Body Corporate 90247 v Wellington City Council [2014] NZHC 295 PDF

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY CIV 2011-485-710 NZHC 295 BETWEEN BODY CORPORATE 90247...

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY CIV 2011-485-710 NZHC 295 BETWEEN BODY CORPORATE 90247 First Plaintiff AND MANFRINI LIMITED Second Plaintiff AND DAVID JAMES McCOLL AND BRENDA ELLEN McCOLL Third Plaintiffs AND TEMPLAR RESIDENTIAL HOLDINGS LIMITED Fourth Plaintiff AND REDWOOD COLLIER PROPERTIES LIMITED Fifth Plaintiff AND WELLINGTON CITY COUNCIL First Defendant AND DAYTONA DEVELOPMENTS LIMITED (IN LIQUIDATION) Second Defendant Hearing: 29 October - 1 November 2014 4 November - 8 November 2014 11 November - 15 November 2014 18 November - 19 November 2014 Counsel: D J S Parker and A V Williamson for First to Fifth Plaintiffs L J Taylor QC and T C Wood for First Defendant Judgment: 27 February 2014 JUDGMENT OF RONALD YOUNG J (Recalled Judgment: 21 March 2014) BODY CORPORATE 90247 v MANFRINI LIMITED NZHC 295 [21 March 2014]  Table of Contents Paragraph No. Introduction Background The pleadings Limitation Scope of the CCC: preliminary issues Did the 1996 building consent (15997) lapse? Was the 1996 building consent (15997) cancelled? What did building consent 71330 and therefore the June 2001 CCC relate to? Retrospective Building Consent Policy Communications with Mr Tait Content of the consent and CCC documents Conclusions in relation to scope of the CCCs Deck CCC Negligent inspections Was the Council negligent in issuing the CCC relating to building consent 71330? Scope of inspection What defects should have been seen at Glenmore Street by a competent building inspector? Bay window flashing Window and door flashing Deck construction Monolithic cladding Steel beam repair  Roof Negligence and damage caused Retaining walls Limitation Were the retaining walls required for a CCC? Is the north east slope likely to collapse in an earthquake? Likelihood of severe damage or injury North west slope Under floor retaining wall Solicitor’s negligence and contributory negligence Solicitors’ negligence Contributory negligence of solicitors Plaintiffs’ liability for contributory negligence of solicitors Private building inspector’s negligence Causation Building maintenance Summary so far Measure of damages Loss based on diminution of value Repair measure of damages Betterment Post-remediation stigma Discrete valuation issues (a) Replacement of the internal framing and consequential replacement  (b) Remediation and design costs (c) The carpet/vinyl (d) The drapes (e) The roof (f) Investigation cost (g) Steel beam repair Peer review Damages General damages Daytona Developments Summary Costs Introduction This case involves four leaky town house units built between 1996 and 2000 in Glenmore Street, Wellington. There is no doubt the units suffer from serious water entry and resulting damage. The Body Corporate and the owners of the four town houses now sue the Wellington City Council (the Council) and Daytona Developments Limited (Daytona) (the “final” builder and now in liquidation) in negligence. Daytona has not participated in the hearing. Broadly, the Glenmore Street unit owners (Glenmore) allege the Council owed a duty of care to them in issuing building consents, undertaking inspections and issuing code compliance certificates (CCC) with respect to their town houses. Glenmore’s case is that the Council was negligent in its inspection of the building work and in granting a CCC, because the building did not in fact meet the requirements of the Building Code and the Building Act 1991. The owners say the measure of damages is the remedial work (including the repair costs and consultants’ costs) to bring the building up to code compliance. This cost, together with a general damages claim, the owners say totals $2,165,958.10. In addition to denying it was negligent the Council raises affirmative defences including limitation, causation and contributory negligence. The Council also challenges the amount of the owners’ claims and the basis on which they measure damages. The Council say the appropriate measure of damages is the difference in value between the town houses as they were with all defects known and the value without those defects. Background On 26 January 1996 Remarkable Residential Housing Limited applied to the Council for a Project Information Memorandum (PIM) and a building consent to build four town houses at 14C Glenmore Street, Wellington. The application included plans and a number of engineering calculations for those plans. The town houses were some distance up a driveway from Glenmore Street. They were terraced houses on a sloping site. Unit 1 at the eastern end of the site was the lowest. Each unit was higher than the next as the ground sloped uphill towards Unit 4 at the western end of the site. Each had their own garage at ground level and then three further levels of living space. Below and above these town houses at 14C Glenmore Street were other similar town house developments. The exterior cladding was mostly rusticated weatherboards with some monolithic cladding especially in the exterior junctions between the town houses. The roof was made of iron. There were aluminium windows. On the northern side of the property there was a steep bank which had been cut from the existing topography. It began below Unit 1 and at its highest point was 4.7 m above the building platform of Unit 1. The height of the cutting gradually decreased as it went uphill and then rose again on the north west corner. In addition, a cutting had been made at the rear of the property (its western side) beyond Unit 4 and a retaining wall constructed there. Part of the cut was unretained and its highest point was about five metres above the building platform. In May 1996 a building consent (15997) was issued by the Council for the construction of the units. Building then commenced. The original Council inspection records are no longer available but they have been (at least partially) converted to computer records. They were produced at the hearing. There appear to have been 24 inspections of the building by the Council between April 1996 and March 1997. The inspections from late 1996 until March 1997 were all related to plumbing and drainage. The last inspection of the structure itself was in December 1996. This was the pre-line inspection. Such an inspection is made when most of the exterior work is complete, including the roof and external cladding but before internal linings are fixed. The only issue noted by the Council inspectors at the time as preventing approval of the pre-line building work was that the framing timber was too wet to fix the interior lining. After the inspection of 12 March 1997 there was a gap of over three years until the next inspection of the building by the Council. In the intervening three years it appears that the original developer was unable to complete the project. The land was sold to a company called Tavern One Limited and the building work contracted to Daytona, the second defendant. Tavern One, which had borrowed money from a law firm, also had financial difficulties. The law firm finally took over the completion of the work and the sale of the units. In September 2000 an application was made by Tavern One to the Council for a building consent for the construction of a retaining wall on the property. The application was granted. Shortly afterwards a complaint was made to the Council about a deck being built at the rear of Unit 4 without building consent. A Council inspector went to the property to discover that the four units had been almost completed in the interim although, as I have noted, no inspection had taken place since March 1997. The Council then issued notice to rectify (NTR) number C69193, dated 4 October 2000.1 The notice told the owner that (amongst other things) the building consent2 had lapsed, the deck built on Unit 4 had been built without building consent and. Units 1 to 4 “appeared to have been fully completed even though the building consent has lapsed”. The NTR went on to say in the “Particulars of Contravention”: You are given notice that you must apply for a retrospective building consent to authorise the works set out in clause 1 above within 30 days of this notice. On the same day, the owner was told that the building work would have to stop. A few days later (on 9 October 2000) Mr Tait, who was a Council inspector in the Environmental Control Business Unit (ECBU), wrote to the owner of the property. He said that the purpose of the letter was to “clarify the situation in regards to building consents”. He said that the owner would “need to apply for a retrospective building consent and a building consent to satisfy the requirements of the NTR”. He then went on to describe in particular what was required. He said that once the relevant consent had been obtained the Council would be in a position to carry out an inspection of the dwellings “when required”. 1 Building Act 1991, s 42. 2 Consent 15997 issued in May 1996.  One of the issues of concern to Mr Tait was the 100 mm x 100 mm posts in the deck attached to Unit 4. He noted that the normal sized posts would be 125 mm x 125 mm and that the Council would need certification from an engineer to accept the lesser posts. By 17 October Steven Young & Associates, Wellington engineers, provided a certificate to the Council which said the 100 mm x 100 mm posts were acceptable and the concrete stairs to the deck were adequately reinforced. They attached a plan to illustrate their advice. On 18 October 2000 the Council received an application for a PIM and building consent by Tavern One relating to 14C Glenmore Street. It related to a consent for the deck, mostly completed, to the rear of Unit 4. A copy of the building consent application subsequently discovered in these proceedings by the Council had a notation which said “deck consent PS 4 to be issued not retro. See Mark Scully”. Mr Scully was a Council employee. Building consent number 70437 was granted for the new deck. At about this time Mr Brodie, who was the principal of Tavern One and Daytona, was convicted (after prosecution by the Council) of constructing apartments in Taranaki Street other than in accordance with a building consent. Mr Brodie appealed unsuccessfully to the High Court against the conviction. On 15 November 2000 Tavern One made an application for another PIM and building consent. This was allocated number 71330. The work described was “plumbing and building to complete project to Units 1 to 4 for code compliance certificate”. The value of the work was said to be $10,000 and there was a description of the plumbing and building work (primarily the installation of handrails) to be completed. Attached to the application was a set of plans for the construction of the town houses. Two of the plans had notations as to the installation of hand rails and plumbing work.  