KEITH MICHAEL NEWTON, JOANNE LESLEY DAVEY AND SCOTT MORAN AS TRUSTEES OF THE DAVEY-NEWTON FAMILY TRUST V WAYNE PETER STEWART AND LEE-BIN TEE HC WN CIV-2010-485-2116

KEITH MICHAEL NEWTON, JOANNE LESLEY DAVEY AND SCOTT MORAN AS TRUSTEES OF THE DAVEY-NEWTON FAMILY TRUST V WAYNE PETER STEWART AND LEE-BIN TEE HC WN CIV-2010- 485-2116 [6 May 2013]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYCIV-2010-485-2116[2013] NZHC 970BETWEEN KEITH MICHAEL NEWTON, JOANNELESLEY DAVEY AND SCOTT MORANAS TRUSTEES OF THE DAVEY-NEWTON FAMILY TRUSTPlaintiffsAND WAYNE PETER STEWART AND LEE-BIN TEEFirst DefendantsAND JAMES PUMIPI MAETANGAHAMMONDSecond DefendantAND ANDREW JOHN HASTIEThird Defendant and First Third PartyAND JOHN MILTON LYTTLESecond Third PartyAND VALUATION CONSULTANTSNEW ZEALAND LIMITEDThird Third PartyHearing: 21-24 May and 7 June 2012Counsel: A G Hazelton for PlaintiffsD A Webb and M H O Maling for First DefendantsNo appearance for Second DefendantM R Sherwood-King for Third Defendant/First Third PartyM Atkinson for Second Third PartyJudgment: 6 May 2013JUDGMENT OF WILLIAMS JIn accordance with r 11.5, I direct the Registrar to endorse this judgment with the delivery time of 12:30pm on the 6th of May 2013.ContentsIntroduction ............................................................................................................. [1]The facts ................................................................................................................... [5]The first sale: Hastie to Stewart/Tee .................................................................... [5]Repairs .................................................................................................................. [7]Second sale: Stewart/Tee to Newton/Davey ....................................................... [32]Aftermath ............................................................................................................. [44]Proceedings and summary judgment .................................................................. [46]The issues ............................................................................................................... [52]Between plaintiffs and first defendants ............................................................... [52]Between plaintiffs and second defendant ............................................................ [55]Between plaintiffs and third defendant (Mr Hastie) ............................................ [57]Between first defendants and first third party (Mr Hastie) ................................. [58]Between first defendants and second third party (Mr Lyttle) .............................. [59]Expert evidence ..................................................................................................... [61]Plaintiffs .............................................................................................................. [62]First defendants................................................................................................... [67]Third defendant/first third party.......................................................................... [69]Expert agreements ............................................................................................... [71]Between plaintiffs and first defendants ............................................................... [75]Privity .................................................................................................................. [75]Warranty .............................................................................................................. [80]Relevant provisions ............................................................................................... [81]Arguments .............................................................................................................. [94]Analysis .................................................................................................................. [98]Loss ................................................................................................................... [115]Causation ..........................................................................................................[126]Quantum ............................................................................................................[134]Between plaintiffs and second defendant (Mr Hammond) ............................. [139]Between plaintiffs and third defendant (Mr Hastie) ........................................ [157]Limitations ........................................................................................................[158]Arguments..........................................................................................................[159]Analysis .............................................................................................................[160]Developer? ........................................................................................................[167]Analysis .............................................................................................................[170]Breach and causation ........................................................................................[171]Between first defendants and first third party (Mr Hastie) ............................ [179]Limitations ........................................................................................................[180]Duty and breach ................................................................................................[183]Causation and contribution ..............................................................................[184]Between first defendants and second third party (Mr Lyttle) ........................ [188]Duty ...................................................................................................................[190]Res judicata .......................................................................................................[199]Conclusion............................................................................................................ [200]Between the plaintiffs and the first defendants .................................................[200]Between the plaintiffs and the second defendant (Mr Hammond) ....................[204]Between the plaintiffs and the third defendant (Mr Hastie) ..............................[208]Between the first defendants and the first third party (Mr Hastie) ...................[210]Between the first defendants and the second third party (Mr Lyttle) ................[212]Introduction[1] 2 Huxley Grove, Churton Park, Wellington is a leaky home. The owners are the plaintiffs, Keith Newton, his wife, Joanne Davey and their lawyer, Scott Moran. Together they are trustees of the Davey-Newton Family Trust. They now sue Wayne Stewart and Lee-Bin Tee, the couple from whom they purchased in 2004.They rely on the vendors' warranty that all necessary consents had been obtained byMr Stewart and Ms Tee for repair work they had done on the dwelling prior to theplaintiffs' purchase.[2] They also sue their pre-purchase inspector, James Hammond, and Andrew Hastie, the owner before Stewart and Tee. Mr Hastie had the dwelling built on the property. They say both Mr Hastie and Mr Hammond were negligent.[3] Meanwhile Mr Stewart and Ms Tee issued third party notices against Mr Hastie (from whom they purchased), VCNZ Limited, a company offering pre- purchase advice, and John Lyttle, a contractor to VCNZ. It was Mr Lyttle whom Mr Stewart and Ms Tee instructed in 2003-2004 to provide them with weathertightness advice leading ultimately to the repairs mentioned earlier. Mr Stewart and Ms Tee say if they are liable to the plaintiffs for breach of warranty, then the breach was the fault of Mr Hastie, VCNZ and/or Mr Lyttle.[4] As is customary for litigation of this kind, multiple issues of law and fact arise. I will set out a summary of the factual background to the multiple transactions and relationships caught up in this proceeding. I will then identify and address the issues that arise.The factsThe first sale: Hastie to Stewart/Tee[5] Mr Hastie owned the land at 2 Huxley Grove. He had the dwelling in question built on that land from mid-1999 to 2000. He is a builder by trade but it is common ground that he did not build the dwelling himself. But he did control the project throughout. He obtained all materials, instructed professionals and tradesmen to undertake the necessary design, construction and related work and obtained all of the relevant local authority regulatory consents.[6] The development was sold off the plans to Wayne Stewart and Lee-Bin Tee on 12 July 1999. Construction was completed in December of that year and a code compliance certificate was issued on 5 January 2000.Repairs[7] Three years later, Mr Stewart and Ms Tee decided to market the property. On 16 November, they entered into an agreement with Ashish Sinha and Anna Sahgal for sale and purchase of the property. The agreement was made conditional upon the purchasers obtaining a satisfactory pre-purchase report. Two days later(18 November 2003), Mr Lyttle, a building surveyor contracted to VCNZ Limited, undertook the inspection. The following day he provided his report. The report advised that there were higher than normal moisture levels under the window at the front of the house on the left side and around roof flashings on the north-eastern side. He recommended targeted invasive moisture testing. A possible cause was identified in the following terms:While this is only an assumption I am presuming that as the trim around the window has been fitted with a flat surface, during times of heavy rain water is sitting on this flat surface and entering through any possible gaps in the sill area of the window. Should this be the problem then it would be a simple process to seal the inside junction of the window and the polystyrene cappings.There is also higher than usual levels of moisture around the flashing to the roof area on the northern eastern side of the house. A gap was noticeable at the flashing and I would recommend that this gap be filled with a sealant.Should any remedial work be done I would recommend that further testing be done particularly after the end of a wet winter to check that the remedial work had resolved these minor leaking issues. I would also recommend that all the windows be sealed in the manner mentioned above.[8] On receipt of Mr Lyttle's report, the purchasers pulled out of the agreement.[9] Mr Stewart and Ms Tee, being anxious to know what the problem was, contacted Mr Lyttle in late November 2003. They asked to see a copy of the report. Mr Lyttle would not provide it but he agreed to re-inspect and provide a further report to Mr Stewart and Ms Tee.[10] Mr Stewart then arranged for Mr Lyttle to meet him on-site with the original owner, Mr Hastie. The meeting took place on 26 November 2003. A discussion took place between the three, the content of which is in dispute. Mr Lyttle said he was asked only for moisture readings and no more. Mr Hastie said Mr Lyttle was in charge as a professional and specialist building surveyor, and he (Mr Hastie) was only there to hear and follow Mr Lyttle's instructions in relation to remedial work.[11] Mr Stewart on the other hand said he was expecting advice from Mr Lyttle on the nature of the problem and solutions. He understood, he said, that Mr Hastie would implement any recommendations at Mr Hastie's expense. He said that a plangoing forward had been the subject of a consensus decision between him and the two experts. I come to what that plan was below.[12] Following the meeting and re-inspection, Mr Lyttle duly completed his written report and provided it to the parties the following day on 27 November 2003. This report takes on some significance in the dispute, so it is necessary to go through it in some detail. The report is issued on VCNZ letterhead and is signed off "John Lyttle for VCNZ". He describes with specificity the brief that he was given as follows:The purpose of the investigation was to confirm the levels of moisture in the framing, in particular the lower level north-west window and the fence.[13] The relevant tests undertaken and the results were described in this way:Using invasive drilling I took readings of 24% at the level of the bottom plate under the northern corner of the [north-west family room] window. I also took readings of 40%+ in three tests under the sill on the same side. The timber framing was very soft inside these holes indicating there may berotting taking place I also took high readings (30%+) using a humitest MC – 50 [non invasive moisture tester] under the sill to the upstairs window above the [north-west family room] window.[14] Mr Lyttle also advised that his non-invasive testing for Mr Sinha and Ms Sahgal had shown elevated moisture levels at the edges of a half-roof above a bay window on the north side lower level.[15] Then, despite the indication that his brief was only to ascertain moisture levels at the two positions mentioned, Mr Lyttle offered extensive advice and recommendations. He began:As we did not undertake any further investigation in the [lower north-west family room window] area, I was not able to conclusively ascertain the source of the leaks. I do however believe that there is a high probability that water is entering through the polystyrene facings fitted around the windows.[16] This assessment of the probable culprit repeated the written advice Mr Lyttle had given to Mr Sinha and Ms Sahgal.[17] The polystyrene features Mr Lyttle refers to are variously described in the evidence as facings, cappings, sill details or plant-ons. The plant-ons (as I will call them) appear to be decorative detail only. As far as I can tell they perform no utilitarian function. They are made of polystyrene and glued onto the wall surrounding each window to give the appearance of a window frame. Each of the four lengths making up the plant-on assembly is approximately 120 mm wide and 40 mm thick. Once attached in the manner described, the plant-on (along with the rest of the cladding) is covered with a specialised texture coating normally associated with monolithically clad homes.2 Huxley Grove showing plant-on window detailing[18] Mr Lyttle's report then set out a relatively detailed course of work designed to correct what he at least, thought was the most likely cause of water ingress around that window. His recommendations were as follows:That further investigation be undertaken to fully ascertain the entry of water. A quick fix or repairing a leak from the outside may only be a short term resolution.Assuming that the leak is through the tops of the polystyrene cappings I would suggest that these be cut back on a slope and either a waterproof plaster system be used or a coloursteel flashing be fitted on the slope to allow the run off of water, or a combination of both. The present plaster system could be used however it would need to provide a waterproof surface. On the presumption that all of the exterior windows are fitted in the same manner I would recommend this work be undertaken to all windows. I would also recommend that the corners where the windows meet the polystyrene cappings be sealed with a flexible, paintable sealant.I would also recommend that internal linings be removed to ascertain whether any of the external framing needs to be replaced due to the presence of rot.That the moisture levels be monitored on a three monthly basis for the next twelve months and annually after that. This will confirm that the problem has been resolved. It may be possible to speed up this process if internal linings are left off and a pressure test is undertaken with a hose.