Cole v Pinnock HC Auckland CIV-2011-404-003743

[2011] NZHC 1795

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-003743

UNDER  the Weathertight Homes Resolution

Services Act 2006

BETWEEN  ROWAN NIGEL COLE Appellant

ANDRALPH ERNEST KENNEDY PINNOCK, ADRIANA LUCY PINNOCK AND PETER BRUCE JACOBSON AS TRUSTEES OF THE PINNOCK TRUST Respondents

Hearing:         9 December 2011

Appearances: D M Salmon and K L J Simcock for Appellant

A Ivory for Respondents

Judgment:      16 December 2011 at 4:00 PM

JUDGMENT OF VENNING J

This judgment was delivered by me on 16 December 2011 at 4.00 pm, pursuant to Rule 11.5 of the

High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Lee Salmon Long, Auckland

Shanahans, Waitakere, Auckland

Copy to:            A Ivory, Auckland

COLE V PINNOCK & ORS HC AK CIV-2011-404-003743 16 December 2011

Introduction

[1]      This is an appeal from a decision of the Weathertight Homes Tribunal (the Tribunal).   The respondents (the Pinnocks) own a house in Parnell.   In 1999 they extensively renovated it.  The appellant (Mr Cole) was a director of Auckland Wide Builders Ltd (AWB).   AWB carried out the renovations.   The Pinnocks’ house developed a number of leaks.  In August 2008 the Pinnocks applied for an assessor’s report under the provisions of the Weathertight Homes Resolution Services Act

2006.   The assessor confirmed the Pinnock’s house was a “leaky home”.   The Tribunal subsequently found that Mr Cole, the Auckland Council and Mr Nishar Mohammed, a plasterer, were liable to the Pinnocks for the defects in the Pinnocks’ house.

[2]      Mr Cole appeals from the Tribunal’s decision.  He says the Pinnocks’ claim is barred by the provisions of the Limitation Act 1950.   In the alternative, if the claim is not out of time, then he says it should be reduced because of the Pinnocks’ contributory negligence or failure to mitigate their loss.

[3]      Neither the Council nor Mr Mohammed have taken any steps to appeal the Tribunal’s findings.   However, the Council seeks to piggyback upon Mr Cole’s appeal.  It has filed a memorandum to confirm that, if Mr Cole succeeds, then the defences advanced by him are ones that are also available to the Council (and Mr Mohammed) as concurrent tortfeasors.  The Council seeks the appropriate orders.

Background

[4]      The Pinnocks’ house was built in the 1940s.  The alterations and additions in

1999 were extensive.  They involved demolition of part of the existing dwelling and construction of a new garage with a guest room over it together with an upper studio with a deck.  An existing deck on the east elevation ground level was also altered and a new balustrade provided to it.

[5]      The construction work began in May 1999.   On 3 June 1999 the Pinnocks advised the architect, Mr Wood that they would administer the contract themselves.

[6]     Problems arose between the Pinnocks and AWB during the course of construction.  Mr Cole was the AWB person on site and responsible for the work. On 19 October 1999 the Pinnocks gave notice to AWB and Mr Cole that they proposed to engage another builder to complete the work.

[7]      On 6 December 1999 the parties went to arbitration.  The arbitrator dealt with a number of issues including dampness in the garage wall, height clearances in relation to a stairway and a leak in the dining room light fitting.

[8]      AWB was placed into liquidation in March 2000.   The Pinnocks and their solicitor, Mr Jacobson, corresponded with the liquidators regarding problems with the building work.  On 7 August 2000 Mr Jacobson described the house as “suffering from major leaks every time it rains”.

[9]      The Pinnocks ultimately retained a new company, Eastridge Construction Ltd, to complete the project and obtain code compliance from the Council.  The code compliance certificate issued on 20 February 2001.

[10]     Despite the code compliance certificate the Pinnocks noticed that the leaks through the dining room ceiling continued.  In August 2001 the Pinnocks engaged a specialist water leaks company, Water Leak Solutions Ltd.  That company reported on the leak on 20 September 2001.   It recommended remedial action which the Pinnocks attended to.

