MINISTER OF EDUCATION V ECONICORP HOLDINGS LTD COA CA160/2011

MINISTER OF EDUCATION V ECONICORP HOLDINGS LTD COA CA160/2011 12 September 2011IN THE COURT OF APPEAL OF NEW ZEALANDCA160/2011[2011] NZCA 450BETWEEN MINISTER OF EDUCATIONAppellantAND ECONICORP HOLDINGS LIMITEDFirst RespondentAND LHT LIMITEDSecond RespondentHearing: 11 May 2011Court: Glazebrook, Arnold and Harrison JJCounsel: M S R Palmer, R Chan and T M Bromwich for AppellantR J Hollman, S McLaughlin and J Little for First and SecondRespondentsJudgment: 12 September 2011 at 2:30 PMJUDGMENT OF THE COURTA The appeal is allowed.B The order of the High Court striking out the appellant's claim againstthe first respondent is quashed.C The first respondent must pay the appellant costs for a standard appeal on a band B basis plus usual disbursements. We certify for two counsel.REASONSArnold J [1]Glazebrook J [69]Harrison J (dissenting) [72]ARNOLD JTable of ContentsPara No.A defective school hall [1]Background to the building of the hall [6]Statutory context [7]Construction of the hall [13]The Minister's claim against Ahead [20]Determining whether a duty of care exists [23]The High Court decision [31]My evaluation [36]Proximity [40](i) Submissions [40](ii) Discussion [43]Policy [51](i) Submissions [51](ii) Discussion [54]Is it fair, just and reasonable to impose a duty? [63]Conclusion [64]Decision [68]A defective school hall[1] In 1999 the first respondent Econicorp Ltd, trading as Ahead Buildings (Ahead), built a hall at the Glenn Innes Primary School (the school) pursuant to acontract it had entered into with the school's Board of Trustees (the Board). Ahead engaged the second respondent, LHT Ltd (LHT), to provide design and other services in relation to the hall. The total cost of the project was $345,531.13.[2] Three or four years after the hall was completed it became apparent that it had serious defects in relation to its foundations, cladding, joinery, plumbing and drainage and had suffered serious damage as a consequence. The estimated cost of repair is $760,000. The Board considered that the defects resulted from negligence on the part of both Ahead and LHT and so, on 6 April 2006, it issued proceedings against them. It claimed in both contract and tort against Ahead and in tort against LHT.[3] The land and buildings that comprise the school are owned by the Crown through the appellant, the Minister of Education. The Board occupies them as if it were a lessee.1 Although the Crown owns the hall and, through the Ministry of Education, provided around 70 per cent of the funding for its construction, the Minister was not a party to the contract between Ahead and the Board. Nevertheless, on 31 October 2008 the Minister issued proceedings against Ahead and LHT, alleging that she had suffered loss as a result of their breach of the duty of care owedto her (in tort) in relation to designing and constructing the hall. The Minister'sproceedings were consolidated with those of the Board.[4] Ahead applied to strike out the claims against it or, in the alternative, sought summary judgment.2 Keane J struck out the Board's claim in contract, on the groundthat it was time barred, and the Minister's claim in tort, on the ground that Ahead did not owe the Minister a duty of care.3 Thus the Board's claim in tort against Aheadwas all that remained for determination at trial (besides, of course, the claim brought by the Board and the Minister against LHT).[5] The Minister now appeals against Keane J's decision to strike out her claimagainst Ahead (the Board has not appealed the decision to strike out its claim in contract). The issue is whether it is arguable that Ahead owed the Minister a duty to take reasonable care in building the hall. The Court was told that there are numerous similar cases awaiting the outcome of this appeal.Background to the building of the hall[6] To understand the events leading to the construction of the hall, it is necessary to understand the statutory context against which they occurred. Accordingly I begin with that.1 Education Act 1989, s 70(6).2 LHT did not apply to strike out the claims against it and so did not participate in the hearingsbefore Keane J or before this Court. Accordingly, the claims against it remain.3 Board of Trustees, Glen Innes Primary School v Ahead Buildings, an operating Division ofEconicorp Buildings Ltd HC Auckland CIV-2006-404-1884, 21 December 2009.Statutory context[7] A little over 20 years ago major changes were made to the way schools wereadministered as a result of the Government's adoption and implementation of the "Tomorrow's Schools" policy through the Education Act 1989 (the Act). Theblueprint for this reform was a report published in 1988 entitled Administering for Excellence (often referred to as the Picot report).4 Essentially, the intention of theTomorrow's Schools policy was to devolve more power (and therefore more responsibility) to parents and to local communities in respect of the operation and governance of local schools. The establishment of boards of trustees for schools was a key component of the reform. Boards were made up of parent representatives, the principal, a member of staff and a number of trustees (co-opted or appointed). Initially they were constituted simply under the Act. After the Crown Entities Act 2004 came into force, it applied to some extent to boards.5[8] When the hall was built, the Board was constituted simply under the Act. Ithad "complete discretion to control the management of the school as it [thought] fit"except to the extent that an Act or law provided otherwise.6 The Crown owned theschool's land and buildings and the Board occupied them as if under a lease,7although it did not pay any rent.[9] The terms on which boards occupied school property were set out in a document known as the Property Occupancy Document (POD), issued under s 70(1) of the Act. The relevant POD is that promulgated in 1990.8 It provided that the Ministry was to decide what capital works were required and only the Ministry or its agents could commission or let contracts for such works. The Board could not commission or carry out any capital works unless prior authorisation was received from the Ministry. Although the Board was responsible for general maintenance and operating costs, the Ministry was responsible for major maintenance (that is, maintenance that could be expected to occur outside a ten year cycle).4 Taskforce to Review Education Administration Administering For Excellence: EffectiveAdministration in Education (1988).5 Education Act 1989, s 65H.6 Section 75.7 Section 70(6).8 Subsequent PODs were promulgated in 1999 and 2007.[10] It seems, however, that over time the Ministry allowed for a greater degree of self-management on the part of boards in relation to capital works. In a circular dated 29 July 1993, the Ministry noted that it was a "policy requirement" that boardsobtain consent from the Ministry to, among other things, construct a new building atthe school. The circular then contained what is described as a "policy statement". Itsaid that buildings fell into three categories: those funded by the Ministry, those funded by the Ministry and boards jointly, and those funded by boards. It then set out responsibilities for operational, maintenance and insurance costs for each category of building.