[19] Before me, Mr Lyttle focused particularly on the caution contained in the first bullet-point above. It was clear, he said, that the client was warned that the true source of the leak needed to be found. Without that information, there was no way of knowing whether the repairs were directed at the actual problem.[20] Those seeking to sheet home responsibility to Mr Lyttle, focused instead on the detailed prescription for remediation contained in the three bullet-points that followed the caution. Both Mr Hastie and the first defendants said all they did was follow Mr Lyttle's instructions. Mr Hastie added that he had no role in instructing Mr Lyttle. Mr Lyttle's contractual relationship was with Mr Stewart and Ms Tee. Mr Hastie's role was, he said, very minor.[21] For this part, Mr Stewart said that in opting to modify the plant-ons as recommended, he wanted to see whether this relatively inexpensive solution wouldwork before committing to more invasive investigation. He said all agreed on this course.[22] Mr Hastie then, at Mr Stewart's request, set about following therecommendation to cut slopes into the plant-ons to enable moisture to drain away from the windows rather than pool on the flat surface close to the aluminium sill flange. Note that only the lower surfaces (at sill level) were so sloped. The flat surface above the windows remained untouched.[23] Mr Hastie's company, Trademark Residential Limited, then arranged forImpact Plastering Limited to cut the slopes and recoat the modified surfaces. Impact Plastering Limited is a specialist coating and waterproofing business.[24] During the course of March/April 2004, modifications were made on the windows that Mr Lyttle had specifically investigated.[25] On 26 April 2004, Mr Lyttle was invited to make a further inspection. He did so and reported his findings in writing on 5 May 2004. He said that as the work had only recently been undertaken, it was too early to tell whether it had been successful in solving the problem. In any event, Mr Lyttle said, not all plant-ons had been modified and this was required. He said that three to four months would be needed after all plant-ons had been modified in order to ascertain whether the problem had indeed been alleviated. Re-inspection would be appropriate after that interval.[26] Mr Lyttle also repeated the warning he gave in his first report in November. This time the warning was in these terms:I did note on my inspection that not all of the recommendations that I suggested in my letter dated 27 November 2003, have no [sic] beenundertaken. In particular it wasn't first confirmed where the leaks werecoming from, not all the flat edges to the polystyrene cappings have been done and there is uncertainty as to whether a flashing system or waterproof plaster has been used on the remedial work done to the window sills.[27] The remaining plant-on sills were modified and recoated by Impact Plastering Limited during May to July 2004.[28] The coating product was provided by Hitchins NZ Limited. Mr Hastie paid for both the work and the materials.[29] Despite his suggestion that he return three to four months after the modifications were completed to conduct further testing, Mr Lyttle had no further involvement in remediation. Mr Stewart's evidence was that he had lost confidence in Mr Lyttle and wanted a fresh pair of eyes.[30] In November 2004, Mr Stewart instructed Ian Vaughan of Realsure Limited to undertake a fresh inspection. Mr Stewart told Mr Vaughan about the repairs and why they had been done. Mr Vaughan advised that there were a number of weathertightness risk areas that should be addressed. These related mostly to unsealed cladding penetrations or damage, unprotected joins between roof and cladding in some places, and a lack of capillary gap between cladding and ground in some places.[31] One observation of direct relevance to the plant-on work was that only the sill surfaces had been modified but the top surface at the window head had not. This, according to Mr Vaughan, represented a weathertightness risk and should be remedied. Overall however, Mr Vaughan's assessment of weathertightness postrepairs appeared to be positive. He wrote:The repairs to fix leaks appear to have worked. This report cannot give any waterproofing guarantee as it is not readily possible nor required to create simulated conditions to induce moisture ingress. However, signs of moisture ingress were looked for and spot checking was carried out predominantly around windows, doors and identified risk areas with a non-destructive moisture meter, where accessible. The only higher than normal moisture levels detected were in the Bathroom, Ensuite and Laundry.Second sale: Stewart/Tee to Newton/Davey[32] Following receipt of the good news, Mr Stewart and Ms Tee put the property back on the market. On 8 November 2004, the plaintiffs, Mr Newton and Ms Davey, entered into a conditional agreement to purchase the property. In the agreement, they reserved the right to transfer the benefit of the contract to "their nominee".Whether a nomination was actually made in favour of the Davey-Newton Family Trust is an issue.[33] The purchase price was $427,500.[34] I mention here, because it becomes an important issue later, that the standard form sale and purchase agreement included cl 6.2(5) under the heading "Vendor's Warranties and Undertakings". Under the clause the vendors warranted and undertook to the purchasers as follows:Where the vendor has done or caused or permitted to be done on the property any works for which a permit or building consent was required by law:(a) the required permit was obtained;(b) the works were completed in compliance with that permit or consent;(c) where appropriate a code compliance certificate was issued for those works; and(d) all obligations imposed under the Building Act 1991 were complied with.[35] Special conditions added by the purchasers to the agreement related to asatisfactory title search and builder's report within two working days. JamesHammond, a pre-purchase inspector, trading as Inspect-it 1st Home Inspections, was instructed to do the builder's report. He produced a report within the required timeframe. It ran to 25 pages and cost $280 plus GST.[36] Mr Hammond noted that the exterior cladding was in generally good condition although some cracking to joints was apparent and required repair. That said, he noted that his moisture meter showed no elevated moisture levels around the area of the cracks. Window exteriors were considered to be in good order."Overall", the report said "this is a nice home, well finished, in need of someremedial work."[37] In a fax of 10 November 2004, the purchasers' solicitors required the cladding cracks to be fixed but accepted that the purchase could be treated in allother respects as unconditional provided the cracks were seen to in a workman-like manner. On 11 November 2004, the purchasers' solicitors sent draft transfer and sales notices to the vendors' solicitors. The drafts identify Mr Newton, Mr Davey and Mr Moran as transferees.1[38] A few days before settlement date, the repair work had still not been completed and the purchasers proposed holding back $10,000 of the purchase price to cover this issue, but on the same day the vendor's solicitors advised that the workhad been completed at minimal cost. The purchasers' solicitor then certified that the repair requirement had been satisfied. It is common ground that no check of the nature or quality of the work was done by the purchasers or their solicitor at that point.[39] Meanwhile on 8 December 2004, Mr Newton and Ms Davey had executed a deed of nomination in which they nominated the trustees of the Davey Newton Family Trust (themselves and Scott Moran) as purchasers, together with a resolution of trustees authorising the purchase. Although these documents made the fact of nomination crystal clear, they were not in fact brought to the notice of the vendors until after commencement of this litigation.[40] The sale duly settled on 13 December 2004 in the following manner.[41] At 10:37 am on 13 December 2004, the vendors' solicitors faxed to the purchasers the now executed transfer instrument (ie the document that had been provided in draft form by the purchasers on 11 November 2004), discharge of mortgage and certificate of non-revocation of power of attorney. The message on the fax cover sheet provided:As we mentioned the telephone conversation [sic], our clients require this settlement in order to settle their purchase in Christchurch today. Their vendor has also purchased a property requiring settlement today.1 The draft transfers were not included in the bundle together with the 11 November fax, but it canbe inferred from the transfer documents executed the following month that the three names wereon the draft sent on that date.[42] The transfer instrument recorded that the transferees were Keith Michael Newton, Joanne Lesley Davey and Scott Moran. The transferors, Wayne Peter Stewart and Lee-Bin Tee, both signed the transfer and this was witnessed by Daniel Lewis Boyle, solicitor of Wellington. The instrument is in fact later dated 16 December 2004 by the vendors' solicitors but there is no doubt that the executed transfer instrument was sent to the purchasers on 13 December 2004.[43] By letter of 13 December 2004, the purchasers' solicitors confirmed that theyhad paid into the vendors' solicitors' trust account the outstanding portion of thepurchase price at 2:45pm on that day. A photocopy of the bank cheque and deposit slip was attached.Aftermath[44] Ten months later in October 2005, Keith Newton arranged for Specialist Coating Services Limited to repair cladding cracks that the company had identified during an inspection the previous August. I do not know whether these cracks were different to those identified by James Hammond. Once the cracks were repaired Specialist Coating Services then applied a Taubmans coating product called Grano Impact Hi Build acrylic membrane beneath an extra top coat described as Taubmans Granoskin protective coating system. It is common ground that the plant-ons were also recoated with these materials.[45] Around four years later in January 2010, the Trust put the property back on the (now sluggish) market. After five months, P J and P Ranchhod made a conditional offer at $580,000. The offer was accepted. One of the conditions was a satisfactory pre-purchase report. Ironically, the Ranchhods instructed Realsure Limited to do the report (it will be remembered that Ian Vaughan of Realsure had taken over from Mr Lyttle and advised Mr Stewart and Ms Tee that the house'sweathertightness problem had apparently been solved). Realsure then advised the Ranchhods that 2 Huxley Grove was a leaky home. They promptly cancelled the agreement.Proceedings and summary judgment[46] The plaintiffs issued proceedings against Mr Stewart, Ms Tee and Mr Hammond on 28 October 2010. On 22 December 2010, Mr Stewart and Ms Tee applied to join Mr Hastie, and Mr Hastie was subsequently also joined by the plaintiffs as a third defendant in his own right.[47] On 18 October 2011, Mr Stewart and Ms Tee applied to join Mr Lyttle and VCNZ as second and third third parties.[48] Both Mr Lyttle and VCNZ subsequently applied to strike-out the proceedings brought against them by Mr Stewart and Ms Tee. On 18 April 2012, Ronald Young J rejected Mr Lyttle's application, but allowed VCNZ's.2 Mr Lyttle has appealedagainst Young J's decision in relation to his application, and the plaintiffs have appealed the decision in relation to VCNZ. Thus, the strike-out applications are not yet finally disposed of, but it is nonetheless worth traversing what was decided.[49] Insofar as VCNZ is concerned, the Court accepted that the work undertaken by Mr Lyttle on behalf of VCNZ could not possibly be said to breach the applicable standard of care because Mr Lyttle had done only what was asked of him by Mr Stewart. And he had warned Mr Stewart that, without ascertaining the source of the leaks, any repair work may simply postpone further damage. The claim against VCNZ was therefore struck out on the merits.[50] Mr Lyttle, on the other hand, did not run a lack of merits argument before Ronald Young J. His arguments focused on limitations. In that respect, Ronald Young J found:(a) The first defendants' claim against Mr Lyttle was for indemnity and covered by s 14 of the Limitation Act 1950. As a result, time could not start running on that claim until a judgment had been entered against the first defendants. Since that had yet to occur, the claim was in time.2 Newton v Stewart HC Wellington CIV-2010-485-2116, 18 April 2012.(b) In case that was wrong then, in terms of s 4 of the Limitation Act 1950, the claim accrued in 2004 when the weathertightness problems with the house were identified by Mr Lyttle, taking the firstdefendants' proceeding outside the six year limitation period and therefore out of time.(c) If (a) and (b) were wrong, and the relevant defect was not the structure of the dwelling but the failure to obtain a building consent for the repair, then time could not start running until 2010 when, on a reasonable basis, the plaintiffs discovered this failure and breach of the warranty contained in cl 6.2(5).[51] The court's findings in relation to VCNZ, and its findings (b) and (c) in relation to Mr Lyttle, are obviously now also relevant to the plaintiffs' substantivecase.The issuesBetween plaintiffs and first defendants[52] The action by the plaintiffs, Mr Newton, Ms Davey and Mr Moran, against the first defendants, Mr Stewart and Ms Tee, is in contract only. The plaintiffs argue that the modification work to the plant-ons required a building consent and when the first defendants failed to obtain one, they breached the warranty at cl 6.2(5) of the agreement for sale and purchase.