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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2009-404

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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2009-404 Powered By Docstoc
					IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
                                                                     CIV 2009-404-003465



                BETWEEN                      KENNETH HARRIS
                                             Appellant

                AND                          RICHARD KENNETH SELL
                                             RENEE MARIE SELL
                                             First Respondents

                AND                          AUCKLAND CITY COUNCIL
                                             Second Respondent

                AND                          GARY SMITH
                                             Third Respondent


Hearing:        4 November 2009

Counsel:        PJ Dalkie for Appellant
                DM Carden for First Respondents
                HM Rice for Second Respondent
                No appearance for Third Respondent

Judgment:       22 December 2009


                       JUDGMENT OF RODNEY HANSEN J


              This judgment was delivered by me on 22 December 2009 at 3.00 pm,
                        pursuant to Rule 11.5 of the High Court Rules.


                                  Registrar/Deputy Registrar

                                 Date: ………………………….


Solicitors:     Dyer Whitechurch, P O Box 5547, Wellesley Street, Auckland 1141
                Craig Griffin and Lord, P O Box 9049, Newmarket, Auckland 1149

Copy to:        PJ Dalkie, P O Box 392, Shortland Street, Auckland 1140
                DM Carden, P O Box 5444, Wellesley Street, Auckland 1141
                Heaney & Co, P O Box 105391, Auckland 1143




HARRIS V SELL And Ors HC AK CIV 2009-404-003465 [22 December 2009]
Introduction


[1]    In 1996 – 97 the appellant (Mr Harris) built a house for the first respondents
(Mr and Mrs Sell) in Rukutai Street, Orakei. It turned out to be a leaky home. Mr
and Mrs Sell brought a claim before the Weathertight Homes Tribunal. They were
awarded a total of $202,082.23 after allowing 10% for their contributory negligence.
The Adjudicator held that Mr Harris and the Auckland City Council (the Council)
were jointly and severally liable for the entire claim and the fourth respondent (Mr
Smith), a concrete layer, to be liable for 25% of the claim. She determined that Mr
Harris was entitled to a contribution of 35% from the Council and Mr Smith; the
Council to be entitled to a contribution of 80% from Messrs Harris and Smith; and
Mr Smith to be entitled to a contribution of 10% from Mr Harris and the Council.


[2]    Mr Harris appeals against the Adjudicator’s findings on liability, contribution
and contributory negligence.     The Council cross-appeals against the finding on
contributory negligence.


First ground of appeal – terms of contract


[3]    The central issue in the claim by Mr and Mrs Sell against Mr Harris was the
terms on which he undertook the building work. The Sells’ position was that they
contracted with him to carry out the building work and to supervise the construction
of the property. Mr Harris maintained that he was only ever engaged as a labour-
only contractor and that Mrs Sell was the head contractor and project manager. His
position was that he could be liable only for building work that he actually carried
out and that he had no responsibility for supervision. The Adjudicator found in
favour of the Sells. The first ground of appeal is that this finding was contrary to the
evidence.


[4]    The Adjudicator observed at [80] that her decision on this issue involved an
assessment of the credibility of Mrs Sell and Mr Harris. Mrs Sell was directly
involved in making arrangements with Mr Harris. She agreed to take responsibility
for dealing with subcontractors, including arranging for them to be on site and
paying them. However, she was clear that Mr Harris undertook to be responsible for
all on-site supervision.


[5]       The Adjudicator preferred Mrs Sell’s evidence. She found her “quite clear
and consistent in her answers”. She had a clear memory of key aspects of what had
occurred and was willing to admit when she could not recall or remember. On the
other hand, she found Mr Harris’ evidence to be inconsistent with his witness brief.


[6]       The Adjudicator concluded that where the evidence of Mr Harris and
Mrs Sell was in conflict, generally she preferred the evidence of Mrs Sell. She found
the agreement was that Mr Harris would build and provide on-site supervision for
the construction of the dwelling in accordance with the plans and specifications. To
assist Mr Harris to reduce costs, Mrs Sell agreed to undertake the paperwork,
organise the sub-trades to be on site, and arrange and attend to payment of all sub-
trades.


