis case sets it well apart from Carter Holt. Furthermore, FCC did not contract to60 Referring to Rolls-Royce, above n 10, at [70]-[94].exercise reasonable skill and care generally. It would not be fair just and reasonableto impose a duty in tort.[285] In his reply submissions dated 21 October 2016, Mr Fulton further submittedthat FCC was not contracted to make the copper pipes, but to construct a building. Itis only the work a builder is engaged to do that could possibly give rise to a duty. FCCdid not make the copper pipes, and nor did it sub-contract the making of the pipes.[286] In his additional submissions dated 6 March 2017, Mr Fulton referred to thefollowing commentary in The Law of Torts:61So in contract the builder warrants that the materials are good and proper,whereas in tort the builder must take care to use good materials, and is notliable if without personal fault they unexpectedly turn out to be defective.[287] He submitted also that FCC should not owe a duty of care for the manufactureof a generic product. Builders can be held liable only for building work.Submissions for CCH[288] Mr Thain submits based on many of the authorities outlined above62 that it isclearly arguable that a head contractor, such as FCC, owes a duty of care to itsprincipal, notwithstanding the contractual relationship between the parties. Further, itis undoubtedly arguable that the duty of care owed by FCC to CCH was non-delegable.Broadly, such a duty of care would require a reasonable head contractor to properlycarry out the installation and commissioning of the materials used in the construction,in accordance with commonly known and accepted best practice.Submissions for Beca[289] Mr Neutze also submits that the non-delegable duty of care contended for byCCH is arguable. He relies on Minister for Education v YQT Ltd and Blain & Ors vEvan Jones Construction Ltd.63 He refers to the Court of Appeal's observation in Blain61 Stephen Todd (ed) The Law of Torts (5th ed, Thomson Reuters, Wellington 2009) at 279.62 Spencer on Byron, above n 19, The Grange, above n 23; Carter Holt, above n 17 and Minister ofEducation v Econicorp Holdings Ltd, above n 56.63 Minister for Education v YQT Ltd, above n 55; Blain, above n 52..that Rolls-Royce was not a case where the alleged duty of care was said to be owed byone contracting party to another,64 and submits that Rolls-Royce can be distinguishedon the same basis in this case.[290] Mr Neutze pointed to the fact that the Court of Appeal in Blain rejected asubmission that the terms of the building contract were inconsistent with the duty ofcare contended for. It considered that the duty of care issue should be left to bedetermined at trial. Mr Neutze submits that the same conclusions should apply in thiscase.Discussion and conclusions on the FCC duty of care issue[291] I will first broadly address whether FCC can owe a duty of care to CCH in thiscase, before addressing each of the proposed duties in CCH's statement of claim.[292] While I accept FCC and CCH entered into a highly detailed and specificagreement, I do not accept Mr Fulton's submission that the contractual contextinevitably prevents CCH succeeding on issues of proximity. As a starting point, thereis nothing preventing concurrent liability in contract and tort.65[293] There are three principal reasons why I have concluded there was sufficientproximity for an arguable duty of care.[294] First, FCC had a direct relationship with CCH in that it was the head contractorand "main player" in the construction project. I have referred to a number of caseswhere the courts have recognised a potential duty of care for a builder in relation tothe construction of a building.66 And in light of the Supreme Court decision in Spenceron Byron it is clearly arguable that there is no relevant distinction to be drawn betweena commercial and residential building. Those considerations must weigh heavilyagainst FCC's argument there is insufficient proximity to establish a duty of care.64 Blain, above n 52, at [31].65 Carter Holt, above n 17, at [42]. See also Frost and Sutcliffe v Tuiara, above n 41 at [22].66 Blain, above n 52; Minister for Education v YQT Ltd, above n 55 and Minister of Education vEconicorp Holdings Ltd, above n 56.[295] The second key point I wish to make on the proximity analysis is that this caseis distinguishable from Rolls-Royce.67 In Rolls-Royce there was no contractualrelationship between Carter Holt Harvey and Rolls-Royce (although the cogenerationcontract did foreshadow the turnkey contract). Here, there is a contractual relationshipthat sets as a base certain obligations on FCC's part in respect of the constructionproject. While FCC refers to various features of the Beca contract as indicating anassumption of responsibility on Beca's part, it is at least arguable that FCC retainedsome level of responsibility where Beca did not, such as ensuring building materialscomplied with the Building Code and ensuring sub-contractors were suitably qualified(two specific pleaded duties which are dealt with below).[296] In this respect, the case also differs from Minister of Education v Econicorp,68where one of the main proximity factors weighing against a duty of care being owedto the Minister was the Minister's decision not to contract with Ahead, and thesituation was one where the Minister had "stood back" from the school buildingcontract. Here, the relationship between FCC and CCH is more direct than therelationship between the Minister and Ahead, where, despite the lack of a directrelationship in relation to the project, a duty of care was found to be arguable. The"closeness" of the relationship between a construction company (FCC) and the owner(CCH) is more akin to the relationship in Minister of Education v Econicorp betweenthe Board of Trustees and Ahead, where a duty in tort had apparently been acceptedby the parties as being reasonably arguable.