[53] The first defendants argue that cl 6.2(5) is not engaged because no building consent was required for such minor work. In any event, the first defendants argue, the plaintiffs have no standing to sue because the agreement was not with the family trust on whose behalf (as trustees) they sue, but with Mr Newton and Ms Davey personally. That, the first defendants say, is because despite the express addition of"or nominee" in the section of the agreement that identified the purchasers, Mr Newton and Ms Davey failed properly to nominate the trustees. This means, the first defendants say, that they have no contract with the trustees.[54] If the plaintiffs can overcome these obstacles, then the ordinary requirements of proof of loss, causation and quantum must then be addressed.Between plaintiffs and second defendant[55] The second defendant, Mr Hammond (the pre-purchase inspector who advised the plaintiffs when they bought the property) took no steps to defend this proceeding. He is sued in contract and tort in relation to the 2004 inspection. He was personally served with the proceedings at the beginning of 2011.[56] Where the plaintiff appears and the defendant does not, the plaintiff must prove the cause of action so far as the burden of proof lies with the plaintiff.3 This means that the plaintiffs must still prove negligence, damage and causation. The plaintiffs do not need to address any of the exclusions from liability contained in the contract.4 The defendant waived this affirmative defence when he did not appear at the hearing.Between plaintiffs and third defendant (Mr Hastie)[57] The third defendant, Mr Hastie, is sued in negligence in relation only to the repair works completed in 2003 and 2004. Any liability that might have arisen from the original build in 1999 is now well outside the 10 year long-stop provision in the Building Act 1991. The issues in relation to the third defendant are:(a) did the plaintiffs' cause of action in respect of the repairs accrue before 14 September 2006 – that is outside the six year time bar?(b) was the third defendant a "developer" when the repairs were donesuch that he continued to owe a non-delegable duty of care to the plaintiffs?(c) was any such duty breached in the context of the repair work?3 High Court Rules, r 10.7.4 High Court Rules, r 10.7.02.(d) did it cause the damage claimed?(e) quantum; and(f) were the plaintiffs contributorily negligent when they opted to settle the purchase without checking whether the necessary repairs identified by Mr Hammond had in fact been properly carried out?Between first defendants and first third party (Mr Hastie)[58] Many of the issues between these parties (Mr Stewart and Ms Tee against Mr Hastie) are similar to those between the plaintiffs and Mr Hastie. The firstdefendants' case against Mr Hastie is founded in contract and tort. Mr Hastie, they say, was primarily responsible for fixing the problem and he accepted that responsibility by arranging the repairs. Mr Hastie denies this role. He says Mr Lyttle was the expert building surveyor. Mr Hastie, he claimed, did what he was told. Issues arising are:(a) whether the first defendants' claim against Hastie is time-barred;(b) what Mr Hastie's role was in carrying out the repairs and therefore the scope of his obligation to the first defendants in the context of the 2003-2004 repair work;(c) whether that obligation was breached;(d) whether it caused the loss for which the first defendants may be responsible to the plaintiffs; and(e) whether the first defendants are guilty of contributory negligence infailing to follow Mr Lyttle's advice to find the source of the leaks.Between first defendants and second third party (Mr Lyttle)[59] Mr Stewart and Ms Tee say they relied entirely on Mr Lyttle's advice, givennegligently, in attempting to fix the problem. Mr Lyttle, on the other hand, says Mr Stewart made his own decision and specifically did not follow his advice. Anumber of the issues arising out of the first defendants' claim against Mr Lyttle are addressed in Ronald Young J's judgment. Those findings extend beyond limitation issues to relevant findings on the merits. A significant issue raised was whether the issues in that litigation, or any of them, must now be treated as res judicata.[60] In light of Ronald Young J's decision, Mr Lyttle did not advance a limitation argument before me, but questions of the scope of any duty owed to the first defendants in the context of the repairs, whether that duty was breached and, if so, whether it caused the loss were all argued. Mr Lyttle also raised res judicataarguments, seeking to shelter beneath the decision of Ronald Young J to strike outthe first defendants' action against VCNZ on the merits.Expert evidence[61] In addition to the witnesses of primary fact from whose evidence the foregoing summary has been gleaned, the parties called a number of expert witnesses in support of their respective cases.Plaintiffs[62] The plaintiffs called Russell Cooney, a building surveyor who inspected the property in June 2010. He completed invasive testing at two of the building's 29 windows and found evidence of water damage at the family room window at the north-western corner of the house. Testing at the window on the south wall of the garage showed no damage or elevated moisture levels. He also carried out non- invasive capacitance monitor tests at the following locations:(a) the wall linings and finishes adjacent to and beneath all of the windows inside the house. He did not find any indications of excess moisture; and(b) the wall cladding immediately beneath the plant-ons at the window sills. Excess moisture was indicated in the wall cladding beneath a number of windows, particularly those on the north and east elevations.[63] Mr Cooney concluded that poorly sealed or unsealed windows were a primary cause of damage and that the repair work in 2004 may have exacerbated the problem. He recommended that the plaintiffs undertake further investigation on other windows, but suggested that the problems found at the north-western family room window are likely to be repeated at most other windows. He concluded further that a building consent would have been required in 2003-2004 for the plant-on modifications.[64] Alistair Mooney was the plaintiffs' quantity surveyor. On the basis of the scope of works provided by Mr Cooney, he estimated the cost of remediation at $99,500.[65] Timothy Truebridge is a property valuer called by the plaintiffs. His evidence was that the total reduction in value of the property as a result of water damage is $146,500 being Mr Cooney's estimated cost of remediation of $99,500 plus a 15 per cent margin of error and a further 7.5 per cent margin for post-remediation stigma.[66] Finally, the plaintiffs called Lorinda Kelly, a forensic accountant. She gave evidence of the additional interest the plaintiffs had to pay as a result of purchasing a property whose value was inflated by $146,500 at the time of purchase. The additional interest figure was $95,788.First defendants[67] The first defendant called building surveyor Garrett Butt. His evidence was that Mr Cooney's investigations provided insufficient information to reach any conclusion as to the causes of weathertightness problems at the property. He found also that the remediation undertaken was inadequate but that no building consent was required for that work.[68] Maxwell Myers, a valuer, provided his own figure as to diminution in value. He set it at $99,500, plus 15 per cent, making a total of $114,000. Mr Myers rejected any separate or greater discount for post-remediation stigma.Third defendant/first third party[69] The third defendant and first third party, Mr Hastie, called Dianne Johnson, a building surveyor. She reviewed and audited the various weathertightness assessments completed at the property and concluded that insufficient is known of the cause of the leaks. She accepted, however, that five of the windows on the northern elevation (including the northwest family room window) are likely to require comprehensive remediation but that it is not yet known whether the remaining 24 windows require similar treatment.[70] The third defendant also called Brian Nightingale, a building consultant, whoestimated the value of remedial works based on Dianne Johnson's scope of works, at$47,065.35.Expert agreements[71] The building surveyors and valuers each helpfully reached agreements on some of the issues they confronted.[72] Mr Truebridge and Mr Myers were agreed that at 8 November 2004 the unaffected market value of 2 Huxley Grove was $427,500. They also agreed that if the property were to sell immediately after remediation, there would be a discount onthe property's otherwise unaffected market value attributable to post-remediation stigma. They could not however agree on the quantum of that discount.[73] Building surveyors, Messrs Cooney and Butt and Mrs Johnson, met and discussed five issues. They are agreed that the matrix of responses I set out below accurately describes the position each of them took in respect of the five issues.QuestionNoQuestion Cooney Butt Johnson Collectiveview1 Was the originalconstruction of thejunctions of the claddingsystem (including the'plant-ons') and the sillsof the window framesdefective?Yes Yes Yes All agreed.2 Was the mode offailure/leaks as Cooneydescribed?Yes Yes. However,highly likelythat there areother leakingmechanismsoccurring at thewindows.Yes. Highlyprobable thatthere may alsobe leaks at thejoints mitrecorners andheads of thewindows.Yes – but.3 If yes to Question 1.Was the scope of theremedial work andinvestigation appropriate:(a) as recommended(b) as undertaken?(a) No.(b) No.(a) No.(b) No.(a) No.(b) No.All agreed.4 If no to Question 3. Wasany of the wall framingtimber likely to bedecayed in 2003/2004such as:(a) to needreplacement;(b) to need a buildingconsent?(a) Yes.(b) Yes.(a) Yes.(b) Yes.(a) Yes highlyprobable but nolaboratory testsundertaken.(b) Failure ofrequirements ofB2 of BuildingCode is a triggerfor buildingconsent.All agreed.5 If yes to Question 4.Would Cooney's scopeof work:(a) reflect theknowledge of a buildingsurveyor in 2003/04?(a) Yes. (a) Yes. But Iwould haveinvestigatedfurther andhighly likelywould haverecommended areclad.(a) Yes. Butonly claddingremoval if highmoisture found.Yes – but.[74] I turn now to address the issues arising in each action.Between plaintiffs and first defendantsPrivity[75] The first defendants, as I have said, argue that the plaintiffs never communicated the fact that they had been nominated by Keith Newton and Joanne Davey to be the purchasers in their stead. That meant there had been no lawful nomination and there is no privity between the Newton-Davey Family trustees and the first defendants. That in turn meant, obviously, that the trustees had no standing to sue.[76] In my view, this contention must fail on the facts. The evidence is, as Mr Webb conceded, that a draft transfer instrument was sent by the purchasers' solicitors to the vendors' solicitors. I infer that this was done on 11 November 2004. It specifically noted that the transferee would be the three plaintiffs Mr Newton, Ms Davey and Mr Moran. The transferors, Mr Stewart and Ms Tee, then executed it, acknowledging thereby that they understood and accepted that the transferees were not the same as the named purchasers in the agreement. Their solicitors then faxedthe transfer to the purchasers' solicitors at 10.35 am on settlement day. They thentook the purchasers' money at 2.45 pm and were advised shortly thereafter by lettersfrom the purchasers' solicitors that the three purchasers were trustees of the Davey- Newton Family Trust.[77] I do not consider that any particular formality is required to communicate a nomination. The fact that in this case it was done in the draft transfer itself does not disqualify it from serving that communication purpose. It should be rememberedthat the purpose of communication is to ensure that the vendors know to whom the transfer should be made. Why would any particular formality be necessary? Whether communication has occurred must therefore be purely a question of fact. In this case, the necessary communication occurred over a month earlier and was acknowledged at the point that the vendors executed the transfer instrument. Having given such acknowledgement, they accepted the purchase price. It would be inequitable in those circumstances to allow the vendors to deny the existence of a contract between themselves and the three named nominees.[78] The Court of Appeal decision in Laidlaw v Parsonage has resolved the debate about whether a properly nominated nominee under an agreement for sale and purchase of land is a privy for the purposes of s 4 of the Contracts Privity Act 1982.5That court held that nominees are privies.[79] It follows that the plaintiffs in this case have standing to sue.Warranty[80] It will be recalled that the issue here is whether the modifications to the plant-ons required a building consent. If they did, then the first defendants' failure toobtain one would amount to a breach of the warranty in cl 2(5)(a) that such consent was obtained, and perhaps a breach also of (b) that the work was completed in accordance with the consent. That in turn would require an assessment of damages in accordance with the considerations very carefully set out by MacKenzie J in Ford v Ryan.6 Whether such a consent was in fact required is by no means a straightforward matter. It will be necessary to map out the applicable trail of provisions in the Building Act 1991 and Building Code, before outlining the arguments of counsel and then setting out my own views.5 Laidlaw v Parsonage [2010] 1 NZLR 286.6 Ford v Ryan (2007) 8 NZCPR 945 at [48] and [52] to [53].Relevant provisions[81] At the relevant time, the applicable law was as contained in the Building Act 1991 – even though parts of the 2004 Building Act had already come into force.7Section 7(1) of the 1991 Act provides:All building work shall comply with the Building Code to the extent required by this Act, whether or not a building consent is required for that building work.[82] Section 32(1) provides:It shall not be lawful to carry out building work except in accordance with a consent to carry out building work (in this Act called a "building consent"),issued by a territorial authority, in accordance with this Act.