In its NTR the Council had mentioned a retrospective building consent. It seems that the Wellington City Council was the only local authority in New Zealand that had a “retrospective” building consent process and as part of this process the Council had developed a retrospective building consent policy (dated March 1998). In his letter dated 9 October 2000 Mr Tait told the owners that they would need to apply for both retrospective and prospective building consents to comply with the NTR. Mr Tait’s evidence was that he told the owner shortly before sending that letter there was no possibility of obtaining a retrospective building consent for the work done from the beginning of construction of the building until the lapse of the building consent. The Council said that the original building consent had lapsed in 1999. And so Mr Tait claimed he had told the owners of Glenmore that there could never be a building consent for the work done from 1996 to 1999. This was when a significant majority of the construction work on the units took place. Building consent 71330 was granted on 29 November 2000. The Council then carried out inspections under 71330 between January and May 2001. Mr Tane was responsible for inspecting the plumbing, storm water and drainage and Mr Tait the building work. The first inspection by Mr Tait was on 11 January 2001 and the inspections appear to have finished by 1 June 2001 when a CCC was issued for building consent 71330 by the Council as well as for 70437, the deck building consent. Mr Tait gave evidence at trial. He understandably had limited recollection of the precise details of the inspections carried out by him in 2001. The items noted as inspected by Mr Tane and Mr Tait in both the Council inspection check lists and in correspondence from Mr Tait to the owners included: rustic plugs in the weather boards, the cladding and jointing system, gully traps, sealing around the doors and windows, deck nailing, glazing of the bay windows, drainage metal, the fibre cement cladding and the storm water system.  The two inspectors carried out approximately 15 inspections. Eventually an interim CCC was issued on 9 May 2001 for 71330. It was said to be “interim for units 2, 3, 4 excluding the decks and unit 1 only”. On 1 June 2001 CCCs were issued for 70431 for the deck attached to Unit 4 and for 71330. The exact terms of the 71330 CCC are matters of some importance in this case and I will return to the content of that CCC later in this judgment. The four units are now owned by Manfrini Limited (Unit 1), Mr and Mrs McColl (Unit 2), Templar Residential Holdings Limited (Unit 3), and Redwood Colliers Properties Limited (Unit 4). Three of the four units are therefore currently held as investment properties while Mr and Mrs McColl reside in Unit 2. Dr Richard Mulgan is a shareholder of Templar Residential Holdings Limited which owns Unit 3 at Glenmore Street. He gave evidence at trial. Unit 3 was purchased by Dr Mulgan and his wife as trustees of the Mulgan Family Trust in June 2001 when it was first built. The trust then onsold the unit to the Mulgans’ company, Templar, in July 2002. The conveyancing file relating to the purchase has been destroyed but there is some evidence as to the surrounding circumstances of the purchase. The Mulgan Family Trust obtained a Land Information Memorandum (LIM) when it purchased the property. That LIM identified the lapse of the building consent during the course of the construction of the property. Dr Mulgan said that because of his concern about the building consent and the LIM one of his options was to cancel the contract. However, he decided to make his own enquiries with the Council before deciding whether to proceed with the contract. As a result of his discussion with a Council employee, he decided not to cancel the contract but to delay settling the transaction until a CCC was issued. Eventually Dr Mulgan settled the transaction after he believed a CCC had been issued for Unit 3. Dr Mulgan said the first time he became aware that there were significant defects affecting his unit and other units at 14C Glenmore Street, was in 2011 when he got a call from the owner of Unit 1, Mrs Ryan (of Manfrini Limited), who told him significant watertightness problems had been discovered in the building.  Mr and Mrs McColl own Unit 2. They purchased it new in August 2000 as an investment property. Their sale and purchase agreement was conditional upon the provision of a CCC and title to the unit. There was considerable delay in the provision of both the title and a CCC. In October 2000 the McColls were told that a CCC was expected to be issued in the next few days. That did not happen. It wasn’t until May 2001 that the McColls’ solicitor received an interim CCC to Unit 2. It excluded the deck. It suggested that a CCC would be available the following week. Eventually the deck was completed and a CCC issued on 1 June 2001. Settlement then occurred. Mr and Mrs McColl now live in the unit. They first knew about the problems with the unit when they were told by Mrs Ryan about the leaks. The next purchasers in time were Mr and Mrs Collier through their company Redwood Collier Properties Limited. They own Unit 4 at 14C Glenmore Street. They purchased the unit as an investment property. Prior to entering into a sale and purchase agreement, Mrs Collier employed the New Zealand House Inspection Company to provide a building inspection report. The report said overall the unit was in average to good condition. She also had a builder check the unit. He expressed no concern. Mrs Collier took the view that the defects identified in the building report could be easily repaired and the condition of the unit improved by maintenance. Redwood agreed to buy the unit. The agreement for sale and purchase was conditional upon a Council CCC for the property. There was some delay in settlement relating to the CCC as well as finance. The solicitor approved the CCC for the property and the sale eventually proceeded. Mr and Mrs Collier did not obtain a LIM. The Colliers also first heard of the concerns about watertightness from Mrs Ryan in 2011.  Mrs Ryan is a shareholder (together with her husband) in Manfrini Limited which owns Unit 1. She is the chairperson of the Body Corporate Committee. She purchased Unit 1 in 2010. Manfrini hired a property and investment company to find suitable investment properties to purchase. They identified 14C Glenmore Street as a potential suitable investment. Manfrini’s agreement for sale and purchase was conditional upon a building surveyor’s report as well as a LIM. Mrs Ryan searched the Council’s file with respect to the building. In addition, a building surveyor’s report was obtained. It did not identify any leaky building problems. Mrs Ryan made a number of enquiries arising from the LIM. She consulted her solicitor about the LIM and the CCC. Eventually the purchase proceeded. In January 2011 Manfrini’s tenants complained about damp and cold rooms in winter. Mrs Ryan agreed to provide thermal curtains. When she was installing them she noticed there was some mildew on the back of the blinds and in other areas of the unit. She found some rot on the bay window sill of the downstairs bedroom. There was other damage in that area. Eventually she checked all of the windows and became concerned about the condition of the windows. At about that time the roof of the complex was being repainted because the previous paint surface had failed. It was being repainted under guarantee. While scaffolding was on the building Mrs Ryan arranged for a plumber to check the roof. Her concern about the bay windows led her to believe that there might be hidden rot. Eventually she contacted Helfen Limited (experts in identifying and remediating leaky buildings) and Mr Wutzler (a witness in this case). He confirmed there were major problems with the building. Glenmore identifies 13 categories of defects at the property: (a) lack of adequate detailing of roof and cladding junctions; (b) inadequate fixing of roof flashings and roof cladding in places;  (c) poor installation of roofing underlay and/or an inappropriate underlay used; (d) poor detailing of internal gutters including lack of appropriate fall to internal gutters between units; (e) lack of adequate detailing of timber cladding; (f) lack of adequate detailing of fibre cement cladding; (g) inadequate protection of the junction between the cladding and the tops of the window and door units; (h) inadequate protection of the junction between the cladding and the jambs of the window and door units; (i) inadequate protection of the junction between the cladding and the sills of the windows and doors including installation of the window and door units hard down on timber sills, along with inadequate door thresholds; (j) defects to decks; (k) defects in the subfloor; (l) defects by way of inadequate retaining of ground in the subfloor area; (m) plumbing defects. As a result the direct remediation costs are said to be $1,513,621. Further, consultants’ fees, lost rental while the repairs are undertaken, special damages, legal fees, general damages, post-remediation stigma and disbursements total a further $537,849.10. In total $2,051,182.60. It is estimated there is a further $114,775.50 in fees from consultants to prepare for and attend the experts’ conference hearing. The total claim therefore is $2,165,958.10 based on a repair measure of damages.  The plaintiffs say the proper measure of damages is remediation. But if this Court concludes the proper measure is loss of value then the plaintiffs’ claim is $1,794,000 being the unaffected value of the property ($2,094,000) less its current value ($300,000). The Council disputes the plaintiffs’ assessment of the property’s current value. Much of the quantum has been agreed by the quantity surveyors for the opposing parties. I will return to that issue at the end of the judgment. The pleadings Glenmore sues the Council in negligence. They say the Council owed them a duty of care expressed in the statement of claim in this way: 11. The Council owed the plaintiffs a duty to exercise reasonable care and skill and to properly discharge its functions, powers and duties as a territorial authority in administering and enforcing the Building Act 1991 and the NZBC. The duties owed by the Council to the plaintiffs included the following (inter alia): (a) A duty when processing building consents to, after considering an application for building consent, grant the consent of the Council if satisfied on reasonable grounds that the provisions of the NZBC would mean that the building work would be properly completed in accordance with the plans and specifications submitted with the application. (b) A duty to undertake all inspections necessary for the Council to be satisfied on reasonable grounds that the building work complied with the building consent and the NZBC. (c) A duty when undertaking inspections to exercise reasonable care and skill and to ensure that the building work complied with the building consent and the NZBC. (d) A duty when considering and issuing Code Compliance Certificates to issue a Code Compliance Certificate only if the Council is satisfied on reasonable grounds that: (i) The building work to which the certificate relates complied with the building consent and the NZBC; or (ii) The building work to which the certificate relates complied with the building consent and the NZBC to the extent authorised in terms of any previously approved waiver or modification of the building  consent and the NZBC contained in the building consent which relates to that work. Glenmore says that this duty of care arose from the granting of building consents, inspections and the issue of CCCs. Glenmore alleges the following breaches: 13. In breach of the duties pleaded in paragraph 11 above the Council: (a) Failed to adequately inspect