[297] The final point on the proximity analysis is that the contract itself left openpotential liability in negligence. Mr Fulton did not draw to my attention any expressexclusion in the contract of tortious duties.[298] Turning to the policy analysis, the main policy factor militating against a dutyof care is the need for commercial certainty. Commercial parties are normally entitledto expect that the risk allocation they have negotiated for (and paid for) will not bedisturbed by the courts. Mr Fulton's points regarding the "sanctity of contract" andthe fear of imposing on builders burdensome auditing requirements weigh against67 Rolls-Royce, above n 10.68 Minister of Education v Econicorp Holdings Ltd, above n 56.recognising a duty of care. And in Rolls-Royce, the Court of Appeal noted numerousobiter comments "suggesting that tort liability with regard to defects in quality willnot extend to commercial construction cases".69[299] Having said that, the case law demonstrates that a duty of care in commercialconstruction situations has not been ruled out – despite potential policy downsides. Inaddition, there appears to have been a shift since Rolls-Royce in the Supreme Court'sdecision in Spencer v Byron, which rejected the nature of the building having anysignificance in deciding whether a duty is owed. That shift was also acknowledged inCarter Holt. 70[300] I now turn to the specific alleged duties of care as pleaded in CCH's statementof claim.[301] The first alleged duty (at para 86.1 of the statement of claim) is a duty toexercise the skill and care which a reasonable head contractor would exercise incarrying out its function under the head contract. FCC already had a contractualobligation to "ensure execution and completion of the various subcontracts to the bestpractices of the trades according to the Drawings and Specifications and thecontract",71 and it is difficult to distinguish the alleged duty in tort from the expresscontractual duty just referred to (or from the ordinary implied contract provision thatthose carrying out construction work will exercise reasonable skill and care72.)[302] It seems to me that in most major building projects such as this, where thecontractor and the commissioning owner have gone to considerable lengths to spellout the contractor's obligations in detailed contract documents, it is unlikely to be fair,just or reasonable to impose on the contractor obligations to the commissioning ownerin tort going beyond the "base" obligation to exercise proper skill and care to ensure69 Rolls-Royce, above n 10, at [119].70 Carter Holt, above n 17, at footnote 26: "It will also need to be determined at trial how much ofthe analysis in Rolls-Royce continues to apply after this Court's decision in Spencer on Byron".71 Special Conditions, cl 4.4.6.72 See Tómas Kennedy-Grant QC and Michael Weatherall, Kennedy-Grant Weatherall onConstruction Law (Lexis Nexis, online loose-leaf ed.) at [200.060]; Miller Construction Co Ltd vOlsen [1973] 1 NZLR 265 (SC); McKey v Rorison [1953] NZLR 498 (CA); Penrose PlasterEnterprises (NZ) Ltd v Fe Berger HC Auckland A1735/75, 7 December 1977.that the building work complies with the Building Code (i.e. the duty recognised bythe Supreme Court in Spencer on Byron).[303] A helpful summary of the nature of Building Act/ Code requirements andduties of care is provided in The Law of Torts:73The New Zealand courts [by contrast to the English courts] have beenprepared to identify the requisite standard of quality that must be satisfied ina tort action and to hold the builder to that standard. Initially it was held bythe Court of Appeal that the standard of care expected of the builder of adwellinghouse was to take reasonable care to build a reasonably soundstructure, using good materials and workmanlike practices.74 Most recently,the Supreme Court determined that the builder's and the council's obligationwas to meet the minimum requirements of the Building Code as laid down inthe Building Act 1991.75[304] To the extent that the first duty pleaded by CCH is intended to allege no morethan a duty to exercise reasonable care and skill to ensure that the relevantrequirements of the Building Code were met, the pleading is replicated elsewhere andis unnecessary. To the extent that it was intended to allege a wider duty, I am of theview that it is sufficiently clear at this stage that it would not be fair, just or reasonableto impose the alleged duty. Either way, the pleaded duty must be struck out.[305] In coming to that view I acknowledge that the Court of Appeal considering theapplication in Blain to set aside third party notices did say that the question of whethera duty of care is owed by a builder to a commissioning owner of a commercial buildingis unsettled. But it seems to me that the existence of a duty to exercise at leastreasonable care to ensure compliance with the Building Code was acknowledged bythe Supreme Court in Spencer on Byron (with no distinction between commercial andresidential owners), as a duty one cannot contract out of. I think I am dealing herewith the narrower question of whether a wider tort duty should be recognised (whichwould appear to be co-extensive with FCC's existing contractual duty).