[83] Section 32(2) provides a general exemption from that requirement. It is in these terms:This section shall not apply in respect of–(b) any building works specified in Schedule 3 to this Act as being workfor which a building consent is not required [84] Schedule 3 relevantly described the exempted building work as follows:A building consent shall not be required in respect of the following building work:(a) Maintenance in accordance with procedures specified in the compliance schedule (if any) for the building concerned;(ab) Any other lawful repair with comparable materials, or replacement with a comparable component or assembly in the same position, of any component or assembly incorporated or associated with abuilding, 7 Under s 2 (Commencement) of the 2004 Act the new provisions for exemptions from therequirement to obtain a building consent contained in s 41(1)(b) and the First Schedule to theAct did not come into force until 31 March 2005, nearly a year after the repairs.[85] But there is then an exclusion to the general exemption of repairs and replacements. This exclusion creates three small subcategories within the general Schedule 3 exemption that will nonetheless require a building consent.[86] Schedule 3(ab) continues: but excluding–(i) the complete or substantial replacement of any system listed in s 44(1) or s 44(5) of this Act;(ii) the complete or substantial replacement of any component or assembly contributing to the structural behaviour or fire safety properties of the building;(iii) the repair or replacement of any component or assembly that has failed to satisfy the provisions of the Building Code for durability.[87] Exclusion (i) has no application – s 44(1) and (5) detail all of the systems which, if present in a certain building, require the building to have a compliance schedule. Exclusion (ii) relates to structural and fire safety related repairs and has no application.[88] There is, however, a question about the applicability of (iii). The effect of that subcategory is that where the repair is required because the component or assembly under repair has failed code durability requirements, then that repair will still require a building consent.[89] Relevant code provisions are set out in the 1992 Building Regulations. Regulation 3(1) provides that the Building Code is that contained in Schedule 1. Regulations 3(2) and (3) provide as follows:(2) except as otherwise provided by the Act – each building shall achieve the performance criteria specified in the Building Code forthe classified use of the building (3) the classified use or uses of a building shall be the ones that most closely correspond to the intended use or uses of that building.[90] Clause B2 of the code in Schedule 1 relates specifically to durability. The clause is divided between objectives, functional requirements and performancerequirements. Only the performance requirements are binding standards. This is provided for in Regulation 3(2).[91] In order to understand the thrust of cl B2, it is necessary to set it out in full:ObjectiveB2.1 The objective of this provision is to ensure that a building will throughout its life continue to satisfy the other objectives of this code.Functional requirementB2.2 Building materials, components and construction methods shall be sufficiently durable to ensure that the building, without reconstruction or major renovation, satisfies the other functional requirements of this code throughout the life of the building.PerformanceB2.3 [Revoked]B2.3.1 Building elements must, with only normal maintenance, continue to satisfy the performance requirements of this code for the lesser of the specified intended life of the building, if stated, or:(a) the life of the building, being not less than 50 years, if:(i) those building elements (including floors, walls, and fixings) provide structural stability to the building, or(ii) those building elements are difficult to access or replace, or(iii) failure of those building elements to comply with thebuilding code would go undetected during both normal use and maintenance of the building.(b) 15 years if:(i) those building elements (including the buildingenvelope, exposed plumbing in the sub-floor space, and in-built chimneys and flues) are moderately difficult to access or replace, or(ii) failure of those building elements to comply with thebuilding code would go undetected during normal use of the building, but would be easily detected during normal maintenance.(c) 5 years if:(i) the building elements (including services, linings, renewable protective coatings, and fixtures) are easy to access and replace, and(ii) failure of those building elements to comply with thebuilding code would be easily detected during normal use of the building.B2.3.2 Individual building elements which are components of a buildingsystem and are difficult to access or replace must either:(a) all have the same durability, or(b) be installed in a manner that permits the replacement ofbuilding elements of lesser durability without removingbuilding elements that have greater durability and are not specifically designed for removal and replacement. (italics in original)[92] Clause E2 is entitled "External Moisture" and relates more directly to the issues raised by the plaintiffs. It provides:ObjectiveE2.1 The objective of this provision is to safeguard people from illness or injury that could result from external moisture entering the building.Functional requirementE2.2 Buildings must be constructed to provide adequate resistance to penetration by, and the accumulation of, moisture from the outside.PerformanceE2.3.1 Roofs must shed precipitated moisture. In locations subject to snowfalls, roofs must also shed melted snow.E2.3.2 Roofs and exterior walls must prevent the penetration of water that could cause undue dampness, damage to building elements, or both.E2.3.3 Walls, floors, and structural elements in contact with, or in close proximity to, the ground must not absorb or transmit moisture in quantities that could cause undue dampness, damage to building elements, or both.E2.3.4 Building elements susceptible to damage must be protected from the adverse effects of moisture entering the space below suspended floors.E2.3.5 Concealed spaces and cavities in buildings must be constructed in a way that prevents external moisture being accumulated ortransferred and causing condensation, fungal growth, or the degradation of building elements.E2.3.6 Excess moisture present at the completion of construction must be capable of being dissipated without permanent damage to building elements.E2.3.7 Building elements must be constructed in a way that makes due allowance for the following:(a) the consequences of failure:(b) the effects of uncertainties resulting from construction or from the sequence in which different aspects of constructionoccur:(c) variation in the properties of materials and in the characteristics of the site. (italics in original)[93] The term "building elements" as used in these two clauses is defined widely in cl A2 as:Any structural or non-structural component and assembly incorporated into or associated with a building.Arguments[94] The plaintiffs' argument is put on two bases. First, whether or not a buildingconsent was required, the plant-on modifications were not lawful and therefore did not obtain the protection of the general exemption in Schedule 3(ab). That is because, the plaintiffs say, the work breached s 7(1) requiring all building work to comply with the code even when a building consent is not required. This work, they argued, breached cl E2.3.2 requiring exterior walls to prevent the penetration of water that could cause undue dampness or damage to building elements. The repair was therefore, they said, not lawful.[95] The second basis is that the 'property' (note here the shift from the plant-on itself, to the general state of the dwelling) had failed to satisfy the Building Code for durability (that is, it was leaking). The repair on it was therefore caught by the exception to the general exemption set out in Schedule 3(ab)(iii) and a building consent was required for the work.[96] In response, the first defendants argued that the modification was exempted under Schedule 3(ab) as a lawful repair and that the correct focus for analysis was the state of the plant-ons not the dwelling. The plant-ons, they argued, had not failed for durability under Schedule 3(ab)(iii). The fact that the modification was to aid weathertightness in other components was, they argued, irrelevant.[97] The first defendants argued further that the reference to "lawful" repair didnot engage s 7 requiring all work to comply with the code with or without consent."Lawful", they argued, simply meant consistent with the Building Act's provisions including s 32 and its exemptions. In reality, they argued, this work involved shaving a 6 mm triangular sliver off the top edge of the plant-on sill. It was minor in every respect. A finding that such work required a building consent defied commonsense they argued, especially when, under the code, other far more significant work did not – masts, retaining walls up to 1.5 metres, fences up to 2 metres and so on.Analysis[98] The first point to make is that cl 6.2(5) of the agreement for sale and purchase is not a warranty as to the quality of the home. Specifically, it is not a warranty that the home is watertight.8 It undertakes only that if consents were required for workdone on the house during the vendor's tenure, then such consents were duly obtained and their terms complied with. The sole question then is whether the modifications done to the plant-ons needed a consent.[99] That question in turn depends on whether the work done amounted to a lawful repair of a component or assembly that had not failed the code's durabilityrequirements.9[100] There are therefore three questions:8 See Ford v Ryan, above n 4 at [25].9 The work was clearly not maintenance in accordance with the procedures specified in thecompliance schedule for the building in terms of Schedule 3(a). The Harditex Cladding Manualwas put in evidence. Maintenance is defined in that manual as encompassing only 12 monthlychecks and wash-downs, and recoating every 7 to 12 years. The work in this case, though smallin scale, was more invasive than is contemplated by the term "maintenance" in the manual.(a) Was this a repair?(b) Was it lawful?(c) Had the repaired component failed code durability requirements?[101] The work was a repair in my view in the sense that its purpose was to fix a problem. The problem Mr Lyttle identified in November 2003 was pooling of water on the top surfaces of the plant-ons. His hypothesis was that this problem was very likely to be the cause of water finding its way into the external framing via the junctions between the cladding and window joinery, and via cracks in the cladding itself. Cutting a slope would, he believed, prevent that pooling, leaving no reservoir of water to penetrate at the junction or via the cracks.[102] It was in this sense, a "repair" to the plant-ons in order to prevent them from continuing to be a site for pooling. That is all. This was not an attempt to repair the seals at the window fixings.10 Nor did it attempt to repair any pre-existing damage. It targeted a prior and more specific problem. Thus the components to be focused upon for the purpose of Schedule 3(ab) are the plant-ons not the window assembly, the cladding generally or the external timber framing.[103] Since it was a repair, was it lawful repair? In my view, 'lawful' as used in Schedule 3(ab) was intended to be of wide import, probably so as to ensure that other controls such as those relating to health and safety or town planning matterscould not be ignored via this Schedule 3 exemption. This is a common drafter's beltand braces mechanism to ensure nothing slips through the net. Nonetheless, the requirement I earlier mentioned in s 7 of the Building Act that the Building Code is to be complied with even if no consent is required, must be given some meaning in this context. "Lawful" must therefore be taken to include compliance generally withthe code's mandatory performance standards.10 The evidence was that no seal was applied in 2004 at the plant-on/window-sill flange junctiononce the slopes had been cut, plastered and coated. But it was also clear that this junction wasnever properly sealed, so the repairs did not make the seals any worse than they were already.Mr Hastie said he was aware that a sealant bead should have been applied at the junctionbetween frame and cladding, but this was never done.[104] It follows that, in this case, the repair had to comply with the external moisture performance control in cl E2.3.2. It will be remembered that this control provides that: exterior walls must prevent the penetration of water that could causeundue dampness, damage to the building elements, or both.[105] In my view the repair work done in this case cannot be said to have allowed (ie failed to prevent) water penetration in terms of cl E2.3.2. On the contrary, to the extent that it made any difference at all, the slope may well have alleviated the problem to some extent because it did in fact prevent pooling at those sites.[106] In this respect, I note that the evidence of Mr Cooney and Mr Lyttle was, in combination, that moisture levels at the sill of the north-western family room window had in fact reduced from around 40 per cent in November 2003 to 20.5 per cent in June 2010. Dianne Johnson, suggested that the reason for this reduction may well have been the creation of slopes at the plant-on sills in 2004.[107] The fact that the repairs did not solve problems that had their genesis elsewhere and that Mr Lyttle's optimistic hypothesis turned out to be wrong, is irrelevant. What is relevant – indeed the only thing that is relevant – is that the modification was not in itself shown to have led to moisture penetration of the exterior walls. The repair therefore produced no breach of the standard at E2.3.2.[108] The irony is of course that the work actually needed – window repairs, flashings, resealing and probably cut plant-ons at window sills and heads, not to mention replacement framing – would all unquestionably have required a building consent. That was the conclusion reached by all three building experts in response 4(b) of their agreed statement.11 But Schedule 3(ab) requires a focus on the work actually done, not the work that should have been done. Mr Cooney's evidence inthis respect is telling:It is my opinion that the owners of the property at the time should have obtained a building consent when the remedial work was undertaken. I consider that it was obvious that the integrity of the cladding system had been compromised when Mr Lyttle investigated the property, that rain water11 See [73].had entered behind the wall cladding, at least the window sill, and that framing decay had most probably started.