[11] Category 2 comprised buildings funded jointly by the Ministry and boards, and included halls. It provided that these buildings were owned by the Ministry and that operational, maintenance and insurance costs were to be met by either party depending on the nature of the facility. In relation to halls, it provided that these costs were met by the Ministry through general funding sources in respect of code entitlement buildings and by boards in respect of overcode buildings.9[12] In February 1996, the Ministry provided a further circular on propertymanagement to boards. It contained a section on "self-management" which meantthat boards were required to manage projects to completion. Self-management applied to three types of property project, including projects under the Financial Assistance Scheme. The circular described the Financial Assistance Scheme as follows:The Financial Assistance Scheme allows state boards of trustees to undertake building projects based on the concept of cost sharing between the Government, boards of trustees and the community. Boards submit projects for consideration and bid for funds appropriated by Government each year. For 1995/1996 the allocation was $10 million. Funds were allocated to 518 projects at 480 schools. Districts are allocated a portion of the national fund based on the needs of each district. Individual projects are selected by the DPCC, which rank all applications within criteria reflecting local needs. The scheme applies to integrated schools, but only in respect of projects relating to agreed deferred works.An annual circular to boards of trustees provides details of the scheme'spolicy and an application form.9 As I understand it, code entitlement buildings are buildings to which the school is entitledwhereas overcode buildings are buildings outside that entitlement. It is not clear to me whichcategory the school hall in the present case fell into.Projects approved under the Financial Assistance Scheme have always been self-managed by boards of trustees.The significance of this to the present case is that the hall was a category 2 building funded through the Financial Assistance Scheme.Construction of the hall[13] Following its successful application for assistance under the Financial Assistance Scheme, the Board entered into a Memorandum of Agreement with the Ministry for the building of the hall, dated 25 November 1998. The total cost of the project was noted to be $339,500, of which the Ministry agreed to provide $237,000 (both sums GST exclusive). In the Memorandum, the Board accepted that it wasresponsible for meeting the full cost of the project and that it would "supervise and administer the work and make progress payments to contractors and suppliers". Oncompletion, the Board undertook to provide the Ministry with a certificate of completion, a certificate of receipts and expenditure, copies of the building consent and the compliance certificate, and a photograph of the completed project.[14] It is not clear from the available material how the hall's operational, maintenance and insurance costs were to be met, although it seems likely that, because the school was decile 1, the Ministry made some extra allowance for thesecosts in the school's funding.[15] On 26 February 1999 the Board entered into a contract with Ahead for the construction of the hall. The overall cost was to be $345,531.13 (exclusive of GST). The contract described the Board as the principal and Ahead as the contractor. It made no mention of the Minister or the Ministry.[16] In early March 1999 the Ministry made an application to the Auckland City Council (the Council) for resource consent to build the hall. The application, which named Ahead as the builder and LHT as the designer of the hall, was granted on 26 March 1999.10 The Council forwarded a copy of its decision to Ahead under10 Under cl 5.11.2 of the construction contract obtaining consent was the obligation of theprincipal, that is, the Board.cover of letter dated 30 March 1999. The decision identified the Ministry as the party being advised that the Council had accepted the outline plan for the proposed works.[17] Subsequently, Ahead entered into a contract with LHT to provide a design report and specification for the construction of the hall. Around this time, Ahead started construction.[18] Between May and November 1999, Compass Building Certification Ltd (Compass)11 carried out inspections of the work and, on 26 November 1999, issued a code compliance certificate. By letter dated 20 April 2000, the Board forwarded the required documentation to the Ministry to show completion of the project.[19] In July 2003 Board members and others in the school community began to notice that the hall was subject to moisture problems. The Board commissioned an expert to carry out tests on site. The expert identified numerous defects which had resulted in water entering and damaging the building. The problems are so great that the hall has ceased to be useable and must essentially be rebuilt.The Minister's claim against Ahead[20] The first cause of action in the consolidated statement of claim is a claim by the Board and the Minister against Ahead in negligence. The plaintiffs allege thatAhead owed them "a duty of care to ensure that the Hall was built with reasonableskill and care, that any sub-contractors exercised such reasonable skill and care and that the building met the requirements of the Building Act 1991 and the Building Code".[21] The plaintiffs go on to allege, among other things, that:(a) as owner/occupier of the school they were members of a class who relied on builders to exercise reasonable care and were vulnerable to the risk of loss from a failure to do so;11 Compass is in liquidation and is not a party to these proceedings.(b) Ahead built the hall with defects and, as a consequence, the plaintiffs suffered a loss of amenity in the hall and a risk to the health and safety of its users, together with associated economic losses from the need to repair the hall both to restore its amenity and to mitigate the health and safety risk;(c) Ahead had failed to exercise reasonable care in constructing the building in specified respects and, as a consequence, the hall required repair.The plaintiffs allege that they have suffered economic loss as measured by the costs of repair, then estimated to be $760,000, and consequential costs and seek judgment for these costs.[22] The plaintiffs also bring a claim against LHT on the ground that it was negligent in performing its functions under the design contract. The plaintiffs seek the same relief against LHT as they seek against Ahead.Determining whether a duty of care exists[23] The way in which the existence of a duty of care is to be determined has been the subject of a number of recent decisions of the Supreme Court and this Court in various contexts. For present purposes, it is sufficient that I refer to one, this Court'sdecision in Rolls Royce New Zealand Ltd v Carter Holt Harvey Ltd.12[24] In that case Carter Holt Harvey Ltd (CHH) contracted with Electricity Corporation of New Zealand Ltd (ECNZ) to procure the design, manufacture,construction, purchase and installation of a cogeneration plant at CHH's Kinleithmill (the cogeneration contract). ECNZ then contracted Rolls Royce New Zealand Ltd (Rolls Royce) to design, construct and commission the plant (the turnkey contract). Although the cogeneration contract was entered into on the basis that Rolls Royce was to be the subcontractor, there was no direct contractual relationship between CHH and Rolls Royce.12 Rolls Royce New Zealand Ltd v Carter Holt Harvey Ltd [2005] 1 NZLR 324 (CA).[25] CHH considered that the plant was defective. It sued ECNZ's successor,Genesis Power Ltd (Genesis), for breach of contract and Rolls Royce in negligence.By the time the matter reached this Court, there were two aspects to CHH's claimagainst Rolls Royce. First, CHH alleged that Rolls Royce had been negligent in failing to take reasonable care to perform the turnkey contract. Second, CHH alleged that Rolls Royce had failed to use reasonable care and skill in making statements and giving advice concerning the design, installation and construction of the plant (the Hedley Byrne claim).13 This Court concluded that the first aspect should be struck out but the second allowed to proceed.[26] Delivering the judgment of the Court, Glazebrook J summarised the approach to be adopted when considering whether there should be a duty of care in the following terms:14The ultimate question when deciding whether a duty of care should be recognised in New Zealand is whether, in light of all the circumstances of the case, it is just and reasonable that such a duty be imposed. The focus is on two broad fields of inquiry but these provide only a framework rather than a straightjacket. The first area of inquiry is as to the degree of proximity or relationship between the parties. The second is whether there are other wider policy considerations that tend to negative or restrict or strengthen the existence of a duty in the particular class of case. At thissecond stage, the Court's inquiry is concerned with the effect of the recognition of a duty on other legal duties and, more generally, on society.