[306] CCH is an experienced, well-advised and resourced commissioning owner,who was well able to protect itself by requiring such contractual or insurance73 Stephen Todd (ed) The Law of Torts (7th ed, Thomson Reuters, Wellington, 2016) at 169.74 Porirua City Council v Stieller [1986] 1 NZLR 84 (CA) at 94.75 Spencer on Byron, above n 19.protection as it considered necessary. And given FCC's express contractualobligations, the only practical result of recognising the pleaded duty in tort wouldappear to be to extend the limitation period for CCH to make any claim against FCCfor breach of the alleged duty. I do not think that could be a proper policyconsideration justifying recognition of the claimed duty. In my view, it is notreasonably arguable for CCH, on the facts of this case, that it would be fair, just orreasonable to recognise the first of the broad duties for which it contends.[307] The second of the alleged duties of care (statement of claim, para 86.2) is a"duty to engage and supervise suitably qualified subcontractors".[308] I do not think it arguable for FCC that the duty contended for would extend theduties it accepted in its contract with CCH. Clause 4.4.4(b) of Part B of the FirstSchedule to the Special Conditions required the Contractor to ensure that allsubcontractors and sub-subcontractors were suitably qualified to undertake the work,and cl 4.4.6 of that Schedule provided:4.4.6 The Contractor shall:a) Be fully responsible under the contract for all Subcontractor andsubcontract works as if the Contractor had carried out such works.b) Enter into all subcontracts in its own right and not as an agent of thePrincipal.c) Provide and direct all necessary personnel to administer, supervise,inspect, coordinate and control the various subcontracts; andd) Ensure execution and completion of the various subcontracts to thebest practices of the trades according to the Drawings andSpecifications and the contract.[309] Clause 13 of the subcontractor's specialist guarantee in the FourteenthSchedule to the General Conditions also preserved a level of responsibility on FCC'sbehalf as head contractor. That clause provided:13. Contractor's Guarantee13.1 The Contractor, in consideration of the Principals' consent to theappointment of the Subcontractor as Subcontractor to the Contractor,guarantees to the Principal the obligations of the Subcontractor underthis Deed to the extent that:(a) All the rights and remedies available to the Principal underthis Guarantee against the Subcontractor shall be availablealso against the Contractor; and(b) All the obligations of the Subcontractor under this Deed shallbe equally the obligations of the Contractor; and(c) The liability of the Subcontractor and the Contractor to thePrincipal under this Deed shall be joint and several and shallremain so for the period of this guarantee.13.2 The obligations of the Contractor under this Deed are in addition tothe Contractor's obligations to the Principal under the Contractor anddo not substitute or diminish any of those obligations or theContractor's obligations and liability to the Principal at law.[310] Given FCC's responsibilities for the performance of its subcontractors, itseems to me that this alleged duty of care might reasonably be regarded as a "subset"of the Spencer on Byron duty to exercise reasonable skill and care to ensurecompliance with the Building Code. I think it is also arguable for CCH that thebuilder's duty to the owner is non-delegable,76 and the non-delegable nature of thepleaded duty would not be inconsistent with the contract between FCC and CCH (inparticular, with cls 4.4.4(b) and 4.4.6 of Part B of the First Schedule to the SpecialConditions). Recognising this alleged duty would not cut across any agreed allocationof risks, and I do not consider there is a basis to strike it out.[311] The third alleged duty (statement of claim, para 86.3) is a duty to ensure thatthe building materials used in construction were fit for purpose.[312] Clause 5.9.2 of the General Conditions required that all Materials andworkmanship should comply with the Contract Documents, and cl 3.2 of the relevantpart of the Contract Specification77 required that pipe work materials would be suitablefor the normal operating temperatures and for the normal "fault condition" pressureslikely to be imposed on the system. Materials used in the installation were to be ofconsistent standard throughout.76 See for example Minister for Education v YQT Ltd, above n 55 at [8]-[9] and Mount AlbertBorough Council v Johnson [1979] 2 NZLR 234 (CA).77 Volume 6, "Hydraulic Services."[313] I do not consider this pleaded duty would be inconsistent with the head contractprovisions. But it does seem to me that the duty is similar to the first pleaded duty (toexercise the skill and care that a reasonable head contractor would use), in that it maybe saying no more than that FCC owed a duty to take reasonable care to ensurecompliance with the requirements of the Building Code. If that is all FCC intended toallege, the pleading replicates the fourth of the pleaded duties (see footnote 78 below)and serves no useful purpose. And if and to the extent that it is intended to allege aduty to comply with some quality standard beyond that required by the Building Code,for the reasons set out at [301]to [306]above in respect of the first alleged duty I donot consider it would be fair, just or equitable to impose such a duty. Either way, thispleaded duty must be struck out.[314] The fourth and sixth pleaded duties are both substantially directed tocompliance with the Building Act and/or the Building Code78 (statement of claim,paras 86.4 and 86.6), and on the authority of Spencer on Byron I think they must beregarded as arguable for CCH to that extent.[315] However, the fifth alleged duty, and that part of the sixth alleged duty thatpleads that FCC was under a non-delegable duty to make reasonable enquiries toconfirm that the copper pipes complied with the project specification, clearly cannotstand. These allegations are no more than alleged duties in tort to carry out contractualobligations, and the Court of Appeal made it clear in Rolls-Royce that there is no suchduty. These alleged duties of care will be struck out.