[7]       Mr Dalkie was critical of some of the observations made by the Adjudicator
in the course of reaching her credibility finding. I intend no disrespect to him in not
addressing each of the instances he relied on.         The Adjudicator’s reasons for
generally preferring the evidence of Mrs Sell were considered, cogent and, where
appropriate, grounded in the evidence. Mr Dalkie was, for example, obliged to
accept that the Adjudicator correctly identified three instances in which Mr Harris’
evidence at the hearing contradicted his witness brief. One of these involved his
recanting evidence given in his witness brief that Mrs Sell arranged all Council
inspections.     At the hearing, when presented with documentary evidence, he
conceded that he had arranged at least the first four inspections.         This was a
significant concession given his position that he had no supervisory role at the site.


[8]       Mr Dalkie put great stock on the evidence of a Mrs Christine Freestone
concerning a meeting between Mrs Sell and Mr Harris. Mrs Freestone is the sister-
in-law of Mr Harris and she and Mrs Sell were close friends. She actually suggested
Mr Harris to Mrs Sell as a prospective builder. In her evidence, Mrs Freestone was
adamant that Mr Harris did not supervise the job.
[9]    Mrs Freestone said that the meeting in question took place at her house. She
said her husband was also present. Mrs Sell said the meeting took place at Mr
Harris’ house after she had picked up Mr Freestone and they had driven together to
Mr Harris’ house.


[10]   Mr Dalkie relied on a diary note by Mrs Sell as contradicting her evidence.
The entry (for 15 August 1996) read:

       7.45 p.m. Murray [Freestone] and Ken’s [Harris].

At the foot of the page there was the entry:

       Go to Murray’s to see Ken, 7.45 p.m.

[11]   In cross-examination Mr Dalkie put to Mrs Sell that the diary entry
established that she had met with Mr Harris at the Freestones’ house.                  She
maintained that her evidence was correct and that the diary did not contradict it. She
denied a suggestion that she had sought to change the venue of the meeting so as to
exclude Mrs Freestone who maintained that Mr Harris said that he would build the
house on a labour-only basis.


[12]   The Adjudicator said that she did not find the evidence of Mr or Mrs
Freestone of any real assistance on the issue of the agreement. She said at [89]:

       While Mrs Freestone was adamant in her recollections, they were based
       almost solely on her interpretation and/or recollection of conversations she
       had with Mrs Sell some 13 years previously. She was rarely, if ever, on site
       during the construction and what she did have first-hand knowledge of, was
       not necessarily inconsistent with Mrs Sell’s role as Mrs Sell described it.
       She referred to Mrs Sell doing a lot of running around of having a folder
       with her with quotes and other information in it. She was not able to provide
       any evidence of Mrs Sell providing any on site management or supervision.

[13]   In the face of the Adjudicator’s assessment of Mrs Freestone’s evidence,
there is no room to reject the Adjudicator’s finding on the primary issue. The
difference between Mrs Sell and Mrs Freestone as to the venue of the meeting seems
to me to be very much a subsidiary issue and it is not surprising that the Adjudicator
made no specific finding on it. Indeed, it may even be a complete red herring as it is
by no means clear that they were talking about the same meeting. Mrs Freestone
refers in her evidence to “a meeting at my house during that period”. In any event,
the evidence that she heard Mr Harris say that he would build the house on a labour-
only basis is not clearly referenced to a meeting. Her evidence on that issue is, as the
Adjudicator observes, based on conversations she had 13 years ago with Mrs Sell.


[14]   Mr Dalkie referred to the following further actions of Mrs Sell which he
submitted were inconsistent with what she said in evidence and which the
Adjudicator failed to take into account in assessing the evidence:


       Daily entries in her diary of subcontractors she had dealt with.


       The arrangements she made for contractors’ insurance.


       References to labour-only contractors in the specifications.


       A diary entry showing the sequence in which sub-trades would work.


[15]   Mr Dalkie submitted that the extensive notes Mrs Sell made in her diary,
which included lists of potential contractors and quotes, showed someone who was
well and truly involved in every aspect of the development of the works. That may
be so but it is not inconsistent with the finding that Mr Harris took responsibility for
supervision. After all, it was never Mrs Sell’s position that she would simply stand
by. Although expecting Mr Harris to carry out a supervisory role, it was agreed from
the outset that she would be actively involved: dealing with subcontractors,
obtaining quotes and attending to payments.


[16]   The Adjudicator gave consideration to the implications of Mrs Sell taking out
builders’ risk insurance. She accepted that normally such insurance is taken out by
the builder but accepted Mrs Sell’s evidence that Mr Harris instructed her to arrange
it. She did not find that to be inconsistent with the arrangement she had made with
Mr Harris.