[27] Glazebrook J went on to discuss what was involved in the inquiry into proximity. She noted that it was concerned with the nature of the relationship between the parties and involved more than simply forseeability. The Judgedescribed the proximity enquiry as "reflecting a balancing of the plaintiff's moral claim to compensation for avoidable harm and the defendant's moral claim to beprotected from undue restrictions on its freedom of action and from an undue burdenof legal responsibility".15 The extent to which those in the plaintiff's position werevulnerable was relevant, which could involve an assessment of whether the plaintiff has, or could have had, other remedies. The nature of the loss could also be taken into account, the courts being less willing to impose liability in cases of economic as opposed to physical loss. Finally, Glazebrook J noted that the contractual and13 Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 (HL).14 At [58].15 At [60].statutory context may be relevant to defining the nature of the relationship between the parties and could point either towards or away from a finding of proximity. This could give rise to wider issues of policy, which may merge into the policy assessment that is the second stage of the duty inquiry.[28] In discussing proximity in the context of the factual situation, Glazebrook J said:(a) The factors pointing towards proximity were:it was clearly foreseeable that a lack of reasonable care by Rolls Royce would cause CHH loss of the type that occurred;16 andthere was a great deal of contact between CHH and Rolls Royce before the turnkey contract was entered into.(b) The factors pointing against proximity were:The contractual structure, in particular the fact that there was no contractual relationship between CHH and Rolls Royce, although the cogeneration contract did foreshadow the turnkey contract and CHH and Rolls-Royce had considerable interaction before it was entered into.The parties were sophisticated commercial parties, bargaining from positions of equality, and they had made their own allocations of risk through the contractual provisions, allocations which were inconsistent with alleged liability in tort. The cogeneration contract and the turnkey contract were significantly different in terms of limitation of liability and dispute resolution.(c) The statutory context (the Building Act 1991) was a neutral factor.16 At [121] of the judgment Glazebrook J described foreseeability as "the main factor pointingtowards a duty".[29] Turning to policy considerations, Glazebrook J identified the principalconsideration as being the need for commercial certainty: "Commercial parties are normally entitled to expect that the risk allocation they have negotiated (and paid for) will not be disturbed by the Courts."17 Moreover, such parties are capable of looking after their own interests. The Judge referred to the fact that there had been numerous observations in the authorities that tort liability with regard to defects in quality will not extend to commercial construction cases.[30] Finally, the Judge considered whether it was fair and just to impose a duty. She said that, while the requirement for foreseeability was met, the detailed contractual structure pointed strongly against a finding of proximity. Although CHH well knew that the successful completion of the project depended on Rolls-Royce, it did not seek to contract directly with Rolls-Royce. The Court concluded that CHH'sclaim against Rolls-Royce should be struck out to the extent that it pleaded a duty owed by Rolls-Royce to take reasonable care to perform the turnkey contract. However, the Hedley Byrne claim was not struck out, although it required repleading.The High Court decision[31] In considering whether Ahead owed a duty of care to the Minister, Keane J, having referred to Rolls Royce, identified three features as pointing away from the existence of a duty.[32] First, there was the statutory context provided by the Act. The Judge considered that the Act made it clear that the Minister and the Board were not to be assimilated with one another. The Board was merely an occupier of the school premises with severely circumscribed rights whereas the Minister was the owner. The rights and remedies of the Board and the Minister were necessarily different.[33] Second, the Judge noted that while the Board had entered into a contract with Ahead under which Ahead undertook to carry out the construction work in a"tradesmanlike manner", the Minister had elected not to contract with Ahead. That17 At [118].feature, the Judge said, pointed away from Ahead assuming any duty of care to the Minister.[34] Third, addressing the relative vulnerabilities of the parties, the Judge said thatthe Ministry was "large, well resourced and no stranger to property transactions".18The Minister could have contracted with Ahead as to the terms on which the hall was to be constructed, but chose not to do so. This pointed against Ahead owing any duty to the Minister.[35] The Judge accepted that the respective losses of the Board and the Minister might be different, the former being only an occupier and the latter the owner. Although this consideration favoured imposing a duty to the Minister on Ahead, the other factors told against it. In the result, the Judge held, Ahead owed no duty to the Minister.My evaluation[36] I should make three points at the outset.[37] First, as already noted, Keane J struck out the Board's contract claim against Ahead on limitation grounds but allowed its claim in tort to proceed. There has been no appeal against that aspect of his decision. Accordingly, Ahead must be treated as having accepted that, despite the existence of the contract, it is at least arguable that the Board also has a claim against it in tort. This colours my approach. Given that issues relating to duty and negligence will be traversed at trial in any event, it is difficult to see what benefit there is in preventing the Minister from pursuing her claim at this stage, particularly as she is the owner of the hall and the Board simply its occupier. I return to this aspect at [65]–[66] below.[38] Second, naturally enough, counsel spent some time making submissions about the various decisions relating to the liability of councils to homeowners and others for negligence in conducting building inspections, issuing code compliance certificates and the like. While the reasoning in those cases is of assistance (for18 At [51].example, in identifying the range of relevant considerations), they concern councils, not builders. The significance of this is that, unlike builders (and others), councils were not primarily responsible for the defective buildings. Rather, they were alleged to have failed to exercise reasonable care in their inspection and other processes to identify deficiencies in work undertaken by others, such as architects, designers, builders and engineers.19 As a consequence the analysis of proximity and policy issues is likely to differ as between the two groups.[39] This leads on to the final point. Some time was spent in discussion of the distinction in the authorities between residential and non-residential or commercial buildings. Again, the courts undertook some of that analysis in the context of considering the liability of councils. The factors that come into play in that context may be of less (or no) relevance where it is the builder who is alleged to have been negligent, and other factors may be relevant. This is further complicated in the present case because, although the context is not a residential one, arguably neither is it a truly commercial one, as I discuss further below.Proximity(i) Submissions[40] For the Minister, Dr Palmer argued that foreseeability and reliance pointed strongly towards proximity in this case. He emphasised in particular that the Minister was the owner of the hall and had contributed a substantial proportion ofthe funding for it. Further, despite the devolution resulting from Tomorrow'sSchools, under the POD the decision-making power in relation to capital works rested with the Minister and not the Board. He noted that the Minister proposed to establish as a matter of fact that Ahead was aware of these arrangements (although this is not presently pleaded). Dr Palmer submitted that it would have been clearly foreseeable to Ahead that a want of care on its part could result in the hall requiring repair and that the Minister would have to fund any repair. Accordingly, it would have been foreseeable that the Minister was relying on Ahead to exercise reasonable19 See Queenstown Lakes District Council v Charterhall Trustees [2009] NZCA 374, [2009]3 NZLR 786 at [40].care in building the hall. Dr Palmer said that there was a direct nexus betweenAhead's alleged lack of care and the claimed loss.