[316] The seventh of the pleaded duties (statement of claim, paragraph 86.7) is a dutyto exercise reasonable care before issuing producer statements in respect of the Projectworks including the copper pipes. FCC is said to have breached this duty of care whenit issued the Producer Statement signed by Mr Smith and reproduced at [60] of this78 The pleaded duties are:(iv) to ensure that the building materials used in construction complied with the Building Code;(vi) to make reasonable enquiries to confirm that the copper pipes complied with the projectspecifications and Building Act and Building Code requirements; andjudgment. The Producer Statement is said to have been issued negligently, as thecopper pipes did not comply with the Building Act or the Building Code, did notcomply with the Standard, and were subject to the alleged Defects and Design Defects.[317] I think this alleged duty is clearly arguable for FCC. There is no doubt that the"screening" requirement of foreseeability is met, and I think proximity is clearlyarguable for CCH (the relationship between the parties could not have been closer, andthe duty contended for would not be inconsistent with any contract term). If there arepolicy issues to be argued on this alleged duty I think they should be argued at trial,where full consideration can be given to the issues with the benefit of all of theevidence (including evidence of the "special relationship" and reliance necessary fora plaintiff to make out a claim of negligent mis-statement). This pleaded duty isarguable, and will not be struck out.[318] Summarising my conclusions on issue 7, the result is that the first, third andfifth duties of care pleaded by CCH, and that part of the sixth pleaded duty which isconcerned with compliance with the "project specification", will be struck out. Thesecond, fourth, sixth and seventh duties of care are arguable and are allowed to stand.Issue (8) Has FCC shown that the facts are such that it is clear that neitherof the causes of action against it can succeed, so that orders forsummary judgment in its favour on CCH's claim, and an orderstriking out Beca's cross-claim against it, are appropriate?The allegations of breach[319] CCH alleges the following breaches by FCC of the alleged duty of care:79(i) [FCC] failed to exercise reasonable care and skill whencarrying out its functions under the [head] Contract;(ii) [FCC] failed to take reasonable steps to ensure the CopperPipes were free from material defects;(iii) [FCC] failed to make reasonable enquiries to confirm that theCopper Pipes complied with the project specifications, andBuilding Act and Building Code requirements;79 Statement of claim, paras 87.1–87.4.(iv) [FCC] issued [Producer Statement] PS3 — Constructionwhen the Copper Pipes:a. do not comply with the Building Act or theBuilding Code;b. do not comply with [the Standard]; andc. are subject to the Defects and Design Defects.[320] Those allegations are denied in FCC's statement of defence.The commissioning allegations[321] At the hearing in April 2017, CCH advanced a new argument, which had notbeen pleaded, alleging that FCC was or may have been guilty of negligence in thecommissioning of the hot and cold water systems. This argument was supported byfurther affidavits from Dr Roger O'Halloran, an expert analytical chemist, and CCH'sproject manager Peter Angus. The broad thrust off the new allegations was that thecorrosion in the pipe system may have been caused by a failure or failures to properlyflush the pipe system during commissioning, leaving stagnant water in the pipes for aperiod or periods which may have been as long as seven to nine months.Dr O'Halloran, who had inspected samples of the pipes taken from the hospital,opined that the corrosion was consistent with what could be expected to develop incold water during an extended period of stagnation after the plumbing was pressuretested. Growth of (microbial induced) corrosion pits that had initiated during the(postulated) extended period of cold water stagnation could have accelerated whenexposed to hot oxygenated water after the hot water recirculation system wassubsequently commissioned.[322] Mr Angus gave evidence that although he had conducted extensive searchesusing CCH's document management software, he had not been able to locate anydocuments containing conclusive information about the exact timing of the testing,flushing and commissioning of the copper pipes. However, he surmised based on thedocuments he did review, that water might not have been completely drained from thesystem between the two installation phases ("fix 1" and "fix 2"). If that occurred, heconsidered that water may have been left to stagnate in the pipes for periods rangingbetween seven and nine months.[323] The new argument was rejected in further affidavits filed for FCC byMr Nichols, Mr Smith, and Dr Jonathan Smith.[324] Mr Smith had said in his first affidavit that all of the cleaning, flushing andtesting of the pipes was carried out, and all parties, including CCH and the Engineer,were satisfied at the time. He confirmed in his March 2017 affidavit that water didnot sit stagnant in the pipes for lengthy periods, as Mr Angus had surmised in hisaffidavit.[325] Mr Smith said that the installation and commissioning of the hot and cold watersystems at the hospital was carried out in sections, with some parts coming into usebefore others were finished. He also referred to Producer Statements given for twoseparate portions of the work by Beca, in which Beca stated that (subject to minoromissions and defects) they were satisfied based on their inspections and on thedocuments provided by FCC that the work had been completed in accordance with therequirements of the Building Consent.