[17]   Similarly, she found that references to labour-only contractors in the
specifications had no significance in determining the respective roles of Mrs Sell and
Mr     Harris.       She     observed     that    they    were     obviously      standard
specifications/contractual documents. The contractual parts were never completed
and there was room for variation as to the type of contract that could be entered into.


[18]   Mrs Sell said in evidence that the diary entries she made showing the
sequence in which sub-trades would work was written down at the first meeting she
had with Mr Harris on 15 August 1996. Mr Dalkie submitted that, because of the
amount of detail in the entry, including particular dates for work to be done three
months in the future, the entry must have been made at a later date. He argued that
Mrs Sell used the diary entry to show a greater level of involvement by Mr Harris
than was otherwise justified on the evidence and complained that the Adjudicator
made no findings on this issue.


[19]   A fact-finder is not, of course, expected to make findings on every
contentious issue of fact. It is sufficient if the reasons for preferring the evidence of
one witness to another are reviewed in general terms and the key elements of the
evidence relied on. The evidence the Adjudicator was required to consider was
extensive. The transcript alone ran to 461 pages. There were many hundred pages
of documentary exhibits. The decision of the Adjudicator comprised 165 paragraphs
on 50 pages. That part of the decision which reviewed and decided on the respective
roles of Mrs Sell and Mr Harris is carefully reasoned. The appellant has been unable
to point to any flaw or omission which could undermine her key findings.


[20]   The Adjudicator recognised that Mrs Sell played a much more active role in
the building project than would normally be the case. She said at [94]:

       In summary therefore, I accept that Mrs Sell obtained quotes, ordered
       materials, organised and paid the contractors and arranged for them to be on
       site at appropriate times. I also accept that she applied for the building
       consent and arranged insurance for the construction site. However she did
       not provide any on-site supervision but contracted Mr Harris to build the
       house and provide on-site supervision. The role Mrs Sell assumed in the
       construction of this house was not that of head contractor, supervisor or
       project manager as she was not responsible for, or in charge of, the
       construction side of the project. She contracted Mr Harris to build the house
       and supervise the construction.
[21]   The finding that Mr Harris assumed responsibility to supervise is not only
supported by the evidence but accords with common sense. It is common ground
that Mrs Sell was not competent to supervise the job. Indeed, no-one but Mr Harris
was in a position to properly do so. It seems to me most unlikely that Mrs Sell
would have chosen to assume that responsibility in such circumstances.


[22]   Caution should be exercised in differing from the assessment of the tribunal
appealed from on questions involving assessments of credibility or technical
expertise: [5], [13], [17] Austin, Nichols & Co Inc v Stichting Lodestar [2008] 2
NZLR 141 and Rae v International Insurance Brokers (Nelson Marlborough)
Limited [1998] 3 NZLR 190 (CA). The principle applies to appeals under the
Weathertight Homes Resolution Services Act 2002 (the Act): see the discussion in
Hartley v Balemi & Ors HC AK CIV 2006-404-002589 29 March 2007 Stevens J at
[39] – [53].


[23]   The Adjudicator’s finding on the terms of the contract was solidly grounded
in the evidence and reached only after a comprehensive and reasoned consideration
of the essential facts. There are no grounds to disturb it.


Second ground of appeal – ground levels


[24]   The second ground of appeal concerns the Adjudicator’s findings in relation
to the contribution made by ground clearances to the dwelling leaking. It was
common ground, and the Adjudicator accepted, that insufficient clearance between
ground level and the bottom of the exterior wall was a significant contributor to the
dwelling leaking.    Contact between the ground and the exterior walls allowed
moisture ingress due to capillary action into the timber frame and bottom plates. The
Adjudicator found this was a particular problem where the driveway was laid and
where retaining walls were built at the rear of the garage. In other areas she found
that soft landscaping carried out by Mr and Mrs Sell after construction was
completed contributed to the damage. She found it to be a minor contributing cause
and fixed contributory negligence at 10%.
[25]    For Mr Harris, it was submitted that the contribution of Mr and Mrs Sell
should have been assessed at a much higher figure. 60% was initially suggested. In
oral submissions that was modified to “more than a third”.