[109] What Mr Cooney really meant was that the first defendants should have done more. For that work, they surely did need a building consent. But for the purpose of analysing whether a building consent was needed for the work actually done, that, in my view, was beside the point.[110] Finally, it is clear that the plant-ons were modified for reasons other than a failure of durability in terms of cl B2. They could continue to serve their decorative purpose, with or without the modifications. Their problem was in design, not durability.[111] It is necessary at this point to address a further argument raised by the plaintiffs. Mr Cooney, for the purposes of his investigation, cut away an L shaped corner from the plant-on on the garage's south wall – a window at which he also undertook invasive testing. With the cut away section removed, the side profile of the plant-on component could then be clearly seen. That profile of the plant-on suggested that a thick layer of plaster had been applied on its top surface where the plant-on met the aluminium window sill flange. The plaster had been applied to a level a millimetre or two above the bottom edge of the flange. The plaintiffs argued that this created a damming effect. That is water that had found its way into the framing and window assembly and was prevented by the plaster barrier from draining back out. This, the plaintiffs argued, had made a bad situation even worse. In cross-examination, Mr Butt for the first defendants agreed that this scenario was possible.[112] There are, in my view, several problems with this thesis. The first is that there is direct evidence of plaster build up at only one of the 29 windows. The second is that the window at which the profile was visible did not show any signs of dampness in its framing. This suggested that damming had not in fact occurred at that site. The third is that the only window where there are comparable figures available before and after repair – the northwest family room window – suggests that despite the plastering issue, the slopes may well have materially reduced dampness even if they did not solve the problem entirely.[113] There is a fourth issue: who put the plaster there in the first place? It is possible that it was Impact Plastering Limited in 2004 when the repairs were done. Or it may have been put there a year after the repairs, when the plaintiffs had Specialist Coating Services repair cracks and completely recoat the house. It may, in fact, have been there from the start. Mr Cooney accepted this last mentioned possibility when, in cross-examination, he accepted that damming may have occurred in places prior to the repair. As the plaster may have been there as a result of some or all of these applications, we have no way of knowing the truth any more.[114] I find therefore that the repair work on the plant-ons did not require a building consent and the warranty in cl 6.2(5) of the agreement for sale and purchase was not breached. In case I am wrong in that conclusion, I propose to proceed to consider the remaining issues in the claim against the first defendants.Loss[115] The plaintiffs argue that the first defendants' breach of warranty (if proved), caused them to pay more for 2 Huxley Grove than they would have if they had known and accepted that unconsented work relating to weathertightness had been done on the house. This meant they suffered loss.[116] The claim is for economic loss. That said, the components of loss argued for by the plaintiffs include the cost of repairs, a margin on that cost, a figure for post- remediation stigma and the cost of money for that portion of the purchase price representing the over-value for the duration of the plaintiffs' ownership of theproperty. I will address most of the issues in relation to this claim under the quantum heading, but it is appropriate to deal with the repair issue here, as it is the core component of the loss claimed. As will become clear, it is my view that the plaintiffs are in difficulty on the question of causation, but for present purposes I will proceed on the basis that causation is not an issue.[117] The plaintiffs relied on Mr Cooney's evidence in arguing that water damage had occurred at every window of the house, and that, as a result, seals and framing timber needed to be replaced and proper weathertightness measures installed(flashings and so forth). Mr Cooney identified a number of other problems at roofing, wall and floor junctions, but the windows were very much his focus.[118] Mr Cooney's investigation involved moisture drill tests at three points belowtwo windows: two at the northwest family room window and one at the garage. The northwest family room investigation produced readings above 20 per cent. Mr Cooney also removed internal wall lining at the family room window and had timber framing behind the lining removed and assessed. Lab tests demonstrated both elevated levels of moisture and the presence of actual decay. Mr Cooney pointed to the failure to face seal the junction between the window assemblies and the cladding as the primary culprit. In fact, he said, weathertightness at this point relied on a seal being maintained by applying the standard external coating system all the way to the edge of the aluminium joinery. This, he said, was bound to fail because aluminium and coating expand and contract at different rates in response to temperature change. The join was bound to separate, and that is what happened.[119] As I have said earlier, Mr Cooney also argued that plastering to the edge of the aluminium joinery may well have made the moisture problems worse due to (in his view) the problem of a damming effect. His argument was that the repair not only failed to fix the problem, but actually made it worse. Although Mr Cooney undertook invasive testing at only three locations, non-invasive capacitance testing at other sill locations, together with confirmation by visual inspection that all windows were sealed in the same way, suggested to him that all windows were similarly affected by moisture and required similar remediation. He did however recommend that further investigation be undertaken on all windows.[120] Finally, Mr Cooney noted a number of other faults relating to weathertightness that were likely to be contributing to the moisture problems in thebuilding's structure. These included improperly sealed wall junctions, unsealedpenetrations, short H moulds, lack of capillary gaps and other faults. Mr Cooney said a competent building inspector should have noted these as potentially causative of the problem when suggesting repair options.[121] The first defendants argued that Mr Cooney had done too little work to determine whether damage had occurred on the scale posited by him. Non-invasive capacitance moisture tests were done at 19 sites, but the first defendants argued that capacitance monitors are notoriously unreliable (all experts in fact agreed on this) and all that Mr Cooney's investigations had proved was that one window needed repair due probably to poor seals.[122] Mrs Johnson who gave evidence for the third defendant, but whose view is relevant in this context, argued convincingly that:(a) Mr Cooney's testing at the garage window produced a safe moisture reading at 17 per cent. This suggested that not all windows were affected by moisture ingress.(b) Mr Cooney's evidence in relation to invasive testing at three locations across the framing around two windows (only one of which showed moisture damage) suggested insufficient work had been done to confirm the cause of moisture ingress or the extent of damage beyond the windows actually tested with resistance meters.(c) Equally there was insufficient evidence linking defects to damage or to explain why at least one window was unaffected.(d) On the evidence available in 2003-2004, replacement of window framing could only be justified at five windows on the northern elevation with further investigation of the extent of damage being required at all other windows, although all plant-ons required reinstatement.(e) Tests of moisture done in November 2003 by Mr Lyttle and in June 2010 by Mr Cooney at the family room window suggest that ingress had decreased over the testing period at that location.1212 Mr Lyttle's tests showed 40 per cent at sill, Mr Cooney's showed 20.5 per cent at the silltrimmer.(f) It is possible therefore that the modification in 2004 had done some good even if it had not solved the problem.[123] Mrs Johnson did accept that the remaining windows would eventually begin to leak due to the poorly sealed junctions between the window framing and the cladding. But that, in my view, is not enough. That is evidence of potential, not actual, damage. As I have said, even Mr Cooney accepted that more investigation was needed before the extent of loss could be determined. He said a more extensive investigation was required before it would be possible to confidently reach conclusions about the extent and causes of moisture damage in this dwelling.[124] In my view, the cost of repair able to be demonstrated as a component of overall loss, put at its highest, is the necessity to replace window framing components, lining and cladding around five windows on the northern elevation as accepted by Mrs Johnson. Beyond those five windows, Mrs Johnson recommended only that all windows should be resealed and all plant-ons replaced. Any more than that would, she recommended, only be contemplated on proof of moisture build-up in the adjacent timber framing. Mr Nightingale estimated that the cost of work described by Mrs Johnson was $47,065.35 (including GST and a 15 per cent margin).[125] As I noted at the beginning of this section, the plaintiffs refer to additional components in their loss of value claim. They refer to a 15 per cent loading on the cost of repairs and a 7.5 per cent increase for post-remediation stigma. They also claim interest for the duration of their ownership in relation to the over-value paid and a sum in general damages for stress and inconvenience. I will address these matters in the quantum section.Causation[126] The plaintiffs argued that if an application for a building consent had been made for the repair (and contrary to my view, it was accepted that a consent was necessary), the council would have asked why the modification was being made and that would have triggered an inquiry into the adequacy of Mr Lyttle's proposedsolution. That, in turn, would have led to the council requiring a more comprehensive and considered approach to remediation involving not just modification to the plant-ons, but proper sealing, replacement framing and so on. That is, no council would have granted a building consent in this case without the applicant producing a comprehensive and acceptable weathertightness solution.[127] In my view, the plaintiffs cannot logically show that the damage to 2 Huxley Grove arose naturally (in terms of the first limb of the rule in Hadley v Baxendale13) from the failure to obtain a building consent for the repairs.[128] The first problem is that the bulk of the damage occurred before the repairs were done and may well have had nothing to do with the windows. Mr Cooney's appendices showed that he had in fact completed invasive testing at four other sites unaffected by the plant-on cuts. All showed elevated moisture readings. Thus, the repairs themselves were not causative.14[129] The second problem is that the evidence suggests, as I have said, that the repairs may well have reduced the problem, even if in the end, it was too little too late.[130] The third problem is that the first defendants' causation reasoning contains three links in the chain – each link to arise naturally from its predecessor. The first link is that if the Council had known of the proposed cuts to the plant-ons an inspector would have inspected the site. The second is that on inspection, the inspector would have discovered the full extent of the problem. The third is that, on discovering the full extent of the problem, the inspector would have required full remediation of the pre-existing damage to bring the building up to code standards before granting the building consent. Thus the plaintiffs seek to draw their entire case through the keyhole of this very modest repair.13 Hadley v Baxendale (1854) 9 Exch 341, 156 ER 145.14 For similar facts and reasoning, see BP Oil New Zealand Ltd v Ports of Auckland Ltd [2004]2 NZLR 208 at [115] to [133], particularly the treatment of Johnson v Watson [2003] 1 NZLR626.[131] I do not consider that they can, on the evidence. I cannot be satisfied,without detailed evidence of the Council's standard inspection procedures in suchcases, that each link in the plaintiffs' counterfactual is more likely than not. How doI know that the Council would not, in 2004, have simply seen this repair as a wise preventive measure, plans for which would be approved quickly and the work summarily inspected and approved once complete? Why would the Council havebeen especially watchful in this case? It is possible that the plaintiffs' reasoning issound, but they called no evidence on these matters to support it.[132] Turning to the second limb of the Hadley v Baxendale test, can it be said thatalthough the loss suffered was remote, it was nonetheless in the parties' reasonablecontemplation at the time of the contract? Weathertightness was certainly a live issue for the purchasers in November 2004. The purchasers' pre-purchase inspector checked for weathertightness issues. But I do not accept that the parties would have had in their minds the idea that if this minor repair work was done without a consent, the defendants would be liable for the losses suffered due to the pre-existing state of the building. Such contemplation is, in my view, inherently unlikely and there is no positive evidence tending to support it. On the contrary, the evidence suggests that, once the inspection had been completed by the second defendant, cladding defects were treated as minor matters. The plaintiffs did not even check that the repairs promised by the vendors had been properly made before settling the purchase. Clearly, by that stage cladding integrity was, as they say, "not a biggie" any more.[133] I find therefore that the damages claimed are too remote and there is insufficient proof of causation.Quantum[134] In light of these findings, it is unnecessary for me to assess quantum in anydetail. As I have said, I accept Dianne Johnson's view that the evidence called by the plaintiffs only supported replacement of window assemblies and associated framing on the northern elevation. It would be a straightforward exercise to establish the cost of repairs component of quantum on that basis should, contrary to my findings to this point, that exercise become necessary.