[41] In relation to vulnerability, Dr Palmer accepted that the Minister was not vulnerable in the sense that most home-owners are, but said that this did not detract from the closeness of the connection between the parties.[42] For Ahead, Mr Hollyman focussed on the question of vulnerability and theMinister's opportunities for self-protection. He drew attention to what this Court said in Rolls-Royce, to the effect that the availability of other mechanisms for protection is relevant to the assessment of vulnerability. Mr Hollyman noted that the Minister could have contracted with Ahead but chose not to. The Court should not impose a duty of care that was inconsistent with the way in which the parties had chosen to organise their affairs by means of contract. He identified a number of features of the contract between Ahead and the Board which he said were inconsistent with liability to the Minister in tort, in particular, the provisions as to liability.(ii) Discussion[43] As in Rolls-Royce,20 there can be little doubt that the requirement for foreseeability is met in this case. When it built the hall, Ahead must have realised that a lack of care on its part could result in the owner of the building having to incur costs to repair or replace the hall. It may be that Ahead knew about the ownership and occupancy arrangements between the Board and the Minister, as the Minister contends, or that it should be fixed with knowledge of such information as the legislation reveals about those arrangements. But be that as it may, on an objective basis, I consider it likely that a reasonable builder in Ahead's position would have foreseen that a lack of care on its part could result in loss to the hall's owner(whoever that was).20 At [101].[44] It is equally clear that there is a strong causal nexus between Ahead'sallegedly negligent conduct and the loss suffered. As a consequence, the critical issues in relation to proximity concern vulnerability and reliance.[45] The Minister is a sophisticated, well resourced party. She was well able toprotect the Crown's interests as property owner. She could, for example, have contracted directly with Ahead, or required the Board to include a provision in its contract with Ahead enabling the Minister to have the benefit of it.21 However, no such step was taken, presumably because of the self-management approach referred to earlier. That approach was consistent with the devolvement policy underlyingTomorrow's Schools. Arguably, it is inconsistent with her adoption of a policy ofdevolvement generally, and self-management of building projects in particular, that the Minister should to look to the law of tort for protection if a school building is built with defects. The deliberate distancing involved in devolvement and self- management runs counter to notions of proximity.[46] Moreover, as Mr Hollyman submitted, the contract between Ahead and the Board contained provisions that appear to be inconsistent with Ahead being liable to the Minister in tort. The form of contract was the Conditions of Contract for Building and Engineering Construction published by Standards New Zealand.22Under the contract an engineer was to be appointed who was to act both as an expertadvisor to and representative of the Board, giving directions to Ahead on the Board'sbehalf, and as an independent decision-maker under the contract. Importantly:(a) Ahead had certain contractual obligations in terms of remedying defects in the contract works.(b) Ahead was obliged to indemnify the Board against certain losses.(c) There was a 60 day period of defects liability following the date of practical completion.21 Contracts (Privity) Act 1982, s 4.22 NZS 3910: 1998.[47] On the other hand, the Tomorrow's Schools policy has been implementedthrough legislation. Successive Governments have maintained the policy because they consider that it serves the public interest. The objective of involving parents and local communities in the operation of local schools, even to the point of requiring them to raise funds for, and self-manage, certain building projects, does not mean that the Crown must be taken to have accepted that it could not look to a builder whose negligent construction resulted in damage to a school building that it owned. Put another way, the Minister's decision not to contract with Ahead does notnecessarily reflect a conscious decision about the allocation of risk and may reflect simply the underlying policy of encouraging local participation in decision-making. Accordingly, while the context is not residential, it may not be truly commercial either. This point is discussed further in the policy section of the judgment.[48] Further, despite Tomorrow's Schools, the Minister remained as owner of school land and buildings, was the principal funder of capital works and retained significant control over them, as the PODs indicate. Through the PODs and other documents, the Minister imposed various requirements on boards who were undertaking building projects and attempted to set in place mechanisms to provide some check on the work of builders. For example, there was a requirement that a project manager be retained where a board carried out a building project. These factors go to control and provide some support for an argument that the Minister necessarily (and reasonably) placed some reliance on Ahead exercising an appropriate degree of care and skill. Arguably, any such reliance was foreseeable, although whether it can properly be said that Ahead assumed any responsibility to the Minister will obviously be highly contentious.23[49] Finally, while Mr Hollyman submitted that the contract contained provisions that are inconsistent with Ahead owing a duty in tort to the Minister, that must also be true in relation to the Board, whose claim in tort against Ahead remains on foot. Moreover, in terms of the day to day working of the contract, Ahead would presumably have looked to the engineer rather than the Board as principal, so that to that extent at least the identity of the contracting party (whether the Board, the23 See Rolls Royce at [97]–[100].Minister or both) may not have been as significant as it might have been in another context.[50] On balance, I do not consider that I can confidently rule out as unarguable the contention that the proximity requirement is met in this case. Accordingly, I turn to policy.Policy(i) Submissions[51] Dr Palmer began by noting that several policy considerations that have in other cases pointed against a duty of care are not present in this case. First, the concern that regulatory authorities should be able to perform their regulatory functions in the public interest free of the threat of negligence actions does not arise.24 That concern in part explains the reluctance of the courts to extend Hamlin- type liability of councils beyond a residential setting. Second, any liability in the present case would not arise from an omission but from positive wrong-doing.25Third, the quality standards against which Ahead's conduct would be judged are relatively clear and objective, unlike the situation in Rolls-Royce.26[52] He then submitted that at least two policy considerations supported the imposition of a duty of care. The first was the public interest in discouraging the construction of defective buildings. The second was that this case did not involve indeterminate liability; rather, the burden of liability would be proportionate. Dr Palmer submitted that the fact that the loss could be characterised as economic loss was not decisive against liability, relying on North Shore City Council v Body Corporate 188529.27 He noted that, in the case of non-residential buildings, the courts have emphasised the ability of owners to look after their own interests by engaging experts. He argued that, while this analysis may have some force where24 See the discussion in Bank of New Zealand v New Zealand Exchange Ltd [2008] NZCA 25,[2009] 1 NZLR 53 at [74]–[90]. The Supreme Court declined to grant leave to appeal from thisdecision: see [2008] NZSC 54, [2009] 1 NZLR 145.25 See the discussion in Stephen Todd (ed) The Law of Torts in New Zealand (5th ed, Brookers,Wellington, 2009) at 278, 310–311.26 See Rolls-Royce at [67]–[69], [117].27 North Shore City Council v Body Corporate 188529 [2010] NZSC 158 at [30]councils are sought to be sued, it has little force where it is a builder that is being sued.