and require rectification of defects that ought to have been noted on inspection and/or failed to ensure that defects that were noted on inspection were rectified including the defects set out in paragraph 5 above; (b) The Council issued a code compliance certificate when there were not reasonable grounds upon which the Council could be satisfied that the building work complied with the Building Consent and the NZBC. Particulars (i) The code compliance certificate was issued when the property was subject to the defects pleaded in paragraph 5 above; (ii) The defects particularised in paragraph 5 above should have been identified by a reasonable building inspector and rectification required. The Council’s response is that the duties set out above at do not correctly identify the duty owed by the Council, particularly to future purchasers including the Glenmore owners. In any event most of the plaintiffs’ claims are time barred. As to the building consents, the NTR, the inspections and the CCCs, the Council denies any negligence. They say in any event that the CCCs were only issued in respect of narrow building consents. The Council never certified that the whole building was code compliant. Further, the Council says if they were negligent then there was negligent contribution by the plaintiffs, particularly through the negligent acts of the plaintiffs’ solicitors and with respect to some of the plaintiffs’ negligent pre-purchase inspections. In the alternative, the Council says the actions of the solicitors, the building inspectors and in some cases the plaintiffs, broke the chain of causation. Finally, there is disagreement about the measure of damages and the quantum of damages. Limitation The Council’s case is that the Limitation Act and Building Act time bar much of the plaintiffs’ claim. These proceedings were filed on 21 April 2011. By virtue of s 393(3) of the Building Act 2004 and s 4 of the Limitation Act 1950 any negligent failure by the Council with respect to this building before 20 April 2001 will be time barred. Section 393(2) prohibits proceedings after 10 years from the date of the act or omission on which the proceedings are based. All the building consents relating to 14C Glenmore Street were issued prior to 20 April 2001.3 Any cause of action arising from the issue of these consents is, the Council says, time barred. Secondly, all Council inspections of the building made before 20 April 2001 giving rise to a cause of action in themselves are also time barred. Council inspections after 20 April 2001 and any CCCs issued after that date will not, the Council accept, be time barred. The Council’s position as far as it goes is correct. However, Glenmore says that s 393 allows inspections and other actions undertaken by the Council which make up the CCC issued within the 10 year backstop to be considered as part of the analysis as to whether the CCC has been negligently issued. The Council says the Court cannot consider any inspections prior to April 2001 whether contributing to the CCC or not. Glenmore’s case focused on the negligent issue of the CCC on 1 June 2001. In a CCC the local authority certifies that the work carried out on a building complies with the Building Code and Act. And so the issue of a CCC by a Council is typically based on Council inspections undertaken during the building work as well as a variety of other information available to the Council during the building work. 3 1996 Building Consent 15997 for the construction of the property, Building Consent 70437 for the deck, Building Consent 71330 granted October 2000. In this case, the Council inevitably had to rely upon inspections it carried out (or failed to adequately carry out) prior to 20 April 2001. I am satisfied that the negligent act in this case which triggers the 10 year Building Act 2004 backstop is the issue of the CCC and time therefore runs from that date. I am satisfied that where, as here, a cause of action arises from the negligent issue of a CCC then for limitation purposes it does not matter that the CCC in part depended upon inspections made more than 10 years before the issue of proceedings. In drafting s 393(3) of the Building Act 2004 Parliament has clearly recognised the potential for conflict given the decision to issue a CCC is typically based on a collection of information including building inspections that may or may not be within the 10 year limitation period. But Parliament has decided that where the collective enquiry including inspections is relied upon to issue a CCC, then “the date of issue of the [CCC]” is the logical start date for a limitation period. I am therefore satisfied that the claim relating to the negligent issue of the June 2001 CCC is not time barred by s 393 of the Building Act 2004. Scope of the CCC: preliminary issues As I have noted Glenmore’s case is based on the proposition that the June 2001 CCC with respect to building consent 71330 is a “full” CCC relating to the whole building. The Council’s case is that this CCC relates only to the four items of plumbing work and the handrails specified in the building consent application and in turn in the CCC. If the Council is correct as to the limited extent of the CCC then Glenmore’s claim overall must fail, subject to the issue of the deck to Unit 4 and its separate CCC and subject to the claim of negligent inspections. There is no evidence that the granting of the CCC for consent 71330 for the limited plumbing work and hand rails was negligent nor that inspections of that work were negligent. Nor is there any evidence that any of the damage to the building was caused as a result of any inspection of the plumbing work and building work mentioned. I must therefore answer this vital factual question: what did the CCC of 1 June 2001 relating to consent 71330 actually certify as code compliant? I pause to note that consent 70437 related to the construction of the deck attached to the back (western side) of Unit 4. A separate CCC was issued with respect to this deck. There are allegations that the CCC relating to this deck was negligently issued by the Council. And so irrespective of my conclusion about the extent of the CCC relating to 71330, the allegedly negligent CCC relating to the deck remains for resolution. Additionally, before I consider the detail of Glenmore’s claims there are a number of factual and legal issues that need to be resolved regarding the first few years of the life of this building. Unfortunately this was a confusing construction. Developers came and went during the construction stage and sometimes they did not comply with their Building Act obligations. The Council’s performance of its obligations relating to building consents, inspections and CCCs was often confused, contradictory and uncertain. Given the vital regulatory function the Council was performing, those failures were concerning. As a result it is not entirely clear what work was done and inspected on 14C Glenmore between 1997, when the inspections stopped, and 2000 when they resumed. It appears that there were no initial problems with the work on the property. However, some of the retaining walls shown in the plans which form the basis of the building consent were not built. The most obvious example is the retaining wall on the north face between Unit 1 and the cut slope. The plan showed a 1.5 m high retaining wall. This would typically be built before the foundations. It was not built. There is nothing in the Council notes that showed its inspectors were aware of the change, nor whether it was approved. The Council’s record keeping was poor. There is a computer record of what appear to be the notes made by inspectors at each visit in 1996/1997, but no original inspection notes from this period. There are full inspection notes for 2001.  The Council building inspection notes from 2001 are likely to illustrate Council inspector practice in 1996. The Council had prepared pre-printed inspection forms for its inspectors. The pre-printed forms required the inspector on each inspection to identify what work had been inspected by using tick boxes. If necessary there was room for comment. Assuming the inspection forms of the 24 inspections from 1996 and 1997 were accurately converted to the computer records, there is very little information about what was inspected, what was approved and what was not. The inspection forms from 2001 show a similar pattern. The inspection comments are almost exclusively comments about inadequacies in the building work. It is rare to read a report that a particular aspect of the building work has been properly completed. The tick boxes in the form are rarely used. Overall it is difficult to accurately identify what building work has been done, what has been inspected and what has been approved. The later inspection entries in 1996 and 1997 make it clear that the pre-line inspections failed because the moisture level of the framing timber was too high for the interior lining to be affixed. At this stage the building had the exterior cladding, roof, walls and windows in place. They seem to have been approved. It appears as though it was a question of waiting for the moisture level of the framing timber to drop before the interior lining could be fitted. March 1997 marked the last building inspection requested under the original building consent. At some stage, probably in 1999, the Council considered the original building consent 15997 had lapsed. In a LIM dated 15 November 1999 the Council said: The following consents have no code compliance certificate and have lapsed: (i) number 15997 issued on 14 May 1996 for four units; and (ii) further, note inspections need carrying out on Units 1, 2, 3 and 4. No final inspections have been requested and no code compliance certificate has been sought or issued. (iii) no reasonable progress has been made within 12 months and therefore under s 41(1)(b) of the Building Act 1991, builder consent number 15997 has lapsed; (iv) no recent audit of the units has been undertaken to determine the compliance with the approved building consent.  On 20 September 2000 Dr Mulgan obtained a LIM. That LIM was in similar but not identical terms to the 1999 LIM. It confirmed that: The following consents have no code compliance certificate and have lapsed: (i) 15997 issued on 14 May 1996 for four units. The LIM also said: Note: Inspections have been carried out through the construction period on units 1, 2, 3 and 4. No final inspections have been requested and no code compliance certificates have been sought or issued. An inspection was undertaken on 18 December 2000 by officers of the Wellington City Council. It appears that work has been undertaken to finish the units, even though the building consent for the units has lapsed and a new consent was required to complete the work. The LIM noted that a new deck on Unit 4 had been built without a building consent. The LIM then said: Further work is required to be completed before the units fully comply with the Building Code 1992. A notice to rectify under the Building Act 1991 is to be issued for building work done without a Building Consent. Did the 1996 building consent (15997) lapse? Glenmore’s position is that the Council had no authority under s 41 of the Building Act 1991 to lapse this building consent. The Council argued otherwise. Section 41(1) of the Building Act 1991 provides as follows: 41 Lapse and cancellation of building consent (1) A building consent shall lapse and be of no effect if— (a) The building work concerned has not been commenced within 6 calendar months after the date of issue of the consent or within such further period as the territorial authority in its absolute discretion may allow; or (b) Reasonable progress on the building work has not been made within 12 calendar months after work has commenced or within such further period as the territorial authority in its absolute discretion may allow.  