[11]     In  late  2003  Water  Leak  Solutions  inspected  the  property  again  at  the Pinnocks’ request.  The Pinnocks also engaged Prendos Limited to inspect the house and to advise on any watertightness issues.   Prendos ultimately recommended a complete reclad of the building with a ventilated cavity system.   Prendos did not recommend targeted repairs.

[12]     The Pinnocks did not immediately carry out the reclad.   They engaged a builder, Mr Marty Malone of Malone Contracting Ltd to address a number of the repairs identified by Prendos.

[13]     In 2008 the Pinnocks noticed further staining at skirting board level at the top of the stairs leading to the laundry.  By this time Mr Malone’s company had been placed into liquidation.   The Pinnocks contacted another builder.   That builder arranged for infra-red photographs to be taken  and reported that the house had watertightness issues.   Then, on 19 August 2008, the Pinnocks applied for an assessor’s report.   The assessor concluded there were weathertight issues.   The matter proceeded to the hearing before the Tribunal.

Issues

[14]     The following issues arise on this appeal:

[a]       Did the Pinnocks’ cause of action accrue before 19 August 2002 so

that it is barred by the provisions of the Limitation Act?

[b]       Were the Pinnocks contributorily negligent or did they fail to mitigate their loss by:

[i]        dismissing the architect and thereby assuming responsibility for oversight of the project;

[ii]       removing       the      builders       and      appointing      other advisors/contractors on a piecemeal basis; and/or

[iii]      choosing not to follow expert recommendations for further monitoring and testing including destructive investigation in

2002/2003?

The limitation issue – test for reasonable discoverability

[15]     The claim against Mr Cole is in negligence.  It is his case that once there was any loss in market value the cause of action accrued in relation to the entire negligence sued on by the Pinnocks.  It was not necessary for all the defects or for all

their causes to be discovered for the cause of action to accrue.  The test is not actual discovery of each defect, it is reasonable discoverability of loss.

[16]     Mr Salmon submitted that there were a number of occasions on which leaks and their financial implications arose in relation to the Pinnocks’ house prior to August 2002.  They were identified by the Pinnocks and their advisors and known by them.  Mr Salmon referred to the arbitration held in December 1999, the earlier leaks in  the  ceiling  observed  by  the  Pinnocks  during  1999,  the  attempted  repairs  in

1999/early 2000,  Eastridge  Construction’s  attempted  repairs,  the  correspondence engaged in on behalf of the Pinnocks by Mr Jacobson and the Water Leak Solutions’ report.  All these events occurred before 19 August 2002.

[17]     The underlying problem, that the Pinnocks’ house was what is now known as a “leaky home”, was latent.   The law in relation to when the cause of action in negligence accrues in  relation to a latent defect is settled.   In  Invercargill City Council v Hamlin1 the Privy Council confirmed that in such cases the loss sued for is economic loss.2      The cause of action  accrues  when  any reasonable homeowner would call in an expert to address the defects so that the market value of the house is

depreciated because the defects would be obvious to a potential buyer.  The Privy

Council stated:3

The plaintiff's loss occurs when the market value of the house is depreciated by reason of the defective foundations, and not before. If he resells the house at full value before the defect is discovered, he has suffered no loss. Thus in the common case the occurrence of the loss and the discovery of the loss will coincide.

But the plaintiff cannot postpone the start of the limitation period by shutting his eyes to the obvious. In Dennis v Charnwood Borough Council [[1983] QB 409 (CA)], a case decided in the Court of Appeal before Pirelli reached the House of Lords, Templeman LJ said at p 420 that time would begin to run in favour of a local authority:

". . . if the building suffers damage or an event occurs which reveals the breach of duty by the local authority or which would cause a prudent owner-occupier to make investigations which, if properly carried out, would reveal the breach of duty by that local authority."