[26]    The Adjudicator found that Mr Harris was responsible for the inadequate
ground clearance where the driveway abutted the house. She found that Mr Harris
should either have ensured that ground levels were correctly fixed before the
driveway was laid personally, or if, as Mr Harris claimed, they were set by the
concrete layer, by Mr Harris in his supervisory capacity.


[27]    Mr Harris denied that either he or a builder working under him were
responsible for the construction of the retaining walls that were identified as the
other main contributor to damage from inadequate clearances. Mrs Sell did not see
the work being done as she was unwell at the time. She gave evidence that the work
must have been completed during the period she was not on site as it had been done
when she returned. On the basis of her evidence, the Adjudicator found that, on the
balance of probabilities, either Mr Harris did the work or arranged for someone else
to do it.


[28]    Mr Dalkie submitted there was insufficient evidence to support the finding
that there was contact between Mr Harris and Mr Smith, the concrete layer.
Mr Harris denied in evidence that there had been contact between the two.
Mr Dalkie claimed that, as Mrs Sell did not have direct knowledge of a meeting
between Messrs Harris and Smith, the Adjudicator should not have preferred her
evidence on the issue.


[29]    The Adjudicator’s finding on this issue needs to be set in a wider context.
The evidence is clear that Mr Harris established the ground levels when the house
was set out. A photograph taken before the driveway was laid confirms that the
preparation work he had done or supervised included setting the levels for the
driveway.


[30]    The Adjudicator recognised that the initial levels he set were not
determinative of the final driveway levels; the concrete layer could have excavated
further to lay them at a lower level.       Her crucial finding was that Mr Harris’
supervisory role required that he ensure that any necessary adjustments to the
driveway levels were done.


[31]      I consider there was a sufficient evidential basis for the Adjudicator to find
that a meeting between Mr Harris and Mr Smith had taken place. She was entitled to
prefer Mrs Sell’s evidence on this issue. The fact that Mrs Sell could not assert first-
hand knowledge did not preclude such a finding. Although Mr Harris was not on
site when the driveway was laid, it seems most improbable that the concrete layer
would have embarked on his part of the project without any prior discussion with Mr
Harris.


[32]      I also note that Mr Harris returned to the site after the driveway was laid to
carry out remedial work. In his supervisory capacity, he then had the opportunity to
check on ground clearances adjacent to the driveway. This would have provided an
alternative basis for a finding that he breached his duty to Mr and Mrs Sell.


[33]      Mr Dalkie submitted that the Adjudicator was wrong to rely on Mrs Sell’s
statement of belief in finding that Mr Harris built or arranged for the building of the
retaining walls. However, it seems to me that she was entitled to find that Mr Harris
was responsible for their construction in the absence of some tenable alternative
explanation. It was accepted that the retaining walls must have been constructed
before the driveway was laid. Mr Harris and his assistant did not actually deny
building the walls; they said they could not recall whether they did. But neither
suggested who else might have built them.           In the circumstances, Mrs Sell’s
evidence was in accordance with the only reasonably available inference.


Third ground of appeal - contributory negligence



Ground clearance


[34]      As earlier noted, the Adjudicator accepted that the soft landscaping carried
out following construction of the house resulted in inadequate ground clearance
which caused damage to other areas of the house. The Adjudicator allowed for this
by assessing contributory negligence by Mr and Mrs Sell at 10%.


[35]   Mr Dalkie submitted the 10% allowance was inadequate. His argument was
supported by Ms Rice for the Council. The Council accepted that it was negligent in
failing to detect the ground clearance problems caused by the driveway and retaining
walls. It also accepted the Tribunal’s apportionment of responsibility between the
Council, Mr Harris and Mr Smith.        The Council’s concern is confined to the
allowance made for the contributory negligence of the Sells.


[36]   The Adjudicator found that the main issues involving ground levels were
caused by the driveway and retaining walls. She noted that the expert witness for
Mr Harris, Dr Kelvin Walls, believed ground levels were a significant contributing
factor on other elevations. However, the expert for Mr and Mrs Sell, Mr Patrick
O’Hagan, and the independent assessor appointed under the Act, Mr Mark Hadley,
considered ground levels would be only a minor consideration on other walls. They
noted that moisture levels were high around the bottom plate only at the corners of
the dwelling on other elevations and not consistently along the walls.              The
Adjudicator noted their view that, if ground levels had been a significant
contributing cause, they would have expected higher moisture readings along the
walls as well. This evidence plainly formed the basis of her conclusion at [31] that
ground clearances were a significant contributing factor to the dwelling leaking,
particularly in relation to the driveway at the rear of the garage. In contrast, she
described ground clearance as simply “a contributing factor” on other elevations.