The applicable provision, both parties agree, is para (b). It seems that the Council interpreted para (b) as meaning that if in any 12 month calendar period after a building consent is granted, reasonable progress was not made on the building work, then the building consent would lapse. Strangely there is no process for a building consent to lapse under s 41. No one is authorised to decide whether or not reasonable progress has been made. There is no notification of a “lapse”. Somehow it just happens. Here, the Council did not notify the builder or developer that the building consent had lapsed. Most probably when the Council received the 1999 request for a LIM it looked at the consent file and realised no inspection had been made on the building for several years and concluded no reasonable progress had been made. And so it notified the LIM applicant the consent had lapsed. Neither the builder nor the developer seems to have been notified the consent had lapsed. It seems probable therefore they proceeded to complete the building in 1999/2000 believing the original consent remained alive. The Council argued that the intent behind para (b) of s 41(1) must be to lapse consent if reasonable progress is not made during any 12 month period. They submitted that otherwise after the first 12 months or any further extended period a building consent could remain alive for an indefinite period and the work being done subject to that consent could be delayed for an indefinite period without affecting the consent. Glenmore argues that the plain words meant that the only circumstance under para (b) where a building consent could lapse is where insufficient progress was made within 12 months of commencement, with the Council having the right to extend the 12 month period. There is no evidence before the Court as to Parliament’s intention in enacting this provision. The plain words of para (b) link the lapse of consent to a failure to make reasonable progress after commencing the building work. The Council can provide more time than 12 months from commencement for reasonable progress to be made. This could be exercised, for example, where an unexpected event has caused delay in getting started. There seems no other way to interpret para (b) other than that a building consent will lapse and be of no effect only if reasonable progress has not been made on the building work within 12 months after the work has begun or within an extended period nominated by the territorial authority. I consider there is no basis on the plain words of para (b) to favour the Council’s interpretation. Neither situation provided for in para (b) applies here. It is common ground that within the first 12 month period after the building consent was granted, reasonable progress was made on the construction of 14C Glenmore Street. While it can be appreciated that Parliament may have wished to lapse building consents when inadequate progress was made on the work approved, the plain words of s 41(1)(b) do not provide such a broad or generous power of control. The section’s plain words relate the lapse principle to progress in the 12 months after commencement of building only. The Council’s action in claiming that the building consent had lapsed and was of no effect in 1999 and 2000 was therefore wrong. On the basis of my analysis of s 41(1)(b) the building consent had not lapsed. Was the 1996 building consent (15997) cancelled? In the alternative the Council says it cancelled the building permit under s 41(2) of the Building Act 1991. Section 41(2), (3) and (4) provide as follows: 41 Lapse and cancellation of building consent... (2) The territorial authority may cancel a building consent in whole or in part forthwith if— (a) There has been a change of circumstances such that the territorial authority believes that the proposed building work may contravene any provision of the building code as in force at the time the work commenced; or  (b) The rectification work required to be done by a notice to rectify under section 42 of this Act has not been commenced within a reasonable time, or there has been a breach of a condition of any such notice. (3) When a territorial authority cancels a building consent, all building work to which it relates shall cease immediately, except for work necessary to properly secure and protect the building and to keep the site in a safe condition. (4) If a building consent is cancelled under subsection (2) of this section, the owner may apply for a new consent as if making an application in respect of an alteration to an existing building. The claim of cancellation seems to be based on the notation in the CCC for consent 71330. As to consent 15997 it said:... please note this consent has lapsed and is considered cancelled... There was no evidence as to how this “cancellation” came about other than the words of the CCC for the 71330 consent. This comment seems to assume that where a consent lapses it is by virtue of the lapse cancelled. This is not at all the process contemplated by s 41(2). Subsection (2) anticipates a different situation than provided for in subs (1). Subsection (1) declares that a building consent lapses if certain events occur. Subsection (2) is concerned with the power of a territorial authority to cancel a building consent if certain events occur. Subsection (2) therefore involves some form of giving of notice and some form of exercise of discretion by the territorial authority. For example, the subsection requires that the Council “believe” the proposed work may contravene the Code. I consider subs (2) has no application to the facts of this case. There is no evidence that the Council turned its mind to s 41(2) and its application to consent 15997, nor that it in fact cancelled the building consent either under subs (2)(a) or (b). Further, neither para (a) nor (b) of subs (2) fit the facts of this case. Under para (a) if there has been a change of circumstances such that the territorial authority believes that the “proposed building work” may contravene the building code, then it can cancel the building consent. There is no reason here to suppose that in 1999 the Council considered that proposed building work (the only work then left was some straightforward plumbing work and the fitting of hand rails to stairs) would contravene the building code. As to rectification work in para (b), a NTR had been given to the owners in September 2000 but there was no evidence that the rectification work had not been commenced within a reasonable time. Further, all of the LIM reports refer to the building consent as being lapsed and the NTR of 4 October 2000 also referred to the building consent having lapsed. I am therefore satisfied that the Council had no authority to lapse building consent 15997 under s 41(1) nor to cancel the building consent under s 41(2). I am also satisfied that the Council did not in fact intend to cancel building consent 15997. Unfortunately the Council proceeded on the basis that building consent 15997 had lapsed and as consequence had been cancelled from 1999 onwards. This erroneous view informed its decision making and its certification with respect to the building from then on. This view informed the LIMs, the NTR, the advice regarding building consents, its inspections and the issue of CCCs. Many of the subsequent problems in the Council approvals for this building and in this litigation have arisen because of these errors by the Council in its approach to this building. What did building consent 71330 and therefore the June 2001 CCC relate to? This is perhaps the most important factual issue in this litigation. Glenmore’s case is that the CCC from the Council on 1 June 2001 relating to consent 71330 was a full CCC for the four completed units covering all the building work. Their case is that prospective purchasers including all of the four owners of the units were entitled to rely upon the CCC as certifying that the four units complied with the Building Act and Code. And so Glenmore’s case is that each owner proceeded with the purchase of their unit believing they had a CCC which covered the whole of the construction of their unit. Their case primarily relies upon this claim.  The Council says that the CCC had limited coverage. They say it covered minor plumbing, handrails to each unit’s stairwells and some safety rails and nothing further. And so the Council’s case is that the vast majority of the construction work on the four units at 14C Glenmore Street was not certified by the Council as code compliant. The owners of the four units were wrong to believe the CCC covered the whole of their units. Their solicitors were negligent in either failing to ascertain this was a limited CCC or at least in failing to recognise the coverage of the CCC was not clear and advising further investigation. A Council CCC is intended to certify that particular building work covered by a building consent complies with the Building Code and has been completed. In this case there was considerable debate between the witnesses about what was being sought in the building consent and what was ultimately certified by the Council. Mr Wutzler and Mr Tidd took the view that whatever the building consent application covered, the CCC issued by the Council covered the whole of the building. Mr Flay took the view that whatever the building consent application covered, the CCC at least covered all that the Council inspectors had noted that they inspected and that required remedial work. As I have noted, the difficulty with Mr Flay’s approach is that it assumes the inspectors have noted on the inspection forms all that they inspected. In fact it seems clear from the evidence that the inspectors only noted “problem” areas and did not generally note on their inspection forms building work which had been completed correctly and in compliance with the Code. And so it is not at all clear what in fact was inspected by the building inspectors in 2001. Finally, there is Mr Jones and Mr Tait who say that the building consent was only for some minor plumbing and building work and the CCC can only therefore cover that work. To understand these expert opinions and the issues that arise it is necessary to consider in further details the facts surrounding the issue of the CCC relating to consent 71330.  