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  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.  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  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.  The Adjudicator observed at  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.  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.  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.  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.  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.  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.  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.  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.  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 : 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.  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.  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.  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.  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.  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.  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.  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.  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 : 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.  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.  Caution should be exercised in differing from the assessment of the tribunal appealed from on questions involving assessments of credibility or technical expertise: , ,  Austin, Nichols & Co Inc v Stichting Lodestar  2 NZLR 141 and Rae v International Insurance Brokers (Nelson Marlborough) Limited  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  – .  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  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%.  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”.  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.  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.  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.  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.  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.  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.  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.  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  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%.  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.  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  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.  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  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 : ... 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.  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:  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.  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.  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.  This ground of appeal also fails. Conclusion  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  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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