[37]   The evidence, to which I was referred, fully supported the Adjudicator’s
assessment. Mr O’Hagan and Mr Hadley agreed that ground level issues did not
arise in any significant way in the eastern elevation and Mr Hadley said there were
no ground level issues in the south eastern corner where substantial damage was
found. There was evidence (accepted by the Sells) that soft landscaping contributed
to damage at the eastern corner of the north wall. I was not, however, referred to any
evidence which would cause me to doubt that the Adjudicator made inadequate
allowance for the contribution made by Mr and Mrs Sells to the damage through the
later landscaping work.
Maintenance


[38]   For Mr Harris and the Council, it was further submitted that the Adjudicator
was wrong to reject lack of maintenance by Mr and Mrs Sell as a contributing cause
to the dwelling leaking. Dr Walls, for Mr Harris, told the hearing that if regular and
careful maintenance had been carried out, the dwelling would not have leaked. The
Adjudicator recorded that Mr O’Hagan, the expert called by Mr and Mrs Sell, and
the independent assessor, Mr Hadley, disagreed. She rejected a submission by
Mr Dalkie that Mr Hadley had accepted that the lack of maintenance was a
significant issue. She said at [49]:

       ... I have re-listened to those parts of the hearing where maintenance was
       discussed and do not accept Mr Dalkie’s submission. Mr Hadley
       specifically ruled out maintenance as being a contributing factor and said
       that he did not believe that additional maintenance would have prevented the
       problems. He noted that this had been a new house and there was no
       reasonable expectation that the owners would need to carry maintenance
       over and above what they did, which was clean the house down every 18
       months to 2 years. He also noted that if you look at the leaks listed and at
       the consequential damage, more maintenance would not have made any
       significant difference.

[39]   She went on to say that Mr Hadley doubted whether more stringent
inspections and filling of cracks as soon as they appeared would have confined or
reduced the damage. Mr O’Hagan had said the damage was such that the house must
have leaked as soon as it was built. The Adjudicator concluded:

       [51]    I accordingly do not accept that the lack of maintenance was a key
       contributing cause to the dwelling leaking. Any regular maintenance work
       that the claimants could reasonably have undertaken would not have
       addressed the key causes to the dwelling leaking. Whilst more proactive
       maintenance after 2004 would have reduced some of the damage, the
       complete reclad was inevitable as was the adjustment of ground levels in key
       areas. I therefore conclude that the lack of maintenance has not caused the
       damage or significantly increased the cost of the remedial work.

[40]   Mr Dalkie submitted that the Adjudicator’s findings were wrong as:


       Both Mr Hadley and Dr Walls had said that lack of maintenance was a
       significant factor; and
       Mr Hadley said that between 2005, when he first inspected the property, and
       2008, continued deterioration led to the necessity for a reclad because of:


       [i]     A change in Council regulations to prohibit the monolithic cladding
               which was permitted at the time of construction; and


       [ii]    The lack of maintenance in the meantime.


[41]   The Adjudicator preferred the evidence of Mr O’Hagan and Mr Hadley to
Dr Walls so his contrary opinion is irrelevant. Read in its full context, Mr Hadley’s
evidence supports the Adjudicator’s findings.          Indeed, at the conclusion of
questioning in the hot tub, he was asked by counsel for the Council:

       Suppose the legislation never changed and it was three years on. Was the
       deterioration so bad that you would have to have said, overwhelmingly, the
       best course is a complete re-clad in 2005?

To this question he answered:

       Most likely.

Later in his evidence he said that in his view maintenance, by which he referred to
painting over the cracks, could actually make the problem worse and, in his opinion,
would not have made a significant difference to the outcome.


[42]   This ground of appeal also fails.


Conclusion


[43]   The Adjudicator’s decision impressed me as careful, comprehensive and well
reasoned. Those aspects of it which were examined on appeal easily survived testing
scrutiny. In my view, the parties were well served by a decision-making process
which thoroughly examined and determined all matters in issue.
Result


[44]     The appeal is dismissed. Mr Harris and the Council must pay Mr and Mrs
Sell costs on a category 2 band B basis.

				
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