[326] In his affidavit, Mr Nichols noted that neither CCH nor Beca had produced anyevidence that suggested FCC had failed to comply with the relevant provisions of theSpecification (which made FCC as contractor responsible for cleaning and flushing atthe time of function testing and commissioning).[327] Dr Jonathan Smith also rejected Dr O'Halloran's theory of microbial corrosionarising from extended periods when stagnant water remained in the pipes duringcommissioning. If the theory were correct, Dr Smith considered there would still beevidence of biofilms on the pipe surfaces, but no such evidence has been found. Andthere is no evidence of microbial corrosion having occurred.[328] Dr Smith also said that any initial issues arising from stagnant water remainingin the pipes (if there had been any such issues) would have long ago been spent:stagnant water could not have been the cause of the premature failure of the pipes.[329] Dr Smith referred to a Producer Statement PS3 issued by Aquaheat on 4 March2009, which referred to the water tanks and pipework reticulation system having beenflushed. In his view, the very limited information provided by Mr Peter Angus doesnot provide any basis to conclude that the commissioning was not carried out inaccordance with the specification.Submissions for FCC[330] FCC submits that the alleged breaches are all based on the pipes having theDesign Defects, and are therefore Beca's responsibility. There is not a singleallegation or piece of evidence from which it could be inferred that FCC has not builtwhat has been designed by Beca and approved by the Engineer and CCH.[331] In respect of the allegations relating to the axial die lines and the deleteriousfilm, FCC says these defects, if they were defects, would only have been detectableby experts. FCC cannot be liable in those circumstances. FCC relies on the evidenceof Dr Smith, who says: the scope for a manufacturing defect to give rise to copper pipe failure islimited, but in any event beyond the expected knowledge of any constructioncompany to be able to detect. Any such defects would be entirely latent to aconstruction company.[332] FCC also relies on the markings on the pipes indicating that they complied withthe Standard. Mr Fulton submits that there can be no breach of an obligation to makereasonable enquiries as to whether the pipes complied with the Standard when thepipes themselves were stamped by the manufacturer with a marking indicating thatthey did comply. That is a complete answer to any negligence claim.[333] On the allegation regarding the Producer Statement, Mr Fulton submits that theevidence shows that there could not have been any negligence on the part of FCC as:(1) a statement was received from Aquaheat on 4 March 2009 stating it hadcomplied with the contract;(2) the contract works had been monitored by Beca;(3) the system had been tested and commissioned;(4) the pipes were stamped as compliant with the Standard; and(5) Aquaheat had a detailed and written quality assurance plan.[334] Mr Fulton also submits that CCH cannot prove loss arising from the ProducerStatement issued by FCC. He relies on Pacific Independent Insurance Ltd v Webber,where on a summary judgment application, Lang J dismissed claims against acompany and its director, based on statements made in a producer statement.80Submissions for CCH[335] In his submissions for the October 2016 hearing Mr Thain appeared to placemost reliance on CCH's claim under the FCC guarantee, which I have held is notarguable. However, he pointed out (relevant to the negligence cause of action) thatthe pipes are clearly failing. He referred to the evidence of Mr Cox, and the differencesof opinion between the experts on the cause of the failures.[336] In his submissions for the April 2017 hearing, Mr Thain relied on the evidenceof Mr Rowlands, submitting that there is a prospect that the axial die lines may be adefect which has contributed to the pitting corrosion in the pipes.[337] He also referred to Dr Nicholas' evidence that the science in the field of copperpipe corrosion is still developing, and his opinion that the quality of the Wellingtonwater supply is not a factor that has contributed to the corrosion.[338] Mr Thain then referred to the further evidence of Dr O'Halloran and Mr Angus,produced for the April 2017 hearing, relating to the possibility that the piping systemmay not have been properly commissioned.[339] Mr Thain referred to a "genuine question" as to whether the pipes wereproperly flushed and cleaned during the commissioning of the system, notingDr O'Halloran's evidence that failure to carry out the commissioning properly couldhave given rise to the pitting corrosion seen in the main building, and his examination80 Pacific Independent Insurance Ltd v Webber HC Auckland CIV-2009-404-4168, 24 November2010.of pipe samples obtained from the main building showed signs that he considered wereconsistent with a period of stagnation during commissioning. CCH does not have thenecessary documents to show whether or not there was a period when water wasstagnating in the pipes — documents of that sort are likely to be in the possession orcontrol of FCC.Submissions for Beca[340] Mr Neutze relied on Mr Rowlands' evidence as to the presence ofmanufacturing defects in the pipes. He noted that Beca has not yet had the opportunityto inspect, investigate and/or test the water pipe system.