[135] I accept that a 15 per cent margin on the cost of repairs is justified as an industry standard.[136] On the question of post-remediation stigma, the difference between Mr Truebridge for the plaintiffs and Mr Meyers for the first defendants was whether post-remediation stigma ought properly to be included within the 15 per cent agreed margin for unknowns, or whether a stand-alone category could be justified at Mr Truebridge's assessment of 7.5 per cent. It is, in my view, difficult to assess an appropriate figure (even as a percentage) because the extent of damage is not known. I must therefore proceed on the basis that the only damage is that to the windows on the northern elevation. That damage was limited in nature and, whilst still likely to produce a negative market reaction, that reaction would, in my view, be at the lower end of the scale, commensurate with the scale of damage. I accept Mr Meyers'evidence therefore that the post-remediation stigma can be accommodated within the 15 per cent margin.[137] On the question of interest, I agree that this Court has the discretion to award both simple and compound interest as damages on claims for breach of contract and can do so under either limb of the rule in Hadley v Baxendale. I accept that, viewed objectively, the parties would have understood that a substantial overpayment due to diminution in value would have had downstream consequences for home buyers engaged, as they were, in the most significant acquisition that most family units are likely to make. I therefore consider that the claim to interest paid on the amount borrowed by the plaintiffs for the overpayment is not too remote for the purposes of the first limb of the rule in Hadley v Baxendale. I acknowledge both the caution expressed by Lord Mance in Sempra Metals Ltd (formerly Metallgesellschaft Ltd) v Inland Revenue Commissioners15 and O'Regan J's focus on commercial contracts infollowing Sempra in Clarkson v Whangamata Metal Supplies Ltd.16 But given the significance to household budgets of mortgage repayments, I can see no reason in principle why responsibility for long-term losses of this nature cannot be said to arise15 Sempra Metals Ltd (formerly Metallgesellschaft Ltd) v Inland Revenue Commissioners [2007]3 WLR 354; [2007] 4 All ER 657 (HL) at [100], affirmed in New Zealand in Clarkson vWhangamata Metal Supplies Ltd [2007] NZCA 590, [2008] 3 NZLR 31 (CA).16 Clarkson v Whangamata Metals Supplies Ltd [2007] NZCA 590, [2008] 3 NZLR 31 (CA) at[216].reasonably and naturally from the bargain. There seems to me no good reason to privilege commercial contracts over home loans in this particular context. I do not agree with Mr Webb that Judicature Act 1908 interest is sufficient.[138] That said, I do not agree that an award ought to be made in general damages for stress and inconvenience. It is not possible to know just how much inconvenience or stress will be involved in the remediation of this property, but on the basis of the damage as proved, it is my view that the stress and inconvenience is limited and does not justify a damages award. Nor can a claim to alternative accommodation during remediation be justified. We still do not know the extent of remediation work required on this dwelling and so cannot know whether it will be necessary for the plaintiffs to vacate for the remediation period.Between plaintiffs and second defendant (Mr Hammond)[139] As earlier noted, Mr Hammond took no steps to defend this proceeding and so is taken to have waived any affirmative defences available to him. This means that the liability exclusions in the contract are waived. There is no issue of limitations in this case, the inspection and purchase being inside the six year limit provided by s 4 of the Act.[140] The plaintiffs are required to prove that a competent pre-purchase inspector is likely to have identified weathertightness related defects in the house and that the plaintiffs would not have bought the dwelling if Mr Hammond had brought these issues to their attention. The scope of the report delineates what was required for a competent pre-purchase inspection. Here, Mr Hammond's brief was to conduct a "limited visual inspection" for the purpose of identifying "current deficiencies" that were "visually identifiable at the time of the inspection."[141] In his evidence, Mr Cooney criticised Mr Hammond for failing to identify several issues. These were:(a) structural problems with the window sills;(b) weathertightness issues identified by the Realsure report three weeks earlier; and(c) structural issues with the cladding systems and moisture in the cladding system.[142] Starting with (a), Mr Hammond reported that the window sills in generalwere in "good order" and that the condition of the window exterior was "average". "Average" was defined in his report as "at the standard expected given the age of the house."[143] Mr Cooney was critical of this assessment saying that "at a minimum" the report should have identified the "visually apparent" issue with the window sills.Mr Cooney identified two main issues. The first was that the window frames did not freely drain. That is because there was no sealant bead between the plaster and the window frame, there was no seal behind the sill frame and the fibre cement sheet behind the plant-on and the frame was not sealed. This allowed water to enter behind the wall cladding. While that may be true, only the lack of a seal between the plaster and the window frame could actually be seen. The other two defects were only revealed when, as I discussed earlier17 Mr Cooney cut away an L shaped corner from the plant-on on the garage's south wall. Mr Hammond cannot be expected to find them while conducting a limited visual inspection.[144] The second issue concerned the application of the plant-ons around the windows. Mr Cooney reported that standard industry practice was to use a sill flashing or leave the area behind the seal flanges unsealed and the bottom edge of the frame free to drip and drain water. Here the remedial work applied plaster right up to the face of the frame above the bottom edge of the frame sill. There was no sealant bead between the plaster and the frame (as noted above). Mr Cooney argued that this created a water dam which meant rain water could more freely enter beneath the bottom edge of the window frame and get into the framing timbers. I rejected Mr Cooney's opinion that this failure to conform to standard industry practice had a17 See [111].damming effect.18 But I accept his view that a competent pre-purchase inspector would have identified at least this visible defect and the lack of a seal between the plaster and the window frame.[145] How then, would the purchasers have reacted had they been informed of these visual defects? The most obvious step would have been to conduct a moisture test. But it cannot be assumed that this would have revealed high moisture levels. Mr Vaughan conducted this test three weeks earlier and did not find elevated moisture levels. It is also to be remembered that these meters cannot be relied upon to find moisture levels if they are present. All experts accepted that they are only ever indicative and that invasive testing is the only reliable method.[146] The proper question, therefore, is whether the visual defects alone, without evidence of high moisture levels, would have been sufficient to put the purchasers off. On balance, I think that such a warning would have put them on notice and made them cautious before spending $427,500 on the purchase. Mr Hammond, onthe contrary said "windows, in general, are in good order"; and the window exteriors were described as "average". I find that this aspect of the inspection was negligent and that the purchasers would not have purchased the dwelling without a further close look at the visible defects identified by Mr Cooney.[147] The key question is what the purchasers would have done after taking this look. Starting with the lack of seal between the plaster and the window frame, it is likely that, even in what was described by the purchasers as a seller's market, thepurchasers would have required the problem to be fixed. This can be done by removing the old plaster and inserting sealant in its place. But this simple task would not have revealed damp or rotting timber framing. It could not, therefore, have caused the purchasers to walk away.[148] The problem of the application of the plant-ons to the window sills is more complicated. A closer look would probably have involved moisture testing. But this is unlikely to have revealed anything for the reasons discussed above. It is possible18 Note that I rejected Mr Cooney's opinion that this failure to conform to standard industrypractice had a damning effect at [112]. But Mr Hammond still should have identified thisimproper construction of the plant-ons.that, despite testing having been undertaken, the purchasers would still have required the window sills to conform to standard industry practice. Mr Cooney said this can be done in two ways. The first is to install a sill flashing. This would have revealed the damp and rotting wood. The second is to remove the plaster from the bottom edge of the frame, allowing water to drip from the frame. I think the purchasers would probably have chosen the second, easier, cheaper option. This minor work would not have revealed anything to cause the purchasers to investigate further or walk away from the sale.[149] Turning to (b), the Realsure report identified seven potential areas of risk with the exterior of the home using the BRANZ Weathertightness, Identification of Risk guidelines. These were:(a) the penetrations through the exterior cladding by plumbing require sealing;(b) the clothes line has been nailed to the exterior cladding;(c) the brackets for the plumbing have been installed prior to the texture coating;(d) the fascia and spouting have been installed prior to the texture coating;(e) there is a lack of slope to the tops of the polystyrene mouldings around the doors and windows and some holes in the mouldings;(f) metal gussets need to be installed to any junction where the roof meets the exterior cladding to direct rainwater away from the cladding and into the spouting; and(g) the paved surface is touching the exterior cladding at the left side of the vehicle access door on the garage.[150] Mr Cooney was critical of Mr Hammond for failing to identify any of these features. Proceeding on the basis that Mr Hammond was negligent in failing to doso, would it have made a difference to Mr Newton and Ms Tee's decision to purchasethe property? I do not think so. These are all minor and common faults associated with monolithically clad dwellings for this period and would have been most unlikely to have prevented purchase in a seller's market at the time.[151] In relation to (c), Mr Cooney criticised Mr Hammond's failure to identifyissues with the cladding. There are two parts to this. Firstly, he said that Mr Hammond should have used the non-invasive moisture meter on the surface ofthe Harditex wall cladding and that had he done so, this would "most probably" have shown water in the cladding system and "possibly" in the framing timbers behind.[152] I am not convinced that this is so. If it cannot be assumed that moisture would have been found at the window sills, where the problem was at its worst (see above), then I cannot reach the conclusion that Mr Hammond would have found elevated moisture levels in the cladding system or the framing timbers by running a meter along the wall cladding. Added to this is that fact that Mr Hammond did run the meter along the cracks in the wall cladding, if not the entire wall, and did not find elevated moisture levels. On this basis, I think it is unlikely that it would have made a difference if Mr Hammond had used a meter along the wall cladding.[153] Secondly, Mr Cooney said that a competent building surveyor would have identified and investigated a number of structural problems with the cladding. These were:(a) ends of some apron flashings were terminated behind the fibre cement cladding without any turn-outs;(b) cladding was fixed hard against the upstand of the roofing membrane to the roof over the front door without an anti-capillary gap;(c) PVC inter-storey 'H' mould had unsealed gaps where it was butt- jointed; and(d) in some places this moulding did not extend to the edges of the sheets.[154] Mr Hammond did not identify any of these issues. He said that the claddingwas "good" apart from two cracks. However, as with (b), these are minor construction defects. At best, the purchasers may have required that the defects be resolved. But this remedial work would not have revealed anything to cause the purchasers to walk away.[155] In conclusion, even if Mr Hammond had conducted a competent pre-purchase report, this would not have caused the plaintiffs to walk away from the purchase.