[53] Mr Hollyman argued that policy considerations point against the imposition of liability. He identified four considerations in particular:(a) The need for commercial certainty. Mr Hollyman's argument seemedto have two aspects to it. First, he said that the parties had determined their rights and obligations through the contract. The Minister could easily have entered into a contract with Ahead but chose not to do so. In those circumstances, she should not be permitted to upset the balance by resorting to a claim in tort. Second, he argued that, while the New Zealand courts had recognised liability on the part of councils and builders to the owners of residences, this was an exceptional liability which should not be extended to the builders of commercial buildings.(b) Consistency with statutory developments. I took this to be a reference to the provisions of the Education Act that bear upon the status of boards as independent legal entities, their role in respect of schools and the relationship between the Minster and the boards (both generally and in relation to property projects).(c) Consistency with overseas jurisdictions in relation to commercial cases. Mr Hollyman referred in particular to the decision of the High Court of Australia in Woolcock Street Investments Pty Ltd v CDG Pty Ltd,28 which this Court relied on in Queenstown Lakes District Council v Charterhall Trustees Ltd when upholding the striking out of a lodge-owner's claim against a council for negligencein its regulatory functions.2928 Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 (HCA).29 Queenstown Lakes District Council v Charterhall Trustees Ltd [2009] NZCA 446, [2009]1 NZLR 460 at [45].(d) The Minister's loss is economic and therefore should not be recoverable.(ii) Discussion[54] Looking at the matter from the perspective of policy, I consider that there are two factors which point towards liability.[55] First, the liability alleged is owed by a builder to the owner of the property being built, albeit that the owner in this case was not party to the contract with the builder. A duty of care in such circumstances does not create a liability which is disproportionate to any wrongdoing. Indeed, in the residential context builders have been held to owe duties not only to the original owner but also to subsequent purchasers.30 In this sense, the duty of care alleged in the present case is orthodox.[56] Second, finding that Ahead as builder of the hall owes a duty of care to the Minister as owner does not seem to place an unfair restriction on Ahead's autonomy. It does not place an unfair burden on Ahead (or builders in general) in terms of taking precautions to avoid the risk, because builders are required to comply with the building code and similar standards in any event, and their obligations in this respect are generally reinforced in the contractual arrangements. Accordingly, tort liability in these circumstances tends to reinforce a builder's obligations.[57] There are, however, policy factors which arguably point the other way.[58] One is that, as Mr Hollyman submitted, the Minister's loss is economic. The New Zealand courts have accepted that this is a relevant consideration but have not regarded it as decisive.31 This is illustrated in the present case. The Board's loss isan economic one, yet its claim in tort against Ahead will proceed to trial, as will the claim of the Board and the Minister against LHT, which is also for economic loss. I30 See Bowen v Paramount Builders (Hamilton) Ltd [1977] 1 NZLR 1 (CA).31 South Pacific Manufacturing Co Ltd v New Zealand Security Consultants & Investigations Ltd[1992] 2 NZLR 282 (CA) at 296; North Shore City Council v Body Corporate 188529 (SunsetTerraces) [2010] NZSC 158, [2011] 2 NZLR 289 at [30].do not see this consideration as justifying striking out the Minister's claim at thisjuncture.[59] The most powerful policy consideration against imposing liability is the non- residential context. In Rolls-Royce, this Court gave particular weight to the commercial context (including the contractual matrix) within which the alleged failure to take care arose in determining that no duty of care was owed by Rolls- Royce to CHH. Understandably, Mr Hollyman gave considerable emphasis to the contractual/commercial considerations in the present case.[60] I acknowledge the force of the commercial/contractual considerations. Undoubtedly, they are powerful, particularly given the significance that Rolls Royceaccords to the existence of contracts.[61] However, I consider it is arguable that these considerations have less force in this particular case, for the following reasons:(a) Arguably this was not a truly commercial situation. School boards have management obligations, including as to building projects, not because they are commercial parties, or because they can be expected to act as if they were commercial parties, but because it is thought that there are significant public benefits, both to schools and their communities, from giving them such responsibilities, albeit subject to Ministry-imposed limitations and requirements. This is a policy assessment which has been legislatively implemented and has been maintained by successive Governments. Unlike the situation in Rolls- Royce, where the relationships between all the parties were clearly commercial, the relationship between the Minister and the Board is, arguably at least, not commercial. Rather, it is a public law relationship, in the sense that it is governed by statutory and other regulatory provisions which are structured to achieve public policy objectives. Precisely how, if at all, this should be accommodated within the duty analysis is, in my view, best left until the facts have been fully determined. In this context, it may be important to knowexactly how much Ahead knew about the nature of the arrangements between the Minister and the Board.(b) Although there was a construction contract between Ahead and the Board, and a design contract between Ahead and LHT, there was not as comprehensive a contractual matrix as existed in Rolls-Royce. Nor is it clear whether there was interaction between the Minister and Ahead prior to the contract being entered into of the type that occurred in Rolls-Royce. In Rolls-Royce the turnkey contract severely limited the liability of Rolls-Royce to Genesis, and CHH was aware of that limitation. Accordingly, it was difficult to say that there was an assumption of responsibility by Rolls-Royce or reasonable reliance by CHH. In the present case, there were, as Mr Hollyman submitted, limitation of liability clauses in the contract for construction of the hall. It is not clear from the available material exactly what the Minister knew of the detail of those contractual arrangements.[62] In summary, then, I accept that there are significant policy considerations pointing against imposing a duty of care to the Minister on Ahead. However, there are features, in particular the precise nature of the relationships between the Minister, the Board and Ahead, which raise a question as to the force of those considerations in the present case. That being so, I am not confidently able to say that the Minister's claim against Ahead must fail on policy grounds.Is it fair, just and reasonable to impose a duty?