1      Invercargill City Council v Hamlin [1996] 1 NZLR 513 (PC).

2      At 526.

3      Ibid.

In other words, the cause of action accrues when the cracks become so bad, or the defects so obvious, that any reasonable homeowner would call in an expert. Since the defects would then be obvious to a potential buyer, or his expert, that marks the moment when the market value of the building is depreciated, and therefore the moment when the economic loss occurs. Their Lordships do not think it is possible to define the moment more accurately.

[18]     That approach is consistent with the underlying principle that a cause of action accrues when, but not before, all the elements necessary to support the plaintiff’s claim are in existence.

[19]     Mr Salmon submitted that the accrual of a cause of action in negligence for latent building defects is delayed only because one of the components of the cause of action (loss) is not initially present.  The claim against Mr Cole was in negligence relating to work carried out in relation to the renovations to the house in 1999.  Mr Salmon submitted that the first occasion of loss in relation to that work was when the initial leaks through the lounge ceiling were discovered so that the cause of action accrued at that time, well before 19 August 2002.  It was irrelevant that the loss was

limited to the cost of repairs:  Thom v Davys Burton.4

[20]     Loss having occurred Mr Salmon submitted that all the essential elements of the cause of action were present and the cause of action accrued at that time.  Mr Salmon noted that apart from the initial leaks, the Pinnocks had identified defects in the building, appointed experts to address those defects, received an expert report from Water Leak Solutions that identified the loss and also identified they had, in counsel’s words, a “Hamlin-type cause of action”, all before 19 August 2002.  He noted the Pinnocks had asserted and relied on the leaks as claims in the arbitration and later against its liquidators’ claim for moneys owing.

[21]     The Pinnocks argue that the leaks identified in 1999 and those that were investigated by Water Leak Solutions were quite different to the underlying watertightness  issues  that  were  subsequently  identified.    The  initial  leaks  were

readily and inexpensively addressed.  The latent underlying issues were major and

4      See Thom v Davys Burton [2008] NZSC 65, [2009] 1 NZLR 437 at [17] and [49].

caused a quite different and distinct loss.  The Pinnocks rely on two decisions of this

Court:  Burns v Argon Construction Ltd5 and Cameron v Stevenson.6

[22]     Burns was an appeal from a decision of the Weathertight Homes Tribunal striking out the appellants’ claim because the claim was time-barred.   In 1996 the appellants had entered into a construction contract with the first respondent for renovation work.   In late 1996, before the renovations were complete, water entry was observed in a bedroom on the ground floor.  The appellants consulted Prendos Limited.  Prendos prepared two reports, in January and February 1997.  Repairs to address matters identified in reports were carried out.  Following inspections in June

2001 the Council issued a code compliance certificate in July 2001.

[23]     In late 2003 the occupants noticed signs of leaking in the house.   Further repairs were carried out but the problem was not resolved.   On 28 May 2004 the trustees applied for an assessor’s report.   The report identified significant defects requiring repair.  The issue for the Tribunal on the limitation point was whether the claims accrued before 28 May 1998.  By that date the earlier leaks of 1996 and the two Prendos reports were available to the appellants. Asher J referred to Invercargill

City Council v Hamlin, the Supreme Court decision in Murray v Morel & Co Ltd7

and the Court of Appeal decision in Pullar v R.8   He then stated:

[31]     Thus, while a building owner calling in an expert to assess damage will provide a strong indication that the cause of action has accrued, that factor in itself cannot be a substitute for a careful consideration of the facts.