[156] In case I am incorrect, and there is sufficient causation, my conclusions on the extent of the damage proved in the context of the action between the plaintiffs and the first defendants also apply here. These were:(a) the cost of repair is the cost of the work identified by Mrs Johnson being replacement of window framing components, lining and cladding around five windows on the northern elevation and of all plant-ons and resealing of all windows;(b) 15 per cent margin for unknowns on the cost of repairs is justified as an industry standard;(c) post-remediation stigma can be accommodated within the 15 per cent margin for unknowns;(d) the plaintiff overpaid for the home because of the diminution of value. The plaintiffs are entitled to claim for interest paid on the amount borrowed by the plaintiffs for the overpayment. This loss rises reasonably and naturally from the bargain and is not too remote; and(e) the plaintiffs are not entitled to an award of general damages for stress and inconvenience.Between plaintiffs and third defendant (Mr Hastie)[157] As I have noted, Mr Hastie owned 2 Huxley Grove in 1999 and arranged for the dwelling to be built on it. He was invited back in 2003 by the first defendants to address the weathertightness problems identified by Mr Lyttle and he arranged and paid for the repair work I have discussed.Limitations[158] These proceedings were filed on 28 October 2010. The first question arising is when the cause of action against Mr Hastie accrued. The cause of action is in negligence for failure to exercise due care and skill in arranging for and seeing to the completion of the repairs. The defects in the dwelling were, for the most part, not obvious. Rather, they were hidden beneath the cladding and joinery. A cause of action in tort accrues in relation to latent defects, such as those in issue here, when a reasonably prudent owner would be put on notice that matters required further and proper investigation.19Arguments[159] The plaintiffs say that they were not put on notice that there was anything amiss until the Ranchhods cancelled their agreement to purchase in April 2010 as a result of the second Realsure pre-purchase inspection. Mr Hastie says the cause of action accrued in 2003-2004 during the tenure of Mr Stewart and Ms Tee. This is because that was when the weathertightness problems were first exposed by Mr Lyttle. Mr Hastie emphasises the evidence of Mr Stewart that he (Mr Stewart) was opposed in 2004 to stripping back the cladding to determine the source of the leaks. Rather, his strategy was to approach remediation incrementally. That is to see whether the plant-on modification did the trick, before resorting to more drastic, and therefore more costly, investigation. The essential problem, Mr Hastie argued, was that Mr Lyttle warned Mr Stewart in the first of his recommendations in the November 2003 report that he (Mr Stewart) had to identify the source of the leaks if19 Invercargill City Council v Hamlin [1996] 1 NZLR 513 (CA) as upheld in Invercargill CityCouncil v Hamlin [1996] AC 624 (PC).he wanted to be sure of the appropriate remediation. Mr Hastie pointed out that this warning was given twice, the second time in April 2004 when, on re-inspection, Mr Lyttle warned Mr Stewart that he had still failed to properly source the leak. Mr Hastie said that Mr Stewart's fatal mistake was his failure to heed that advice.Analysis[160] I agree with Mr Hastie. There is no doubt that when Mr Lyttle gave his advice, the then owners were put on notice in terms of the Hamlin test. It is to be remembered that Mr Lyttle was called in to advise Mr Stewart and Ms Tee because in his pre-purchase report for Mr Sinha and Ms Sahgal, Mr Lyttle advised that the house had weathertightness issues. Mr Stewart and Ms Tee had been made aware in a clear way that there was an issue here. They were advised that, although the plant-on modification might fix the problem, indeed that it was likely to fix the problem, real peace of mind depended on the plaintiffs determining the source of the leaks. As I have said, this advice was given twice – first in November 2003 and then again in May 2004 following re-inspection when it became clear to Mr Lyttle that Mr Stewart and Ms Tee had undertaken no further investigation into the source of the leaks.[161] The presence of pre-existing damage was therefore obvious at the time of the first Lyttle report. As the Court of Appeal said in Pullar v R, it is not necessary to know the exact cause of the problem.20 It is sufficient to know there is a problem. Mr Stewart and Ms Tee certainly knew. By failing to investigate the source of the leaks, the first defendants turned a blind eye to the problem in the sense referred to inHamlin. That incidentally was the point at which economic loss occurred since knowledge of the existence of weathertightness issues in this building must be taken to have caused a fall in value.[162] There is no evidence in this case of fresh damage attributable to the plant-ons alone. On the contrary, the evidence was that the modifications had a neutral effect on moisture levels, or even potentially a positive effect.20 Pullar v R [2007] NZCA 389 at [19].[163] Thus, for the purpose of limitations, the latest the clock starts running is November 2003.21[164] It cannot be the case, in my view, that the six year limitation period restartsinsofar as the developer's liability is concerned (assuming Mr Hastie to be a developer for this purpose) each time that the house is sold. That would be to extend the liability arising from latent defects well beyond that intended by the Court inHamlin. It would mean effectively that the limitation period for developers was 10 years (the statutory long-stop under the Building Act), not six years.22[165] Mr Sherwood-King, for Mr Hastie, referred to the English Court of Appeal decision in Sparham-Souter v Town and Country Developments Ltd, in which that Court took the view that only the owner at the time of the loss – in this case the first defendants – can sue.23 Whether that is applicable law in New Zealand is a matter I need not address, since, as I have said, the Limitation Act 1950 does not give each new owner a fresh six year limitation period vis á vis the developer.[166] I find therefore that the plaintiffs' cause of action against Mr Hastie is out of time. In case I am wrong in that conclusion, I will, of course, go on to consider the remaining questions.Developer?[167] Developers owe a non-delegable duty of care to the original purchaser and subsequent purchasers.24 Mr Hastie was obviously the developer at the time of the original build according to the indicia referred to in the authorities.25 He controlled all aspects of the build and his motive throughout was strictly profit. The question in this case is whether Mr Hastie must still be regarded as the developer for the purpose of assessing liability in the context of his role in the 2003-2004 repairs.21 See generally Hamlin at 526 and Pullar at [13].22 Limitation Act 1950, s 4.23 Sparham-Souter v Town and Country Developments Ltd [1976] QB 858.24 See generally Mount Albert Borough v Johnson [1979] 2 NZLR 234 (CA).25 See Body Corporate 187820 v Auckland City Council (2005) NZCPR 536 which emphasisescontrol and profit motive as the key indicators. See also Body Corporate 199348 v NielsonHC Auckland CIV-2004-404-3989, 3 December 2008, affirming Body Corporate 188273 vLeuschke Group Architects Ltd (2007) 8 NZCPR 914.[168] The plaintiffs say that although Mr Hastie's status as developer derives fromthe original build, he was still exercising developer functions when arranging for the repairs in 2004. Mr Hastie, on the other hand, argues that by 2004, the necessary element of control had disappeared, having been taken over by the new owners, Mr Stewart and Ms Tee, and/or their technical adviser, Mr Lyttle. Mr Hastie made much of the fact that builders (he was of course a builder by trade) always take direction from building surveyors who are considered to be the true experts. Mr Hastie said that his role was very much subordinate to that of Mr Lyttle who was a building surveyor.[169] Counsel distinguished the Court of Appeal decision in Johnson v Watson, a case in which the developer was held responsible for repairs.26 In that case, Mr Sherwood-King argued, the developer was very clearly in control, but that was not so in the present case.Analysis[170] In my view, although Mr Hastie's role was much reduced in 2004, it would be artificial to decouple his work then from his 1999 role as developer. I do not see anything in the argument that builders are junior to, and controlled by, building surveyors. Mr Hastie was not involved in the repairs as a builder. He was there because he was a developer with on-going responsibilities. He came back (no questions asked, it appears) five years after the sale to fix a problem arising from the original build. He did this because he knew he was responsible as the developer. It would no doubt have been a great relief for him to discover that the proposal was for minor repairs in the first instance. His financial exposure would be minimal. This made it easy for him to play the relatively minor facilitative role that he did. But I have no doubt that he would have insisted on taking a more central role if Mr Lyttle had recommended a more expensive remediation and Mr Stewart had accepted that recommendation. As the default payer, Mr Hastie would have demanded a veto over work he considered unnecessary. It would be naïve to conclude that because he did not see the need to take control of the repair process, he had none. His power in26 Johnson v Watson [2003] 1 NZLR 626 (CA).2004 came from the fact that he would be paying. That in turn arose from the fact that he was the original developer. Those two facts are inseparable. That, in my view, is sufficient for Mr Hastie to be treated as carrying a non-delegable duty of care in 2004.Breach and causation[171] It is efficient to deal with these two headings together and briefly. It is clear that the repairs actually undertaken failed to solve the problem. All three experts agreed that the scope of Mr Lyttle's investigation and the remedial work facilitated by Mr Hastie was not fit for purpose or capable of achieving its objective. All also agreed (albeit with caveats in the case of Mr Butt and Mrs Johnson) that Mr Cooney's wider scope of work would have been equally applicable in 2004. Mr Butt's and Mrs Johnson's caveats were that they would have investigated furtherbefore committing to a particular scope of work. There was therefore consensus in that none of the three experts thought that Mr Lyttle had sufficiently investigated or understood the problem, even in 2004 terms.[172] Mr Hastie did accept that there should have been a sealant bead between the texture coating and the window sill, but he noted the possibility that that one had been applied in 2004 and removed in subsequent work.[173] Crucially, as Ronald Young J rightly concluded (with respect), Mr Lyttle did not represent to Mr Stewart and Ms Tee that his investigation was adequate.27 On the contrary, he made it clear that he had not found the cause of the problem. He said without knowledge of the cause, any remediation he suggested risked failing to solve the problem. In lay terms, his advice was:This modification I am recommending may well work, but it may not. I can give no guarantee without doing more investigative work.[174] This was a specific warning about fitness for purpose and likelihood of achieving the desired objective. The scope of both Mr Lyttle's and Mr Hastie's dutyof care must be seen in light of that very conditional advice. Mr Stewart was given27 Newton v Stewart, above n 2 at [33].sufficient information in relation to the risks involved to make his own choice and he chose the cheaper incremental option. He admitted that he had no appetite for a more costly investigation and did not trust Mr Lyttle's advice about that matter.Mr Lyttle was not brought back to complete his checks. Crucially, Mr Stewart specifically rejected the idea of instructing either Mr Hastie or Mr Lyttle to search for the source of the leaks.[175] Mr Stewart's recollection was that the decision had not been his alone, but aconsensus between himself, and Messrs Hastie and Lyttle – that he had, in reality, been led by the experts. I do not think that recollection is accurate when viewed in light of the wider factual context. First, that recollection is inconsistent with the terms of Mr Lyttle's written advice in which he emphasised the importance of sourcing the leak (in November) and expressed concern that this had not been done collaterally with the first repairs (in May). Second, Mr Stewart's recollection wasvague – more a sense of the result of the discussions than any specific recollection. Third, in response to questions from counsel, Mr Stewart in fact accepted that the decision was his to make, and he made it. He said he did not trust Mr Lyttle'spreference for more invasive (and more expensive) work. That was why Mr Lyttle was not brought back.[176] In my view, neither Mr Hastie nor Mr Lyttle can be held responsible in such circumstances. In Mr Hastie's case, that is either because he did not breach a duty much reduced by the conditional nature of the advice Mr Lyttle gave, or because after being twice cautioned by Mr Lyttle, Mr Stewart must be taken to have assumed full responsibility for the risks involved in the limited option he took.[177] There is accordingly either no breach or no causation.[178] I have addressed quantum elsewhere,28 and need not repeat that analysis here.28 See [134].Between first defendants and first third party (Mr Hastie)[179] Although the substantive facts in this contest mirror the preceding cause of action by the plaintiffs against Mr Hastie as third defendant, the applicable analysis necessarily differs. It is nonetheless possible to deal with these issues in summary form only. Of course the following analysis assumes that the plaintiffs have been successful against the first defendants. Contrary to that assumption, I have foundthat the plaintiffs' claim against the first defendants cannot succeed. Once again, I continue assuming for present purposes that my conclusion in this respect is wrong.Limitations[180] On the question of limitations, I agree with the parallel findings of Ronald Young J in respect of Mr Lyttle and VCNZ Limited that the claim by the first defendants is for indemnity in case of a successful claim against that party by the plaintiffs.29 The controlling provision is s 14 of the Limitation Act 1950. That section provides that where a claim is for indemnity, the cause of action accrueswhen the plaintiff triggers the third party's liability by obtaining judgment againstthe defendant. The relevant claim by the plaintiffs against the first defendants is, it will be recalled, in contract for breach of cl 6.2(5) of the 2004 agreement for sale and purchase. The first defendants in turn claim that:(a) any failure on their part to obtain a building consent was the fault either of Mr Hastie or Mr Lyttle;(b) it was Messrs Hastie and Lyttle's individual failure to either obtain the consent or advise the first defendants accordingly that caused the firstdefendants' omission; and(c) Mr Hastie was required either by an implied term in contract with the first defendants, or by his duty of care in tort to give the first defendants proper advice in that respect.29 Newton v Stewart above n 2 at [76].[181] Clearly the first defendants' claim against Mr Hastie is not an independent action, but intimately bound up with the proceedings between the plaintiffs and the first defendants. I agree with Ronald Young J that these facts are on all fours withCarter Holt Harvey Ltd v Genesis Power Ltd.30 That case involved the construction of a co-generation plant at the plaintiff's Kinleith mill. The defendant soughtrecourse to Rolls Royce with whom Genesis had contracted to design, manufacture, construct, install, test and commission the Kinleith co-generation plan on its behalf. Randerson J found that s 14 of the Limitation Act 1950 applied. The relationship between Genesis and Rolls Royce is essentially the same as the relationship between the first defendants in this case and Mr Hastie and Mr Lyttle.