[63] The final step is to consider whether it is arguable that it is just and reasonable to impose a duty. This brings in many of the points that have already been made. For the reasons already expressed, I do not consider that it is clear beyond argument at this stage that it is not fair, just and reasonable that Ahead should owe a duty of care to the Minister as owner of the hall.Conclusion[64] The Court will only strike out a claim where it is certain that it cannot succeed.32 As I have said, I am not satisfied at this stage that the Minister's claimcannot succeed. Accordingly, I consider that it should not have been struck out.[65] Moreover, there is the point that I mentioned earlier,33 namely that theBoard's claim in tort against Ahead was not struck out and there has been no appealfrom that decision. As a consequence, a critical question in the Minister's claimagainst Ahead, namely, whether Ahead was negligent in constructing the hall, will be examined at trial in any event. But if the Board is successful in establishing negligence, an issue may then arise about the nature of the losses it is entitled to recover since it was not the owner of the property but only its occupier. As this Court noted in Riddell v Porteous,34 the courts have traditionally denied claims in respect of damaged property brought by persons who are not the owners but have a contractual right to use the property, although the position is likely to be different where the claimant has a possessory right to the property.35 Having the claims of both the Board and the Minister before it may assist the trial court in dealing with this aspect of the case.[66] Finally, both the Board and the Minister have claimed against LHT in negligence and have claimed the same sums by way of damages as they have from Ahead. As I have said, LHT did not seek to have the claim against it struck out so it remains. Accordingly, difficult issues in relation to apportionment may arise if the Minister is prevented at this stage from pursuing her claim in negligence against Ahead but the Board is not.[67] In my view, these considerations also work against striking out the Minister'sclaim at this point.32 See Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33] and [126].33 At [37] above.34 Riddell v Porteous [1999] 1 NZLR 1 (CA) at 9–10.35 Candlewood Navigation Corporation Ltd v Mitsui O.S.K. Lines Ltd (The Mineral Transporter)[1986] 1 AC 1 (PC) at 15–18. Leigh and Sillavan Ltd v Aliakmon Shipping Co Ltd [1986] AC785 (HL), per Lord Brandon at 809.Decision[68] In accordance with the decision of the majority, the appeal is allowed. Theorder striking out the Minister's claim against Ahead is quashed. The first respondent must pay the appellant costs for a standard appeal on a band B basis plus reasonable disbursements. We certify for two counsel.GLAZEBROOK J[69] I agree with Arnold J that the Minister's claim should not have been struckout, for the reasons he canvasses at [37] and [65]–[66].[70] At this stage I would prefer not to make any further comment on the meritswhich have been fully discussed in the remainder of Arnold J's judgment and in Harrison J's dissent.[71] I concur with the result set out at [68] of Arnold J's judgment.HARRISON JIntroduction[72] I would dismiss the appeal and uphold Keane J's decision.[73] While the contractual structure in this case is simpler, I agree with Mr Hollyman that its essence is materially the same as in Rolls Royce.36 In myjudgment the primary factor telling against imposing a duty in tort is the Minister'sinitiation of a formal contractual relationship between the Board and Ahead which deliberately excluded her participation. The structure adopted illustrates theMinister's recognition of a conventional allocation of risk and responsibility betweenthe interested parties to each of the two contracts. The Minister cannot now disregard it by resorting to a conceptual mechanism which was never intended to36 Rolls-Royce New Zealand Ltd v Carter Holt Harvey Ltd [2005] 1 NZLR 324 (CA).protect a well resourced entity who chose not to take available measures to look after her own interests.[74] I gratefully adopt Arnold J's summary of the statutory and contractualrelationships, of the decision in Rolls Royce and of the competing arguments. I agree with him that the local authority negligence cases are in a discrete category and do not assist materially here (see above at [38] and [39]). I agree also that the elements of reasonable foreseeability and close causal nexus are satisfied (see above at [43] and [44]). But they are not enough on their own, however strong, to meet the proximity requirement.37 Where I respectfully depart from Arnold J is within the analyses of proximity (see at [45]–[50] above) and policy (see at [61]–[62]). What is decisive, I think, is the absence of a special relationship of the kind which is characteristic of successful negligence claims for pure economic loss.38Contractual matrix[75] The contractual matrix is, in my judgment, the starting and end point. Through the POD and its evolution (see above at [9]–[12]) the Minister expressly allowed boards of trustees to carry out their own capital works. By clause 21.2 the POD provided:The Ministry encourages those Boards wishing to undertake improvements to the premises. Boards wishing to carry out work must submit a proposalfor the consideration of the Ministry's District Manager. The proposal must include a report from a registered architect or a registered structural engineer. The Ministry shall not be liable for any expenses arising from theproposed work, including consultants' fees, and travelling costs ofconsultants or the Ministry.[76] The Ministry's policy of self-management by boards was emphasised in later documents including the Financial Assistance Scheme (the FAS). As Mr Hollyman notes, the FAS prescribes a straighforward process whereby (1) the Board makes an application with accompanying documents (including a fixed quotation of costs estimate); (2) a memorandum of agreement is signed by the Minister and the Board;37 See Richardson J's explanation in South Pacific Manufacturing Co Ltd v New Zealand SecurityConsultants & Investigations Ltd [1992] 2 NZLR 282 (CA) at 306.38 See Lord Browne-Wilkinson's discussion of Nocton v Lord Ashburton [1914] AC 932 (HL) inWhite v Jones [1995] 2 AC 207 (HL) at 271–272.and (3) on completion of the commissioned work the Board is to provide a certificate of completion and associated documents. Significantly, the Ministry's nominated financial contribution to the project is to be "full and final".[77] Implementation of the Minister's policy relating to construction of the schoolhall required a two stage contractual process. The first was the agreement entered into between the Minister and the Board on 25 November 1998 (see above at [13]and [14]). That instrument contained the Board's specific declarations that:... the amount allocated by the Ministry ... together with the amount raised by the Board is the total cost of the above project and there will be no further claims on the Ministry ...... it is responsible for meeting the full cost of the work, including [consultants'] advice and ... will supervise and administer the work and make progress payments to contractors and suppliers.[78] The Board's declarations, sought no doubt by the Ministry, acknowledgedunequivocally that the Board alone was responsible for performance of theprincipal's duties under the building contract. Their existence was consistent withthe Minister's conscious process of devolving responsibility and thus liability to the boards. The Minister's financial contribution to the Board's liability for constructioncosts payable under the contract was capped. The Minister was signalling that if the costs overran for whatever reason, neither Ahead nor the Board could look to her for the shortfall. By this means the Minister was distancing herself from any risk of recourse by Ahead.