As I have noted no inspections had been sought for the property by the builder or the owners from March 1997. The building was then at the interior pre-lining stage. In September 2000 the Council received a complaint about a deck being built attached to Unit 4 which was said to be without a building consent. The Council inspectors went to the property and found that the four units had been effectively completed. Mr Tait was then a Council building inspector. He gave evidence at trial. His evidence is of significance in relation to what happened over the following few months. Retrospective Building Consent Policy The Council had developed a retrospective building consent process which was operative at the time. There was subsequently considerable doubt expressed about the lawfulness of any form of retrospective building consent. The Building Act 1991 did not appear to contemplate retrospective consents. In any event the ECBU within the Council issued the policy. The policy was publicly notified and commenced in March 1998. It is no longer operative. The policy provided that retrospective building consent was intended to apply to “building work being carried out (or completed) without a building consent”. This included situations where a building consent had been applied for but had not yet issued; and where no building consent had ever been applied for or issued. It applied where the work concerned was partly or fully completed. The policy worked in this way. When the ECBU found out about non-consented building work it would issue an NTR. The building work was required to stop. The fact there was an NTR with respect to the property would be noted on any LIM then issued. The ECBU would then decide whether the work done was of such a standard that it was necessary to issue a dangerous or insanitary notice. The owner then could do nothing or engage a “suitably qualified person to provide sufficient evidence that demonstrates the work has been done well enough not to pose a safety threat and not to be dangerous or insanitary”. If the owner did so they could then apply for retrospective consent. If the owner chose to do nothing then the Council would consider prosecution or some form of enforcement action. If the owner obtained qualified evidence to show the work done was not dangerous or insanitary then, apart from noting the NTR (in any LIM issued) and that no further work would be allowed on the building, nothing further needed to be done by the Council. If the owner wanted a retrospective building consent, then a number of steps were required. They included providing the Council with: (a) a complete set of consent plans; (b) producer statements from suitably qualified persons covering all aspects of the work done to date;4 (c) accompanying evidence of inspection of the building works; (d) reasons why the building work complied with the building code; and (e) evidence that the consent plans matched the physical structure actually erected. If the Council was satisfied with this evidence then a retrospective building consent could be issued for the work done without consent. In the meantime no work on the building was permitted. Communications with Mr Tait On 4 October 2000 the Council issued a NTR with respect to Glenmore including particulars of contravention to the building owner. It said that the owners were required to rectify the building work not done in accordance with the Building 4 Producer statements were statements from suitably qualified persons that the building work they had done on the relevant building complied with the Building Code and Act. Act as identified in an attached notice. It noted the original building consent had lapsed. The owners were told that work on the entire project was to cease and not to resume until written approval of the Council. The NTR notice said: 1. On 18 September 2000 an officer of the Wellington City Council (the Council) inspected your property and found the building work had been undertaken. In particular the officer observed: (a) a deck has been built on Unit 4 (as shown in the Cutress McKenzie Martin Proposed Unit Title Development Plan 13921) without a building consent and it fails to comply with the requirements of the New Zealand Building Code; (b) Units 1–4 appear to have been fully completed even though the building consent has lapsed. 2. You were given notice that you must apply for a retrospective building consent to authorise the work set out in cl 1 above within 30 days of this notice. The NTR said that it was an offence punishable by conviction and a substantial fine if the owner failed to comply with the NTR. On 9 October 2000 Mr Tait wrote a letter to the owners about 14C Glenmore Street. He referred to the NTR and provided what he described as “clarification” regarding the building consents that would be required. Mr Tait said that the owners would need to apply for both a retrospective building consent and a building consent to satisfy the NTR. The retrospective building consent was for the deck on the uppermost unit (presumably Unit 4) and “any structural work that has been completed on the rest of the apartments”. He noted this would need to include the concrete stairs that had been installed to Unit 4. He noted that the work would need to be certified by an engineer. He said that “the deck has been built on 100 mm x 100 mm posts and not the 125 mm x 125 mm posts as we would normally expect”. He mentioned that the concrete path to the top unit had been poured against the weatherboards of the unit.  He then said: You will also need to apply for a building consent for the work required to complete the apartments. When the apartments were originally inspected no fittings or fixtures had been installed. No taps etc, the showers had not been completed, all the plumbing systems had been capped off. There did not appear to be any hot water cylinders. Once the relevant consent had been obtained the Council said it would then be in a position to carry out an inspection of the dwellings when required. Mr Tait said in evidence that he had had a discussion with the owners prior to the letter dated 9 October 2000 and had made it clear to them that the retrospective policy would not allow them to get any form of building consent for the work done under the original building consent before that consent lapsed. He said that he told the owners that the only consent that they could expect to get retrospectively was consent for the work that had been done without a building consent from the time the building consent lapsed,5 through until the work had been halted with the NTR in October 2000. I did not find Mr Tait’s evidence in this regard convincing or reliable. It is extraordinary to think that Mr Tait can now recall events 12, almost 13 years ago in the detail claimed, including detailed discussions with a particular owner with regard to a particular development. Mr Tait said that he had been involved in dozens of building consent applications for the Council and then as a private contractor both before these events and since. Mr Tait’s evidence about his discussion with the owners was not mentioned in his letter dated 9 October 2000. Indeed this letter appears to be in conflict with this conversation. Part of the requirement for retrospective consent to be obtained in the letter related to “any structural work that has been completed on the rest of the apartments”. The letter did not restrict the structural work to that done since the lapse of the building consent. The letter appeared to include some building work done before the building consent “lapsed”. 5 The exact date and circumstances in which Mr Tait believed the original consent lapsed were not clear.  By 1999 the Council claimed that the original building consent had lapsed and was of no effect. Mr Tait said that the retrospective policy did not apply to work that had a building consent. Thus he said the 1996/1997 building work completed under the original consent could not have a retrospective consent. The principle behind the retrospective building consent process was that where the Council could be reasonably assured that building work that had been done without a consent had been done in accordance with the plans and specifications and the Building Act and Code, it would be prepared to grant a building consent for work already done. The policy behind retrospective consents focused on obtaining evidence as to whether the Council could be reassured the building work had in fact complied with the Code. In this case, there was a high level of assurance that work done under the original building consent complied with the Act and Code. After all, it was the only work that had been done on this building that the Council had inspected, and was in a position to certify that the building work had been done in accordance with the Code and Act. The other building work, done after the Council inspections ended in 1997, would require certification by a third party that the work had been done in accordance with the plans, the Act and the Code. There is also an absurd circularity in Mr Tait’s approach to the meaning of the Council’s retrospective policy. The owner obtained the building consent and built part of the building in accordance with that consent. The building consent was then lapsed by the Council. But the Council knew that the work that had been done was in accordance with the building consent and Code. The lapse of the building consent meant the building consent was of no effect, thus the building work did not have a consent. The building owner wished to apply under the retrospective policy to obtain a building consent for the whole of the building. But Mr Tait said that was impossible because when the first part of the building was completed, it was done under a building consent (although now of no effect). And so the owner did not meet the criteria for a retrospective consent. As I have noted this was the only part of the building work by 2000 that the Council had inspected and could confidentially assess for compliance.  And so Mr Tait’s description of his discussion with the owners/developers as to the meaning of the retrospective policy made no sense. If the building work then completed had a building consent it would not need retrospective consent. If the building work completed did not have a valid building consent (including where it had lapsed and was of no effect),6 there was no reason why it should not come within the retrospective policy and every reason why it should. Content of the consent and CCC documents In any event the service of the NTR in October 2000 was followed by two applications for PIMs and building consents by the owners. The first application related to the deck (70437). It was an application for a PIM and a building consent for the deck to Unit 4. This deck had been built prior to the NTR. As I have noted, on this building consent application these words appear “not retro see Mark Scully”. Mr Scully was an employee of the Council. The note, however, made no sense. On the face of it the deck consent was retrospective. The deck had been all but completed by the time the application for the building consent was made.7 Counsel for the Council speculated that it may not have been seen as a retrospective consent because the deck itself could be inspected even after it was built. Whatever the Council’s capacity to inspect building work which was completed before a building consent was applied for, such construction would always require a retrospective consent. If the work had been completed before a building consent was applied for the consent could only be retrospective. The second consent application (71330) was filed on 15 November 2000. Under the description of building work it said “plumbing and building work to complete project to Units 1 to 4 for CCC”. The value of the projected work was said to be $10,000. 6 However, see. 7 Consent had to be obtained in advance of construction commencing: Building Act 1991, s 32.  