[182] It follows that time under s 14 has yet to start running for the purpose of thefirst defendants' cause of action against Mr Hastie.Duty and breach[183] I have already found that Mr Hastie continued in his role as developer when he met with Mr Stewart and Mr Lyttle in November 2003 and then took responsibility for arranging the plant-on modifications that Mr Lyttle had recommended. Both as developer and as the man in charge of getting the work done, he owed an independent duty to ensure that the Building Act 1991 requirements were complied with, including (if necessary) advising Mr Stewart that a consent was required for the modifications. The duty arose either out of the original contract pursuant to which Mr Hastie returned, in tort because Mr Hastie owed Mr Stewart a duty of care as developer, or by necessary implication of the Building Act 1991 itself. Mr Hastie's failure to either obtain a consent before arranging for the work to be done, or to advise Mr Stewart of the necessity for one, amounted to a breach of that duty.30 Carter Holt Harvey Ltd v Genesis Power Ltd HC Auckland CIV-2001-404-1974, 29 August2008 CIV-2001-404-1974, 29 August 2008. See Newton v Stewart, above n 2 at [73].Causation and contribution[184] I earlier found that causation cannot be proved by the plaintiffs against the first defendants because:first, the damage mostly pre-dated the repairs;second, the repairs may actually have helped; andthird, the connection between obtaining a consent and obtaining a weather-tight house was too remote.[185] Assuming that to be wrong for present purposes, there is no doubt that Mr Stewart was entirely reliant on the advice of Mr Hastie and Mr Lyttle – the experts – as to regulatory requirements and that it was only their failure to take the appropriate steps that caused Mr Stewart to breach cl 6.2(5).[186] Mr Hastie argues that if he must indemnify the first defendants or contribute to their liability, then the first defendants were guilty of substantial contributory negligence in their own right in failing to determine the source of the leak in 2004 in accordance with Mr Lyttle's advice. In light of my earlier analysis, that must be so. The first defendants failed to heed Mr Lyttle's clear warnings and must be taken tohave shouldered the greatest share of responsibility for the loss suffered by turning a blind eye to that advice.[187] In my view, Mr Stewart's choice entirely eclipses Mr Hastie's breach. Iwould set Mr Stewart's contributory negligence at 100 per cent. My reasons are set out above at [174]-[176].Between first defendants and second third party (Mr Lyttle)[188] Mr Lyttle was a sub-contractor to VCNZ. As earlier recited in the facts, Mr Lyttle's reports to the first defendants were signed off in the name of VCNZ.There was therefore no contract between the first defendants and Mr Lyttle, therelevant contract being with VCNZ. Mr Lyttle is therefore sued in negligent misstatement for his repair advice. The first significant issue in the contest between these parties is whether Ronald Young J's dismissal of the first defendants' claim against VCNZ resolves also that party's claim against Mr Lyttle – the issue now being res judicata. The second issue is whether Mr Lyttle owed the first defendants a duty of care and, if so, its scope. Finally, there are the issues of breach and causation.[189] I will address the question of duty first, then breach and causation before returning to res judicata.Duty[190] Mr Stewart and Ms Tee argue that Mr Lyttle owed a duty of care to them to:undertake his inspection work competently and professionally;use reasonable skill and care in investigating moisture levels and in providing advice on remedial work required;ensure that any work he recommended would be fit for purpose and meet Building Code requirements; andtell them if a building consent was needed for recommended works.[191] The first defendants argued that the special relationship of proximity necessary to establish the duty of care arose because Mr Lyttle was the individualactually undertaking the work for the first defendants' home. Mr Lyttle must have known that his recommendations would be accepted and followed and must be taken to have assumed responsibility thereby. In accordance with the principles in Hedley Byrne v Heller & Partners Ltd, Mr Lyttle was a professional engaged to help non- expert home owners.31 By taking the step of giving recommendations as to remediation, he must be taken to have assumed responsibility for them.31 Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 (HL).[192] For Mr Lyttle, it was argued that Mr Stewart made the decision on theremedial works to be undertaken. He took a calculated risk in deciding not to "pull the house down" but to conduct more minor repairs and to monitor the result. Mr Lyttle did not assume responsibility for the first defendants' choice. Anyresponsibility assumed had to be that of VCNZ – the courts being wary of parties suing in negligence where there is recourse to claims in breach of contract.32 In any event, even if a duty of care existed, it was limited in scope by the terms of the contract with VCNZ, and Mr Stewart accepted that he did not rely on Mr Lyttle in forming his view that the remedial works had indeed fixed the leaks. Rather, Mr Stewart himself said he relied on advice from Mr Hastie and Ian Vaughan of Realsure. Mr Vaughan confirmed that, although he could not look behind cladding, his limited investigation indicated no moisture issues were present after the repairs.[193] I agree with Mr Atkinson for Mr Lyttle that the controlling principles on the question of whether a duty of care is owed by a contractor are set out in Body Corporate 202254 v Taylor, a case in which the Court of Appeal took a restrictive view of collateral tort liability where a contract is in place. William Young P and Arnold J said:33Where bargains have gone wrong, but the law of contracts offers no effective remedy, those who are disappointed often resort to the law of negligence. The courts have been very reluctant to confer rights to sue in negligence which are inconsistent with (perhaps just in the sense of going beyond) the rights for which plaintiffs have bargained. As well, to be successful the plaintiff will usually have to show an assumption of personal responsibility by the defendant to the plaintiff which is akin to the acceptance of a contractual obligation.[194] I also agree that where facts somewhat similar to the present ones have arisen, this Court has rejected assumption of personal responsibility.34 The point of difference argued for by the first defendants is that in this case Mr Lyttle went beyond his brief in offering recommendations and this voluntary extension of his brief suggested that Mr Lyttle assumed responsibility.32 Body Corporate 202254 v Taylor [2008] NZCA 317.33 At [16].34 Lockie v North Shore City Council HC Auckland CIV-2007-404-6546, 6 July 2011 and NorthShore City Council v Wightman HC Auckland CIV-2010-404-3942, 30 November 2010.[195] I do not agree with that reasoning. The first defendants' contract was withVCNZ. When Mr Lyttle billed for his work, he billed in the name of that company. The invoice covered all of the work, including advice on repairs. There is nothing on the facts that takes this case outside the principle in Body Corporate 202254 v Taylor. It makes no difference that Mr Lyttle was not an employee of VCNZ but, in fact, an employee of his own company, to which VCNZ had contracted. The same principle must apply unless Mr Lyttle can be shown to have actively and personally assumed responsibility on the facts. There is no evidence of that in this case.[196] If that is wrong, and if a building consent was required for the plant-on works, Mr Lyttle owed an obligation to advise the first defendants of this fact. Once he decided to give advice on remediation and go beyond his brief of advising about moisture levels, he had an obligation to advise on regulatory requirements. He was the expert. The first defendants being lay people would not have had any idea of those requirements and would have been entirely reliant on Mr Lyttle's advice as a building surveyor. From those circumstances, such an obligation is easily and obviously implied. That said, he was not under an obligation to ensure that the recommended work would succeed in fixing the problem or meet Building Code weathertightness requirements. His own advice explicitly denied any such responsibility. As I have said, I agree with Mr Lyttle that it was Mr Stewart who opted for the cheap option and then relied on the advice of Mr Vaughan in (wrongly as it turns out) concluding that the plant-ons had solved the problem.[197] Consistently with earlier factual conclusions, however, the plaintiffs have failed to prove that this breach caused their loss.35 The loss is too remote. It follows that Mr Lyttle can have no liability to the first defendants if they are themselves not liable.[198] Whilst it is possible to argue that building consent advice was required and that obligation was breached, it is not at all possible to argue that the repair work itself was unfit for purpose or incapable of achieving its agreed objective. That is because the modification was never held out to be a definitive solution to the35 See [126]-[133].problem with this dwelling. It was never intended by Mr Lyttle to be anything other than an experiment.Res judicata[199] Because, having had the advantage of hearing the evidence for myself, I ultimately agree with Ronald Young J in the result, it is unnecessary for me to resolve the res judicata question. Nonetheless, I would have found that the principle does not apply in this case because the decision of Ronald Young J has been appealed and it is therefore not a final disposition of the matter in terms of Shiels v Blakeley.36 This point is made by Thomas J in Development Finance Corporation v Bielby.37 But for that appeal, however, I have no doubt that Mr Lyttle and VCNZ are privies. The claim against Mr Lyttle is identical in all respects to that against VCNZ on the merits. If Mr Lyttle did owe a duty of care to the first defendants, the doctrine of res judicata could therefore have applied, and it would not have been open to the first defendants to re-litigate their unsuccessful VCNZ claim against Mr Lyttle.ConclusionBetween the plaintiffs and the first defendants[200] The plaintiffs have standing to sue the first defendants.[201] The claim must fail because the first defendants did not breach the warranty in cl 6.2(5) of the agreement for sale and purchase. That, in turn, is because the repair work on the plant-ons did not require a building consent.[202] If this is incorrect, the damages claimed are too remote and there is insufficient proof of causation.36 Shiels v Blakeley [1986] 2 NZLR 262 (CA) at 266.37 Development Finance Corporation of New Zealand Ltd v Bielby [1991] 1 NZLR 587 at 593(HC).[203] If both of the above conclusions are incorrect, the plaintiffs are entitled to damages for cost of repairs in the amount I have indicated, and interest on the amount borrowed for overpayment.Between the plaintiffs and the second defendant (Mr Hammond)[204] The second defendant waived any affirmative defences available when he did not defend this proceeding.[205] Mr Hammond's report was negligent because it did not:(a) identify visible problems with the window sills;(b) identify seven areas of potential risk for leaks Mr Vaughan reported three weeks earlier; and(c) identify structural problems with the cladding.[206] The plaintiffs' claim fails because there is no causation. Even ifMr Hammond's report was competent, it would not have revealed anything to causethe plaintiffs to walk away from the purchase or to take any action that would have identified the extent of the moisture problem and halted the purchase.[207] If this is incorrect, my findings on damage in the action between the plaintiffs and the first defendants also apply here.Between the plaintiffs and the third defendant (Mr Hastie)[208] This claim fails because it is time-barred. The cause of action accrued when the problem was identified in the first Lyttle report sent in November 2003. Proceedings were filed after the six year time bar.[209] If this is incorrect, Mr Hastie was a developer and therefore did owe the plaintiffs a non-delegable duty of care as subsequent purchasers. But there is nobreach or causation. Mr Hastie did not breach his duty of care because it was much reduced by the conditional nature of the advice Mr Lyttle gave about how to fix the problem in 2003-2004. There is no causation because Mr Stewart assumed full responsibility for the risks involved in the remedial option he chose.Between the first defendants and the first third party (Mr Hastie)[210] This claim does not arise for the same reasons that the plaintiffs' claimagainst Mr Hastie as the third defendant failed. That is, there is insufficient proof ofbreach or causation. If, contrary to my conclusions, the plaintiffs' claim against thefirst defendants is successful, then as between the first defendants and Mr Hastie:(a) the claim is not time-barred because s 14 of the Limitation Act 2010 applies;(b) Mr Hastie owed an independent duty to ensure that Building Act 1991 requirements were complied with;(c) Mr Hastie's failure to obtain a consent before arranging for the plant- on modifications to be done, or to advise Mr Stewart of this requirement breached that duty; and(d) causation is established because Mr Stewart was entirely reliant on Mr Hastie's advice and it was only his failure to take appropriate steps that caused Mr Stewart to breach cl 6.2(5).[211] But the first defendants' claim fail because Mr Stewart did not heed Mr Lyttle's warnings about the need to determine the source of the leak in 2004. That failure entirely eclipses Mr Hastie's breach.Between the first defendants and the second third party (Mr Lyttle)[212] This claim fails. Mr Lyttle does not owe a duty of care to the first defendants because he did not personally and actively assume responsibility for his work. The first defendants' contract was with VCNZ.[213] If I am wrong, and Mr Lyttle did owe a duty of care then he would have been required to advise the first defendants of the requirement to obtain a building consent for the plant-on modifications.[214] Causation is not established because, as I concluded earlier in the action between the plaintiffs and the first defendants, the plaintiffs failed to prove that the failure to obtain a building consent caused their loss. The same reasoning applies here.[215] I also concluded that it is not possible to argue that the repair work was unfit for purpose or incapable of achieving its agreed objective. That is because the modification was not presented as a definitive solution to the problem.[216] The doctrine of res judicata does not apply. That is because the decision of Ronald Young J has been appealed so the matter has not been finally disposed of.[217] Costs are reserved.___________________________Williams J