[79] The second stage was the contract between the Board and Ahead entered into on 26 February 1999 (see above at [15] and [45]), in the form of NZS 3910: 1998"Conditions of Contract for Building and Civil Engineering Construction"supplemented by a 13 page schedule.39 It dealt comprehensively with the parties'respective rights and obligations. It was for a lump sum of $345,531 excluding GST.The Board's principal obligation was its liability to pay this amount uponcompletion. Ahead assumed responsibilities for loss or damage (see cl 5.6.3 General Conditions) and obligations to indemnify the Board against loss (cl 7.1 and39 The Property Management Guidelines of the revised POD circulated on 29 October 1999advised that all tender documents should be based on either NZS 3910 or the New ZealandInstitute of Architects Standard Conditions of Contract.especially 7.1.2). A 60 day defects liability period was also provided (a period notably less than the default period of three months under the generic terms of NZS 3910).[80] Significantly, the contractual relationship between the Board and Ahead was governed by s 4(1)(a) of the Limitation Act 1950.40 The code compliance certificatewas issued on 26 November 1999. That is when the builders' liability in contractbegan to run for limitation purposes. As Keane J found, without challenge by the Board on appeal, that six year period expired on 26 November 2005. The expiry of the limitation period in tort is more problematic because time may not have commenced to run until 2003. As this case illustrates, imposing a duty of care in tort to a third party, where liability depends on the date of knowledge of the breach rather than of its occurrence, exposes a contractor to greater risk and deprives it of a protection against liability to which it was entitled in contract.Proximity[81] I can best explain my difference with Arnold J by reference to his three grounds for upholding the arguability of the proximity element. First, it does notmatter, in my judgment, whether the Minister's decision not to contract with Ahead might reflect an underlying policy of encouraging local participation and decision making rather than a conscious decision about the allocation of risk (see above at [47]). The inquiry for the purpose of determining whether a duty is owed is circumstantial. The question is whether, viewed objectively for the purposes of imposing a duty upon Ahead, the legal structure initiated by the Minister can be construed as a conscious recognition by all parties that responsibilities would be assumed and risks allocated according to the two separate contractual relationships. The Minister cannot contend that the Court should now impose a duty because her actions may have been dictated by her own policy considerations. Her subjective motives appear irrelevant.[82] In this respect, I accept that the legal relationships in this case do not follow the orthodox chain of separate construction contracts between owner, builder and40 See Keane J's discussion on this point at [7] and [20]–[30].sub-contracting entities. But the same principles apply to disqualify a claim by A against C whose only linkage is through separate contracts with B.[83] Some of the Minister's correspondence after the defects were discovered inlate 2003 is instructive in this context. Its tenor was unmistakable. Her representatives considered the dispute to be of a solely contractual nature betweenthe Board and Ahead. For example, one of her officers wrote to the school'sprincipal in November 2004 pointing out that the standard procedure was for the Board to initiate and fund legal action if necessary. In a later email to Ahead on 14 February 2006, another Ministry employee stated (in my view correctly) that:The matter is a contractual one between your company and the Board ... the Ministry has no relationship with your company in this matter and cannot therefore formally intervene.We have a separate and ongoing relationship with [the] Board [which] has sought our (corporate) advice, we have responded and the next actions are between you; the two parties to the dispute. I look forward to receiving a report on the final resolution.[84] Secondly, a similar answer applies to the control and reliance factor (see above at [48]). The Minister does not and could not plead communication of specific reliance to Ahead. That leaves only general reliance,41 which is judicially recognised (for example) in the very limited context of the Hamlin type liability: that is where a section of the community has an expectation that a territorial authority vested with wide statutory powers to control building work will act with skill andcare. Legal responsibility is based upon the authority's knowledge of generaldependence.42 By contrast, the law does not recognise an extension of that expectation to commercial property owners or to an entity like a Minister of the Crown, because they are well able to protect themselves.4341 See Stovin v Wise [1996] 1 AC 923 (HL) at 953–954 per Lord Hoffmann.42 Williams v Mt Eden Borough Council [1986] 1 NZBLC 102,544 (HC) at 551 per Casey J,approved in Invercargill City Council v Hamlin [1996] 1 NZLR 513 (PC) at 517; InvercargillCity Council v Hamlin [1994] 3 NZLR 513 (CA) at 524–529 per Richardson J; Sutherland ShireCouncil v Heyman (1985) 157 CLR 424 at 464 per Mason J.43 Queenstown Lakes District Council v Charterhall Trustees Ltd [2009] NZCA 374, [2009] 3NZLR 786 at [39] and [45].[85] Thirdly, I do not attach any importance to the part played by the engineer (above at [49]). I cannot understand how his presence might possibly justify imposing a duty of care on the builder to a third party.[86] Decisively, in my judgment, there was an insufficient degree of closeness or directness between the Minister and Ahead to satisfy the proximity criterion. Without it, a special relationship does not exist. In fact, there was no direct relationship whatsoever. By contrast, in Rolls Royce there was a high degree of direct contact, pointing towards proximity, but still not sufficient to justify a duty.44Assumption of responsibility[87] Various criteria, identified as alternatives to the orthodox proximity analysis, have attracted recent prominence in the search for a touchstone for imposing tortious liability to third parties for pure economic loss. One is the assumption of responsibility, which postulates a relationship having all the indicia of contract except for consideration.45 Its absence, in the analogous case of R M Turton & Co Ltd (In Liquidation) v Kerslake & Partners,46 was decisive. It is the justification for the discrete lines of liability in the negligent misstatement and disappointed beneficiary cases.47 The assumption of responsibility criterion illustrates howstrictly the law has contained a contractor's liability in negligence to a third party foreconomic loss.[88] In my judgment, when viewed objectively, the relevant circumstances negate any suggestion that Ahead assumed a responsibility to the Minister to properly perform its contractual obligations. In South Pacific Manufacturing Richardson J affirmed that, where contracts cover two separate relationships, they ordinarily control the allocation of risk unless special circumstances dictate a right of action in tort.48 His observation was made within the policy analysis. But it was effectively an44 See Rolls-Royce at [102].45 Customs and Excise Commissioners v Barclays Bank plc [2006] UKHL 28, [2007] 1 AC 181 at[4] per Lord Bingham.46 R M Turton & Co Ltd (in liq) v Kerslake and Partners [2000] 3 NZLR 406 (CA) at [36].47 Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 (HL); White v Jones [1995] 2AC 207 (HL).48 South Pacific Manufacturing Co Ltd v New Zealand Security Consultants & Investigations Ltd[1992] 2 NZLR 282 (CA) at 308 and 309.affirmation that in South Pacific Manufacturing the private investigator engaged by an insurer did not undertake a responsibility to the insured party. By contrast, the same point was made in Rolls Royce within the proximity enquiry.49 In Turton this Court opined that the traditional two stage enquiry was inappropriate in this type of case.50[89] Irrespective of the stage at which the evaluation was made, all three analogous authorities in this Court – Rolls Royce, South Pacific Manufacturing andTurton – gave predominant weight to the contractual structure and its associated allocation of risk. That factor negated any notion of an assumption of responsibility by the primary contractor. And it tells forcefully against imposing a duty where a party like the Minister had an opportunity to obtain full protection by contracting directly with Ahead, but chose to forego it.