[341] Specifically in respect of FCC, Mr Neutze submits that it is clearly arguablethat the duties of care owed by FCC to CCH were non-delegable. He supportsMr Thain's submission that CCH's claim against FCC should not be struck out, andsubmits that it follows that Beca's cross-claim against FCC should not be struck out.Reply submission for FCC on the commissioning issue[342] Mr Fulton relies on the (initially unchallenged) evidence of Mr Smith that thesystem was fully tested, flushed, monitored and passed. That evidence was notcontradicted by CCH's 2016 affidavits, and even with the further evidence ofDr O'Halloran and Dr Nicholas there is no evidence of FCC actually departing fromthe contract specifications. CCH's new position on the commissioning issue is"clearly a dead end".Discussion and conclusions on the breach of duty issue[343] First, it is clearly arguable for CCH that the copper pipe system installed in themain building does not comply with the Building Code. It is common ground that thepipes are leaking and obviously they should not be leaking. A number of provisionsof the Building Code may be engaged,81 and I did not understand any counsel to81 For example, cl G 10.3.(a), providing that piping systems shall be constructed to avoid thelikelihood of significant leakage or damage during normal conditions.suggest that the copper pipes in their present condition meet the requirements of theCode.[344] The principal issues in those circumstances are whether FCC has shown on theevidence produced that CCH clearly cannot succeed at trial on its contentions thatFCC breached a duty (which I have held to be arguable) to (i) exercise reasonable skilland care to ensure compliance with the Building Code (including any duty to engageand supervise suitably qualified contractors) or (ii) exercise reasonable care and skillbefore it issued its Producer Statement.82[345] I do not consider this issue is suitable for determination on a summaryjudgment application, particularly where discovery has not been completed andnumerous parties were engaged in a complex set of contractual arrangements in theconstruction of a substantial public facility. I think it would be dangerous to assumethat all relevant evidence is before the Court, especially in circumstances where noevidence has been given by anyone from Aquaheat, the subcontractor who was directlyresponsible for the installation and commissioning of the copper pipe system. I havefound it arguable that a builder's duty to a commissioning owner is non-delegable,83and (for the limited purpose of the present applications) Mr Fulton elected not to argueto the contrary. And although the parties did not intend the specific guarantee givenby FCC to extend beyond weathertightness issues, there are specific provisions in thecontract between CCH and FCC which appear to have the effect that FCC did acceptcontractual responsibility for the quality of its subcontractors' work (eg cl 4.4.6 of theSpecial Conditions).[346] Turning to the specific alleged faults, there is evidence from Mr Jenkins forCCH that the axial die lines were visible to the naked eye. While that evidence waschallenged by Mr Nichols and Dr Smith, I do not think that challenge is one that Ishould attempt to resolve on a summary judgment application. The broad criticismsmade of Mr Jenkins' and Mr Cox's alleged lack of relevant expertise cannot reallyaffect the issue of whether the axial die lines were or were not visible to the naked eye,and even if Mr Jenkins cut open the pipes on which he observed the axial die lines, (so82 Set out in para [60] of this judgment.83 See para [309] of this judgment.that he was able to find them) I do not think it would be safe to conclude on the verylimited evidence before me that any axial die lines in other pipes were not visible atthe ends of the pipes, without the need to cut the pipes open.84[347] I acknowledge Mr Fulton's point that a plaintiff resisting a defendant'ssummary judgment application will normally be expected to show that there is at leastsome evidence supporting its case – pure speculation that relevant supporting factsmight exist will not usually be enough (although even in that case the Court is likelyto be cautious, especially where discovery has not been completed and the evidencebefore it is incomplete). I think CCH's "negligence in commissioning" argument mayfall into that purely speculative category,85 but I do not think the same can be said ofthe argument that there were axial die lines (which were harmful defects) in the pipeswhich FCC (or those to whom it delegated any duties it may ultimately be found tohave owed) should have picked up. With this argument, there is at least evidence thatsuch die lines were present in at least some of the pipes, that they were or may havebeen visible to the naked eye, and (from Mr Jenkins, Mr Cox and Mr Rowlands) thatthey constituted harmful defects which breached the Standard. Whether that evidenceshould be accepted will be a matter for trial.[348] If the axial die lines were visible to the naked eye (and were arguably"harmful" defects under the Standard), I do not consider there is a sufficient evidentialbase to conclude that CCH has no prospect of proving at trial that FCC was negligentin failing to (i) notice the axial die lines and (ii) take appropriate remedial measures.[349] The "S" stamp on the copper pipes would not necessarily provide a defence forFCC if the axial die lines were clearly visible and the Court concluded at trial that FCCshould have seen them, and that it should have refused to accept the affected pipes ortaken other appropriate remedial steps. Much would depend on the facts establishedat trial.84 I infer that there were numerous copper pipes, and if axial die lines were present in one there maywell have been similar die lines in others.85 On the limited evidence which has so far been produced. I note for example Mr Angus' evidencefor CCH that none of the documents he had reviewed "contain any information about the exacttiming of the testing, flushing and commissioning of the copper pipes and I have not been able tofind any documents that record this."