On the final page of the consent application there was a note identifying plumbing items. It described tap ware, shower mixers, toilet suites and hot water heaters to be installed. Under the heading “building items to be completed” it listed hand rails to each stairwell and safety barriers to Unit 2. Attached to the application were several sets of plans, some of which had notations on them relating to the plumbing and building items to be completed, and others were unmarked. On 15 November 2000, as a result of receiving a producer statement from an engineer, the deck was granted a building consent. As to the second application, a PIM and a building consent were issued (71330). Both the PIM and the building consent had identical project descriptions taken from the application itself. Under “building work”, safety barriers and hand rails were mentioned and under “plumbing”, the four items previously mentioned were identified. On 18 December 2000 Spencer Holmes, an engineering firm in Wellington, told the Council that it had been provided with the NTR of November 2000 and had undertaken various inspections of the building at the owner’s request. Copies of the site reports were also available. The inspections identified areas of non-compliance with the Code which had been addressed as the building work proceeded. Spencer Holmes said that: On completion of the remedial works we confirm our intention to provide Certification as to compliance with the relevant sections of the Building Code completed. The Council inspections in relation to consent 71330 began on 11 January 2001. Mr Tait undertook the building inspections and Mr Tane the plumbing inspections. Inspectors’ checklists from January 2001 through until the issue of the interim and then final CCCs make it clear that both Mr Tane and Mr Tait inspected the property at Glenmore Street far more extensively than the four items of plumbing and two minor items of building work required. I have previously noted the extent of the inspections.8 8 At –.  It was suggested by the Council that what Mr Tait had done was to note a few self-evident inadequacies in the building and pass them on for the information of the owner. But that does not match either the inspection notes or a letter from Mr Tait of 22 March 2001 to the owner. In that letter Mr Tait said he required the following items be fixed: Top Unit (called unit four) unable to gain access. Remove concrete poured up and over weatherboards where cutting has occurred Gully trap under deck to have a surcharge pipe fitted allowing surcharge to flow to a visible outfall Seal around all windows and doors Complete installation of rustic plugs Unit three. Unable to gain access Seal around all windows and doors Complete installation of rustic plugs Unit two Seal around all windows and doors Complete installation of rustic plugs Install air admittance valve to Kitchen sink Seal tub against wall Nail decking correctly Unit one Seal around all windows and doors Complete installation of rustic plugs Verify glazing to bay windows meet the requirements of New Zealand standard applicable at the time of installation Remove drainage metal to north wall of garage to a level either below tanking or below floor level Clip bath waste Expose drainage pipe to rear of garage wall to determine where leak in garage is coming from Toilet pan water traps are pulling, venting to be upgraded and air admittance valves fitted to both toilet pans. In regards to the fibre cement sheet cladding installed in some areas, all joints are to be protected by a covering board as per the detail used on the lower units. Some areas of the rustic weatherboard have cracks or are not fixed in place correctly will need to be made good. In regards to the separate building consent for the deck on unit 4 and the stairs up to Unit 1 a PS4 construction review is required from the design engineer.  Mr Tane’s inspections of the plumbing also went well beyond the four items identified in the original application for a building consent. Two interim CCCs were issued for the two consents without limitation and both noted that the interim CCC “related to the particulars of work as described in the building consent”. The final CCC for 71330 had the following relevant notations. Under “project description” it said “plumbing and building to complete consent of Units 1 to 4 for CCC relating to NTR under SR69193”. The certificate was said to be subject to the conditions specified on the attached page. These conditions were: This certificate relates only to building consent 71330. Nothing in the certificate states or implies that the following building work at the same address complies with the building code: SR15997 – New Dwelling (please note this consent has been lapsed and is considered cancelled). Building consent 71330 is issued for the completion of the apartment. Conclusions in relation to scope of the CCCs To reiterate, the Council’s case was that the CCC was limited to the few items of building and plumbing work expressly mentioned in consent 71330. Glenmore’s case was that the CCC related to the whole of the building work for the four units. I am satisfied that on the balance of probabilities the best view of the oral and documentary evidence is that the building consent application and the building consent was for all the building work for the four units, and that the CCC certified the whole building as code compliant. While there was only a small (thus the reference to $10,000) amount of work for the building to be completed, the consent sought and granted related to the whole building.  As I have previously said, undertaking this analysis to some degree requires an untrue assumption.9 It assumes that the original building consent (15997) had lawfully lapsed or been cancelled when it had not. Consent 15997 was alive in 2000 and a CCC could have been directly issued for the work completed up to the last inspection in 1997. The Council proceeded as if the consent was cancelled. In those circumstances the building work completed up until 1997 could have come within the Council’s retrospective building consent process, despite Mr Tait’s view. Thus, even if the 15997 building consent did lawfully lapse, then on the Council’s own policy that work would have been eligible for a retrospective consent. I mention these matters to illustrate the confusion within the Council. The process of building consents and the issue of CCCs were (and are) of fundamental importance to the purchasers of residential properties in New Zealand. It is no exaggeration to say that in 2000/2001 the Council’s attention to its statutory obligations was hopelessly inadequate. While the developers’ actions left much to be desired in constructing Glenmore, the Council’s inadequacies triggered much of the uncertainty behind this litigation. To return to the CCC. The reasons for my conclusion as to the extent of the CCC are as follows. I accept that there is ambiguity in consent 71330 and the CCC consequently issued. Where the CCC records the building consent was issued for the “completion of the apartment” the “completion” could mean the final work to be done on the apartment only, that is the limited plumbing work and the hand rails. The previous clause in the consent, noting that the original consent had lapsed, could be seen to reinforce this interpretation. On the other hand the issue of a building consent for the “completion of the apartments” could be interpreted as meaning that the whole of the apartments now have a building consent. The CCC condition relating to the original building 10 consent could simply be advice to potential purchasers that this original building consent had lapsed and had been replaced by another building consent, and that it 9 At. 10 See above at. was in respect of that consent that the CCC was granted. The two sentences read together could mean that consent 71330 was issued in place of the original new dwelling consent and was in relation to completing the whole of the building. This interpretation is supported by the actions of the Council inspectors. Mr Tait and Mr Tane approached the building consent and their inspection function as covering far more than a limited installation of the plumbing work and hand rails. These inspectors considered building work compliance with the Code and Act on a much wider basis than claimed by the Council. The purpose of the inspections was to ensure the building work carried out complied with the building consent granted and complied with the Code. Thus the CCC in turn would reflect these inspections. The broad range of inspections undertaken illustrated that this was not an inspection limited to a narrow range of plumbing and building work. The building consent application, the PIM, the building consent, and the CCC all referred in one form or another to CCCs for a “completed” building. This was a new building. The expectation would be for a CCC covering all the building work. If the Council was only certifying limited building work I consider its obligation was to expressly say so. This is especially so in this case where the Council claims the certification relates only to a very modest part of the building work. The Council therefore needed to explicitly say the CCC did not cover the whole building but only the very limited plumbing work and hand rails. It did not do so. The inspection records from 2001 show the inspectors inspected what they could see and required remedy where they believed there was no code compliance. Based on the Council’s records it is now effectively impossible to know what the inspectors did inspect. They listed problems in their inspection sheets. But they did not list building work which they inspected which passed code compliance.11 Even 11 The inspection forms provided a checkbox system for items that “passed” inspection but these were not used. based on these limited inspection records the inspection of the property was wide ranging. These factors together convince me that the most likely position was that the Council inspectors were inspecting the property for a full CCC for the units. They had the inspection records up until 1997 which comprised the bulk of the building work. They could rely upon those records to satisfy themselves the earlier building work had been completed to their satisfaction. They then inspected what they could see of the building. Overall they had an inspection record of the vast majority of the building work. In summary: (a) the owner/developer was more likely than not applying for a CCC in respect of the whole building in its November 2000 application; (b) the inspectors undertook a broad inspection of the property which together with earlier Council inspections covered most if not all of the building; (c) the Council’s failures caused the confusion as to the scope of consent 71330 and the CCC relating to 71330; (d) the CCC although possibly ambiguous can be reasonably interpreted as referring to the whole building. I am satisfied that the most probable interpretation of the CCC was that it certified compliance with the Code of the whole building at 14C Glenmore Street. Deck CCC If I am wrong in my conclusion that the CCC for 71330 only covered the limited building work identified by the Council, then the plaintiffs’ claim against the Council with respect to building consent and CCC 70437 remains.  