[90] In this respect I cannot accept Dr Palmer's rationale that the Minister'sparticipation in the building contract would have been inefficient and unreasonable. His submission has no apparent legal or evidential foundation; for example, there is no suggestion that the Minister sought to participate and was denied. Nor can I follow Dr Palmer's argument that it is for the builder to contract out of a liability intort if it did not wish to bear this risk. In the absence of direct dealing between them, a contractor cannot effectively issue a disclaimer to a non-contracting third party.51Vulnerability[91] Vulnerability is the other, currently emphasised, touchstone for liability. It was an unspoken origin of the modern law of tort formulated in Donoghue v Stevenson.52 Foreseeability of loss was the mechanism employed in that case and inGrant v Australian Knitting Mills53 to extend a manufacturer's obligation to thirdparties who were unable to protect themselves against the risk of physical harm from49 Rolls Royce at [103]–[114].50 R M Turton & Co Ltd at [35] and [36].51 Subject to the exceptions recognising the effect of a contractual disclaimer in the negligentmisstatement cases: see Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 (HC).52 Donoghue v Stevenson [1932] 1 AC 562 (HL).53 Grant v Australian Knitting Mills Ltd [1936] 1 AC 85 (PC).defective goods. Those decisions were the forerunners of modern consumer protection legislation. But they are far removed from this type of case.[92] While the plaintiff's vulnerability is not a sufficient condition for liability, its absence strongly contradicts a duty where economic loss is claimed. As the High Court of Australia noted in Woolcock Street Investments Pty Ltd v CDG Pty Ltd,54vulnerability does not mean only that a party is likely to suffer damage in theabsence of reasonable care. Its additional component is that party's inability to protect itself from the consequences of another's negligence. In Woolcock, rather like Charterhall, the Court did not impose a duty to protect a third party purchaser of a commercial building who could never be characterised as vulnerable.[93] Dr Palmer submits that the Minister's ownership interest was vulnerable to the builder's negligence, thereby creating a community expectation of reliance onproper performance of contractual standards. I do not accept that submission. It is not the vulnerability of the interest itself, but the vulnerability of the claimant in the sense of an inability to protect itself, that is relevant.[94] As Keane J observed in this case, the Ministry is:55... large, well resourced and no stranger to property transactions ... [and] could readily have chosen to contract with Ahead to set the terms on which the hall was to be constructed and to protect the Crown from any want ofcare on Ahead's part and any resulting damage and loss.[95] In this respect it is noteworthy that the Minister seeks to recover the contractual measure of replacement cost. He claims damages of $760,000 and pleads a duty of care:... to ensure that the hall was building with reasonable skill and care, that any subcontractors exercised such reasonable skill and care and that the building met the requirements of the Building Act 1991 and the building code.54 Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16, (2005) 216 CLR 515at 530.55 Board of Trustees, Glen Innes Primary School v Ahead Buildings HC Auckland CIV-2006-404-1884, 21 December 2009.[96] As this Court noted in Rolls Royce,56 the Minister's pleading amounts to anallegation of negligent performance of a duty which is essentially contractual in nature and cannot be owed to a third party.Policy[97] I add that, even if the Minister had satisfied the proximity threshold, I would find against the existence of a duty on policy grounds. In orthodox terms, the purpose of the policy inquiry is to determine whether any factors within that category might negate a prima facie duty.57 Policy factors cannot of themselves operate to create a duty where the proximity threshold is not met.[98] In the dissenting words of Lord Brandon in Junior Books Ltd v Veitchi Co Ltd:58... there is no sound policy reason for substituting the wider scope of the duty of care put forward by [the building owners] for the more restricted scope of such duty put forward by [the subcontractor]. The effect of accepting the[building owners'] contention with regard to the scope of the duty involvedwould be, in substance, to create, as between two persons who are not in any contractual relationship with each other, obligations of one of those two persons to the other which are only really appropriate as between persons who do have such a relationship between them.[99] To similar effect, Glazebrook J observed in Rolls Royce that:59Policy factors also point strongly against there being a duty of care in this case. These are sophisticated commercial parties capable of looking after their own interests. The Courts have no need to interfere in bargains they have freely arrived at.[100] Also I agree with Mr Hollyman that the imposition of a duty would undermine commercial certainty. It would also open the gate to other classes of claims. For example, a mortgagee whose security was reduced in value by abuilder's negligence could invoke the same line of reasoning. Its claim would only be differentiated by a possible degree of remoteness.56 Rolls Royce New Zealand Ltd v Carter Holt Harvey Ltd [2005] 1 NZLR 324 (CA) at [66].57 South Pacific Manufacturing Co Ltd v New Zealand Security Consultants & Investigations Ltd[1992] 2 NZLR 282 (CA) at 293–294.58 Junior Books Ltd v Veitchi Co Ltd [1983] 1 AC 520 (HL) at 551.59 Rolls-Royce at [123].[101] Another factor is material within the policy inquiry. The denial of a tortious duty to the Minister will not necessarily leave the school interests without a remedyfor the builder's alleged negligence. Ahead does not challenge Keane J's finding thatit arguably owed a duty in tort to the Board concurrent with its contractual obligations.60 The Board has an apparently stronger case than the Minister. Those two parties claim the same loss. They cannot have a double recovery, although Iaccept that Ahead might possibly argue on a strict reliance theory that the Board'sright of recovery is limited to its actual contribution to the building costs. TheMinister's participation in this proceeding seems unnecessary.Conclusion[102] When these strands are drawn together, there is no principled justification for what would be a massive extension of the very limited, and for that reason exceptional, categories of cases where the Courts have recognised a contractor'sliability in tort to a third party for economic loss.61 The analogous authorities point in the other direction. While I am not suggesting that the fact that a claim is for economic loss is in itself disqualifying or determinative,62 the cases themselves recognise its exceptional nature. It cannot be arguable, I think, that in this case the builder should owe a duty of care in tort to protect a sophisticated third party against loss, even if loss is reasonably foreseeable. And I do not think that result is unfair, unjust or unreasonable.[103] I should add that I am satisfied that no benefit will be gained from deferring afinal decision on the arguability of the Minister's claim until trial. Counsel haveidentified all the circumstances relevant to determining whether a duty of care should be owed. The principles are settled. The competing arguments have been fully ventilated. It is difficult to understand what more might be available from evidence given at trial.60 English law does not recognise a builder's concurrent liability: see Robinson v P E Jones(Contractors) Ltd [2011] EWCA Civ 9.61 See Sutherland Shire Council v Heyman (1985) 157 CLR 424 per Brennan J at 481, approved inCaparo Industries Plc v Dickman [1990] 2 AC 605 (HL) at 618 per Lord Bridge.62 North Shore City Council v Body Corporate 188529 (Sunset Terraces) [2010] NZSC 158, [2011]NZLR 289 at [30].[104] Accordingly I would dismiss the appeal.Solicitors:Crown Law Office, Wellington for AppellantCockroft d'Young Moorhouse, Auckland for First and Second Respondents