[350] It follows from what I have said on the allegations of breach concerning theaxial die lines, that FCC has failed to show that CCH has no prospect of proving oneor both of the breaches of duty alleged at subparas (ii) and (iii) set out at [319] of thisjudgment (failure "to take reasonable steps to ensure the copper pipes were free frommaterial defects", and failure "to make reasonable enquiries to confirm that the copperpipes complied with Building Act and Building Code requirements").[351] However, the allegations of breach by failure to exercise reasonable care andskill "when carrying out [FCC's] functions under the [head] Contract" (at [319](i)above), and by failure "to make reasonable enquiries to confirm compliance with theproject specifications" (at [319](iii) above), appear to me to be either insufficientlyparticularised or in breach of the Rolls-Royce requirement that a party does not owe aduty of care in tort to carry out its contractual obligations. Further particulars of theallegation set out at [319](i) above should be provided by CCH, making it clear thatthis is not simply an allegation that FCC failed to comply with a contractual duty, andthe allegations at [319](iii) will be struck out to the extent they allege breach by failureto make reasonable enquiries to confirm that the copper pipes complied with theproject specifications.[352] I conclude on Issue (8) that FCC has failed to show that it is clear that thenegligence cause of action against it cannot succeed. To obtain summary judgment,FCC had to show that none of CCH's negligence allegations against it had anyprospect of success, and in my view, it has failed to satisfy that test on the axial dielines issue. In those circumstances, there is no need to consider the allegations ofnegligence by FCC in the subsequent issue of the Producer Statement, or the(unpleaded) allegations of negligence by FCC in the commissioning of the hot andcold water systems.[353] The result is that, while parts of CCH's statement of claim will be struck out,FCC's summary judgment must be dismissed. As FCC's application to strike outBeca's cross-claim was expressed to be dependent on the success of FCC's summaryjudgment application against CCH, the application to strike out the cross-claim willalso be dismissed.Issue (9): How should the Court deal with CCH's claims against the seventh tosixteenth defendants?[354] In its statement of claim CCH pleads, against all of these defendants, that thedefendant "manufactured and/or supplied the copper pipes". In its statement ofdefence, CEM confirmed that, although "joints were not manufactured and suppliedwith the copper piping", CEM did supply the pipes through other companies to CraneDistribution NZ Ltd (a part of the Australian-based Crane Group), and that the copperpipes were then supplied to Aquaheat.[355] In its strike-out application, CEM noted that the piping bears the identifier ofthe manufacturer, and suggested "such widespread allegations" should not have beenmade.[356] In its notice of opposition, CCH contended that the orders sought by theapplicants in respect of the seventh to sixteenth defendants were unnecessary,"because [CCH] will discontinue against any of the seventh to sixteenth defendants ifit is established that they did not manufacture or supply the copper pipe." CCH statedthat it had not yet been established that none of the seventh to sixteenth defendantsmanufactured or supplied the pipes.[357] In his evidence for FCC, Mr Smith said that the copper pipe was sourced byAquaheat from Crane Distribution NZ Ltd, a part of the Australia-based Crane Group.Crane Distribution in turn sourced the product from CEM.[358] In her evidence given for CCH, Ms Wills provided a letter from counsel forCEM. That letter, dated 17 May 2016, confirmed that the copper piping installed aspart of the project was "manufactured by CEM". The letter went on to say:However, we are also instructed that the piping system installed does notconsist entirely of copper pipe supplied by CEM and that there are otheraspects of it which are outside the concession noted above and which were notmanufactured by the defendants we act for.It is unclear what you mean by "supplied", but CEM did not supply the copperpipes in the sense we take it to mean. The subcontractor who supplied andinstalled the copper piping to the Project was [Aquaheat] [359] In his submissions, Mr Thain confirmed that the seventh to sixteenthdefendants have not been served. He noted that, although CEM has confirmed that itmade the pipes, it has not confirmed that it supplied them to Aquaheat. He submitsthat the proper order is for leave to be given to CCH to discontinue against thesedefendants, rather than for the claims against them to be struck out.[360] Mr Fulton submits that granting leave to discontinue is not enough: the seventhto sixteenth defendants have been improperly joined as defendants, and the claimsagainst them should be struck out. He submits the claims are "factuallyunsustainable", and should be struck out so finality is achieved.[361] Rule 15.20(4) of the High Court Rules 2016 requires that a plaintiff must obtainthe consent of the other parties, or the leave of the Court, before it can discontinueagainst some, but not all, of the defendants.[362] Rule 4.56 of the High Court Rules materially provides:(1) A Judge may, at any stage of a proceeding, order that—(a) the name of a party be struck out as a plaintiff or defendant becausethe party was improperly or mistakenly joined; or(2) An order does not require an application and may be made on terms thecourt considers just.