The evidence clearly establishes that the Council’s inspection of the deck attached to Unit 4 (at the rear) was negligent and the CCC should not have been granted. I have previously identified those inadequacies, the primary flaw being construction of the deck so that the decking timber was hard against the exterior weatherboards. This construction did not allow water to drain from the deck and caused both the decking timber and weatherboards to rot. There was no separate identification of the cost of repair of this deck. Negligent inspections If I am wrong and the CCC did not cover the whole of the building then the plaintiffs allege the Council negligently inspected the building in 2001. This claim arose from the Council’s failure to adequately inspect the property and to identify the defects in the building. There is a significant difficulty with the plaintiffs’ inspection failure causes of action. If the consent and CCC relate only to the handrails and plumbing work, the obligation on the Council was only to inspect that limited work. My conclusions about inspection failure leading to a negligently issued CCC were almost exclusively about what the Council inspectors failed to inspect (when they should have) rather than what they negligently did inspect. It seems to me therefore that if the plaintiffs’ claim fails because the CCC is of limited coverage then the inspection cause of action by itself must also fail. Was the Council negligent in issuing the CCC relating to building consent 71330? I am satisfied that the Council was negligent in the issue of the CCC of 1 June 2001 relating to building consent 71330. I am satisfied that if Council inspections had been properly carried out and the Council had taken into account the other information in its possession, the Council would not have certified the building work at 14C Glenmore Street as compliant with the Code. I am satisfied that Council inspectors negligently failed to identify defects in the building work. I am satisfied that the combination of the Council’s knowledge of the builder’s building practices together with the defects in the building work (that a competent inspector would have identified) would have led to further enquiry that in turn would have revealed further building defects. The inevitable investigation which followed would have uncovered many of the leaky building problems. A CCC would not have been issued for the building. Mr Wutzler is a registered building surveyor and remediation specialist. He has been extensively involved in the identification of weathertightness issues in New Zealand buildings and in their remediation for more than 10 years. He was called by Glenmore. He identified a range of defects in the building, and his evidence was that a competent building inspector in 2001 should have identified the vast majority of defects in each of the defect categories he identified.12 I accept, in part, the Council’s criticism of his evidence. Mr Wutzler sets a “gold” standard in the identification of building trouble spots. Mr Wutzler’s expectation of what a competent building inspector should see is, I consider, set at his own standard of knowledge of leaky buildings in 2013. Council building inspectors could not be expected to have reached this advanced level of knowledge in 2000/2001. Any assessment of what a building inspector could be expected to identify has to be tempered by taking into account reasonable standards of the day. I stress the word “reasonable”. However, it is not enough for an inspector to simply say “that’s how we did it in those days”. If what the inspectors were doing was inadequate, judged by a reasonable standard of the day, then it is no excuse to simply say “that’s how we did it then”. There was a significant element of this approach in Mr Tait’s evidence as to his inspections of the building work. The evidence given by Mr Saul and Mr Tidd as well as Mr Flay related directly to the standards of a building inspector in 2001. They gave specific evidence as to what a competent building inspector should have observed of the building work at Glenmore Street. Mr Tait who was the Council’s building inspector for 14C Glenmore Street in 2001 gave evidence of what he could recall, and of 12 For the categories of the building defects see. Council inspection standards of the time. The evidence of Messrs Saul, Flay and Tidd focused on the list of defects identified by Mr Wutzler. Mr Saul is a building consultant with 30 years’ experience in residential and commercial buildings. Between February 2000 and July 2008 he was employed by Wellington City Council, initially as a building officer and later as a consents officer which involved approvals of complex commercial construction. More recently he has run his own building consultancy and teaches Building Code Compliance and Construction. Mr Flay qualified as a carpenter in 1981. He was then self-employed as a builder for over 10 years. In 1996 he began working as a building inspector and was eventually promoted to Team Leader of building consents. Since that time he has primarily worked for various local authorities in inspection and building consents. He now runs his own consultancy business. Mr Tidd has been involved in building for 40 years primarily in residential and commercial construction. He has worked for a number of local authorities including Wellington and Auckland City Councils on building inspections and consents in a direct and supervisory role. More recently he has been employed by private companies in construction supervisory roles. I found Mr Saul an impressive witness who did his best to objectively assess what a reasonable inspector would see. I thought all three witnesses gave their best assessment of what they believe was an adequate inspection standard for 2001. I am satisfied that there were many defects in this building that were evident and should have been identified by a competent Council inspector. Scope of inspection As I have mentioned above, it is not now possible, based on a reconstruction of Council records from 1996 to 2001, to know exactly what the Council inspected of this building.  The fact that an aspect of the building work was not mentioned in the inspection reports did not indicate whether it had been inspected or not. Even if a competent inspector had noted only those defects seen by Mr Tait and Mr Tane the need for a more detailed inspection of the building, prior to any CCC issue, would have been established. This was especially so given the Council’s knowledge of the building company’s prosecution in 2000 for building without consent. In any case, a building inspector must ensure that building work is done in accordance with the building consent and complies with the Building Act and the Code. Obviously a Council inspector cannot and does not need to be on the site each day of construction, nor does he or she need to inspect every item of work done. But overall, a Council has to be able to certify that each part of the building was built to the standard required in the Code. A claim of inadequate inspection cannot therefore be met by an inspector saying that they did not look at that aspect of the building, because the inspector has an obligation to look at each aspect. If a CCC is issued, the Council is certifying that all the work covered by the certificate is built according to the Code. Given my conclusion that the CCC was a “full” certificate for the building, I proceed on the assumption that the Council inspected all the essential elements of the building sufficient to certify this “new build” was code compliant. What defects should have been seen at Glenmore Street by a competent building inspector? The essence of the plaintiffs’ case is that a competent building inspector undertaking an inspection of Glenmore Street in 2001 should have picked up a range of defects in the building even on a superficial inspection. This in turn should have led to a more detailed inspection, which ultimately should have led to a refusal to certify the building as code compliant, recognising the weathertightness problems of the building.  I am satisfied that given the defects the Council inspectors noted and given the building defects the inspectors should have seen during their 2001 inspections, there should have been a more detailed inspection of the building. This in turn would have led to the realisation this was a building seriously vulnerable to water entry. As Mr Saul pointed out, Mr Tait specifically noted (in his letter of 22 March 2001 and in a number of building inspection forms) that there were a number of defects in the building. The letter of 22 March 2001 described at least these defects: concrete had been poured up to and over weatherboards; inadequate gully trap installation; failure to install rustic plugs around the weatherboards; inadequate nailing to the deck; drainage metal removal below floor level of Unit 1; inadequate fibre cement cladding joint installation; and cracks or inadequate fixing of weatherboards and inadequate sealing around all the windows and doors of all the units. Some of these defects related directly to watertightness issues. In Mr Tait’s and Mr Tane’s 2001 inspection records, there were questions noted about the cladding system, the jointing system, cover boards to unflashed horizontal joints, water in the garage of Unit 1 and many other issues. Mr Tait’s evidence was that he had not inspected Glenmore beyond the building work required (essentially the installation of handrails) but had noticed some defects in the course of his inspection. He had noted these defects to assist the owner. He said that these observations were simply coincidental to this main purpose. I do not accept this evidence. The extent and type of the defects, including the number of visits to the building made by Mr Tait and Mr Tane, illustrate that the observations they made of defects and requirements to fix were not simply coincidental. Between them Mr Tait and Mr Tane made 14 inspector visits to the site (often together). If Mr Tait is correct, all he had to inspect were some handrails. One inspection, after he was notified the handrail construction was complete, would have been sufficient. In fact none of the inspection reports mention any inspection of the handrails. The defects listed in the letter of 22 March 2001 and the defects in the inspection sheets needed to be fixed, and the inspectors returned to the site to ensure this had been done. In respect of many of the recorded defects, there is no record that the required remediation work was actually done. This process is consistent with a broad inspection of building work. And so the inspectors began with a significant list of defects they observed and required the builder to “put right”. The inspectors knew that this had been a troubled construction. The original builder and developer had not completed the work. No inspections had been carried out for a period of three years between 1997 and 2000. By then further work had been done and had not been inspected. It seems probable that the Council inspectors were aware of these problems and undertook a detailed inspection of the building. In addition to this list of defects identified by the building inspectors, there were other obvious defects in the building which should have alerted the inspectors to serious concerns about the construction of Glenmore. I now identify some of these defects. Bay window flashing The three bay