[363] I think the starting point is that a plaintiff normally has the right to discontinue.A party will only be constrained in exercising that right where it is necessary to addresssome injustice that would otherwise occur.86[364] Counsel did not refer to any authority on the circumstances in which anapplication for leave to discontinue against a defendant should be refused on theground that the more appropriate order is an order removing that defendant as a party.But I think that where it is clear that a defendant has been improperly joined, an orderremoving that defendant as a party will normally be the appropriate order – in theordinary run of cases a defendant who has been improperly joined should be entitled86 Perpetual Trust Ltd v Mainzeal Property and Construction Ltd [2012] NZHC 223 at [6].to some finality, to a finding that the joinder was improper. That will not occur if anorder is made permitting the plaintiff to discontinue, with the possibility of the sameclaim being made against the defendant at a later time.[365] What is unusual in this case is that it is not the seventh to sixteenth defendantswho are asking to have the claims against them struck out – it is one of their co-defendants. The seventh to sixteenth defendants have not been served, and there is noevidence from any of them supporting the application for strike out. CCH isessentially saying it is unsure whether some of these defendants may have participatedin the supply and/or parts of the manufacture of the copper pipes, and it has joinedthem all to ensure that the correct party or parties is/are before the Court.[366] It is not clear to me that any injustice will occur if CCH is allowed todiscontinue these claims, and nor is the evidence sufficiently clear to justify themaking of the dismissal or strike-out orders sought by CEM. At this stage it is notsufficiently clear that none of the defendants were involved in at least the supply ofthe copper pipes, and the evidence of Ms Wills demonstrates that there may have been"aspects" of the pipes which CEM did not manufacture. The possible involvement ofother defendants in the supply of the pipes leaves the evidence in a state where I donot think the Court can safely conclude that defendants seven to sixteen have beenimproperly or mistakenly joined. The better course is to grant leave to CCH todiscontinue against these defendants, leaving it open to CCH to elect to proceedagainst some or all of them if it considers there are grounds for so doing (subject toany defences or objections which might be available to those defendants, whetherarising out of lateness in serving them or otherwise). Any defendant against whomCCH elected to proceed could file its own strike-out or summary judgmentapplication, or take any other steps it considered appropriate.[367] For the foregoing reasons, CEM's application to dismiss or strike out CCH'sclaims against the seventh to sixteenth defendants will be refused. Leave will begranted to CCH to discontinue its claims against those defendants.Result[368] I make the following orders:(1) entering summary judgment for the fourth defendant, Mr Smith, onCCH's claims against him;(2) dismissing the applications by CEM for summary judgment and fororders striking out CCH's claims against it;(3) dismissing CEM's applications for orders that CCH's claims against theseventh to sixteenth defendants be dismissed, and/or that the seventh tosixteenths defendants be struck out as parties to the proceeding;(4) dismissing CEM's application to strike out Beca's cross-claim againstit;(5) dismissing FCC's application for summary judgment;(6) dismissing FCC's application to strike out Beca's cross-claim againstit;(7) striking out the following paragraphs of CCH's statement of claim:(i) paras 89 to 94 (CCH's claim based on the guarantee);(ii) para 86.1;(iii) para 86.3;(iv) para 86.5;(v) that part of para 86.6 that alleges that FCC owed a duty of careto CCH to make reasonable enquiries to confirm that the copperpipes complied with "the project specifications"; and(vi) that part of paragraph 87.3 which alleges FCC breached thealleged duty referred to at subpara 7(v) above;(8) directing CCH to provide further particulars of the allegation (statementof claim, para 87.1) that FCC failed to exercise reasonable care and skill"when carrying out its functions under [the head contract]", within 15working days; and(9) granting leave to CCH to discontinue its claims against the seventh tosixteenth defendants.(10) Costs – while the applicants made different applications, they wererepresented by the same solicitors and counsel, and I think itappropriate to consider their positions together for costs purposes.When that is done it can be seen that the applicants had a substantialmeasure of success (eg Mr Smith on his summary judgmentapplication, and FCC on its strike-out application), but also had somefailures (eg CEM's applications and the application to strike out Beca'scross-claims). The only party who succeeded in full was Beca, but itwas CCH who carried the greater part of the burden in opposing theapplicants' claims, and I think Beca must take some responsibility forthe need for a second hearing (largely required because Beca failed tofile a timely notice of opposition to the applicants' claims before theOctober 2016 hearing). Weighing these considerations, the fairestcourse is to reserve costs on the applications. I make an orderaccordingly.Associate Judge SmithSolicitors:DLA Piper, Wellington for the PlaintiffBrookfields Lawyers, Auckland for the First DefendantCraig Griffin & Lord, Auckland for the Third and Sixth Defendants