windows at the front of Unit 1 were not flashed. I am satisfied that the lack of flashing at the bay windows was an obvious and serious defect. Council inspectors were well aware that windows needed to be adequately flashed to avoid water entry to a house. By 2000/2001 they would have known that significant water entry often occurs through inadequately installed or flashed windows. The lack of flashing on the lower bay windows could probably have been seen from the driveway and could certainly have been seen from inside Unit 1. Given the inspectors would have known of the dangers of water entry through poor flashing, the absence of flashing should have been seen by them as a serious defect. The inspectors had already noted concern about the adequacy of the glass in the bay windows given the building was in a high wind zone. They had expressed concern in their defects list about the sealing of all windows. Their attention had therefore been drawn to the bay windows. This should have led the inspectors to check the other window and door flashings in all four units. This, in turn, would have revealed a wider window flashing problem. Window and door flashing It is possible (although unlikely) that without the bay window trigger the inspectors may not have seen the full extent of the inadequacy of some of the flashing on the other windows and doors. The flashing around most doors and windows on the lower levels could be easily seen. Many were just above eye level (particularly the doors) or could be seen from inside the building. Even a casual look at these doors and windows would have given reason for a competent inspector to be concerned. On some of the windows the flashing was shaped so that the water ran back into the building. This was obviously unacceptable and undermined the whole purpose of the flashing. It seems that flashings were installed after the weatherboards by making a cut in the weatherboard with a skill saw and slotting the flashing up from behind. This was not a traditional method of installation. While it may be possible to install a sufficient length of flashing behind the weatherboards using such a method, it is likely to be extremely difficult. This unorthodox method of installation should have triggered further enquiry by the inspectors. The incorrect shape of the flashing and the flashing installation should have raised serious concern with the inspectors. Together with the absence of flashings over the bay windows alarm bells should have been ringing. Here were reasons to be seriously concerned about the weathertightness of the doors and windows to the building. These combined inadequacies went to the heart of the building’s weathertightness. Mr Tait, in his letter of 22 March 2001 to the developers, had himself noted that all the doors and windows in all of the units had to be “sealed”. It is not now clear exactly what he meant. At least it seems clear he was concerned about the weathertightness of the doors and windows. Further, it is reasonable to assume on the basis of this letter that Mr Tait had inspected at least some of the doors and windows, that there was inadequate sealing, and that he had reason to believe the inadequacy was repeated throughout the four units. The removal of one of the window flashings of concern would have been relatively straightforward. It would not have been a major intrusion into the integrity of the building, and would have revealed the inadequacy of the flashing uplift. It would have shown that this work had not been done to Code standard. And the obvious inference from this inadequate work was that the builder had cut corners. There should at that point have been an accumulation of evidence pointing to serious concerns about the building. Deck construction Many of the decks had inadequate clearance between the deck timbers and the walls of the house. This was likely to cause water pooling and rotting of both the decking timbers and the weatherboards, allowing water to enter the house. This defect was easily seen. It related directly to building weathertightness. Monolithic cladding Some of the lower monolithic cladding had been embedded in concrete. This had the capacity to rot the weatherboards and cover boards. It indicated a very poor quality of workmanship. It was easily viewable by the inspectors. And indeed the inspection reports noted the defect. Underfloor defects Underneath the house some bearers were not connected to the joists. Drainage pipes were not properly installed. These defects would all have been obvious on inspection. In combination they should have concerned the inspectors. The extent and type of the defects should have told them that this building needed close inspection, including weathertightness checks, before the Council could say it was Code compliant. Steel beam repair The steel beams in the subfloor area had primer paint but no other protective coat applied. There was conflicting evidence from the expert witnesses as to whether the Council would have insisted on a further sealing coat in 2001 and therefore whether the Council were negligent in issuing a CCC without requiring the beams to be painted with “top” coat. Today the steel beams are showing signs of surface corrosion and need to be scraped back, primed and sealed. The estimated cost is $16,448 and is part of the plaintiffs claim. Mr Wutzler’s evidence was that the steel beams should not have been approved as Code compliant by the Council with only a primer coat. Mr Flay accepted that primer only might not meet the durability requirements under the Code but noted that an engineer’s certificate relating to the beams may have covered the situation. An engineer had provided a certificate relating to the beams prior to the CCC being issued. However, as Mr Saul pointed out the engineer’s certificate did not cover durability, the relevant issue with respect to painting of the steel beams. The weight of evidence favours the plaintiffs’ claim that the Council should not have approved the steel in the subfloor area being painted with primer only. This did not meet the durability requirements of the Code. Council inspectors had easy access to the subfloor area. Indeed, the inspectors’ records from 2001 show that the subfloor area was inspected. The fact that the steel beams only had a primer coat could therefore have been easily seen. I am therefore satisfied that the Council was negligent in issuing the CCC when the steel beams were not adequately painted and therefore would not meet the durability requirements of the Code. Further detailed inspections would, if competently done, have revealed many of the defects identified by Mr Wutzler and Mr Jones which have allowed water entry into the building. As the observable defects accumulated, a competent inspector would have understood there was reason to be concerned about the standard of construction and the weathertightness of the apartments.  The inspectors’ failure to observe the obvious defects and to require more detailed inspection of the building was negligent. It led directly to the certifying of the building as Code compliant when it was not. Roof There was significant debate between the witnesses for the plaintiff and witnesses for the Council about inspections of the roof and whether a reasonable inspector could have seen the inadequacies of the roof, particularly the inadequacies of the roof flashings that are now known. I am satisfied that some of the defects on the lower roof could and should have been seen by the inspectors. Whether they would or would not have justified a wider inspection of the roof by themselves can be legitimately debated. But even if the initial inspection reasonably missed the defects in the roof flashings, the other serious inadequacies in the building identified above should have made Council inspectors aware of the serious inadequacies of construction. This in turn should have led to more detailed inspections of the rest of the building including the roof flashings. A reasonably competent inspector considering whether the building was Code compliant would have sought appropriate assurance that the roof and flashings were appropriately installed. This is especially so given the roof and flashings were important to weathertightness and adequate inspection was practically impossible in 2001. I accept that for the inspectors to require scaffolding to be installed so they could inspect the roof would be an absolute last resort. Their approach should have been to require the owners to satisfy the Council that the roof and flashings had been installed to an appropriate standard. The Council might accept a producer statement from the roofer who had undertaken the work if from the Council’s knowledge of the work done by the roofer, he could be fairly relied upon. In the alternative, some form of independent inspection of what could be seen without scaffolding (for example, with ladders) was needed. If some form of additional inspection had been undertaken even without scaffolding, I am satisfied such an inspection would more likely than not have revealed reasons to be concerned about the installation of the roof flashing, at least on the lower roofs. This, together with the other building issues, also should have led to a further comprehensive inspection of the whole roof. This, in turn, would have revealed a range of inadequacies with the roof flashing. The other inadequacies with the roof (for example inadequate nailing) would not have been visible on first inspection. But again, other defects warranted a comprehensive examination of the roof which would have revealed them. Mr Wutzler identified a number of defects within each of the 13 categories of defects (see at ). These were reproduced in a schedule of defects which a number of the witnesses used as a basis to comment. In this judgment I do not assess whether all these allegations are made out and if so whether each defect should have been seen by the Council inspectors. I have taken a different approach. I have concluded that there were a number of fundamental defects in the construction of this building which led to watertightness problems. These defects were there to be seen by a competent Council inspector. If they had been seen a competent inspector would have carried out a detailed and comprehensive inspection of the building. More inadequacies in the building work would have been revealed. A CCC would not have been issued for the building in that state. Perhaps as the Council says, some of Mr Wutzler’s “defects” were either not defects or were not reasonably discoverable by a competent inspector. But the vast majority were not in this category. And many of the defects directly relevant to watertightness were easily able to be seen. I am therefore satisfied that in issuing the CCC the Council inspectors were negligent in their inspection and in turn negligent in certifying that the building had been built according to the Code when that was clearly not the case. Negligence and the damage caused In the evidence of Mr Wutzler and Mr Jones, the two remediation experts, there was significant disagreement about the extent of the defects in the building. Mr Wutzler saw many more defects than Mr Jones. But what was in common was this basic proposition: the building had been constructed in a way which allowed water entry. This, in turn, had caused substantial damage to the building. The main causes of water