[24]     Then, referring to Bowen v Paramount Builders (Hamilton) Ltd,9     Mount Albert Borough Council v Johnson,10   Askin v Knox11   and S v G12 Asher J concluded that in certain circumstances new incidents of damage resulting from negligence

could give rise to new and separate causes of action.13

5      Burns v Argon Construction Ltd HC Auckland CIV-2008-404-7316, 18 May 2009.

6      Cameron v Stevenson HC Napier CIV-2009-441-437, 5 November 2009.

7      Murray v Morel & Co Ltd [2007] NZSC 27, [2007] 3 NZLR 721.

8      Pullar v R [2007] NZCA 389.

9      Bowen v Paramount Builders (Hamilton) Ltd [1977] 1 NZLR 394 (CA).

10     Mount Albert Borough Council v Johnson [1979] 2 NZLR 234 (CA).

11     Askin v Knox [1989] 1 NZLR 248 (CA).

12     S v G [1995] 3 NZLR 681 (CA) at 687.

13 At [32].

[25]     Cameron  v  Stevenson  was  also  an  appeal  against  strike  out.    Potter  J approved the reasoning in Burns confirming that it will be a question of fact and degree whether damage is sufficiently distinct to result in a separate cause of action in negligence.14

[26]     I note that apart from the decisions of Asher and Potter JJ referred to above, there are the further decisions of Kay v Dickson Lonergan Ltd15 and Body Corporate No 169791 v Auckland City Council16  to similar effect.  In both of those cases the Court recognised that multiple causes of action can accrue at different times in relation to building defect claims when sufficiently separate and distinct damage can be identified.

[27]     Mr Salmon submitted that, to the extent Asher J in Burns relied on Bowen v Paramount Builders (Hamilton) Ltd and Mount Albert Borough Council v Johnson, the Privy Council in Hamlin and more recently the Supreme Court in North Shore City Council v Body Corporate 188529 (Sunset Terraces)17  had confirmed that in those cases the Court was addressing the issue of whether a second or subsequent building owner could sue for negligence in relation to that building work.  Where, as

here, the claim was by the original owner, Mr Salmon submitted the cause of action was not severable.  It was a claim in negligence for the loss arising out of the same duty and the same breach of duty.  He submitted that the plaintiffs could not set up each individual head of loss as a separate cause of action in negligence.

[28]     I am unable to accept that the position is as black and white as Mr Salmon argued for.   It will be necessary in each case to consider the pleadings and the particular facts of the case.

[29]     Mr Salmon argued that such an approach would lead to uncertainty, that it could be unworkable and that it was not supported by the plain words of Hamlin.  He

also  relied  on  Pullar.     The  Pullars  had  agreed  to  construct  a  library  and

14 At [81].

15     Kay v Dickson Lonergan Ltd HC Auckland CIV-2005-483-201, 31 May 2006.

16     Body Corporate No 169791 v Auckland City Council HC Auckland CIV-2004-404-5225, 19 May

2009.

17     North Shore City Council v Body Corporate 188529 [2010] NZSC 158, [2011] 2 NZLR 289 [Sunset Terraces].

administration building for Ruatoki School.   A number of issues arose with the Pullars’ building work.  In October 1997 the architects retained by the Ministry of Education identified “leaking windows, plaster and paint work to the exterior and damage  to  the  carving  wall  delamination”  all  of  which  required  repair.    The following year the Ministry sought a report as to all the defects in the building.  It received that report in late December 1998.   The Ministry then commissioned a further report in November 1999 which recommended remedial work “along the lines indicated in [the earlier] report”.

[30]     Despite those reports the Ministry did not file its claim against the Pullars until 17 May 2005.  The Court of Appeal held the claim was time-barred.  The Court referred to Hamlin and noted that:

[15]      We are by no means convinced this was a case of “latent damage”.

The defects were readily apparent as early as 1997, indeed perhaps late

1996. There was no mystery about what was wrong. ... We strongly suspect that any cause of action in negligence had accrued by [October 1997].

[16]      But, even if we are wrong about that, there can be no doubt whatever that a cause of action had definitely accrued by the time of Mr Barnett's inspection and report of December 1998. We do not need to ask, in Hamlin terms, whether “any reasonable [building] owner” would or should have called in “an expert” by then: the Ministry after all had called one in. The defects were obvious. So was the remedial action required.

...

[19]      With respect, the judge applied the wrong test. It is not necessary, in order for time to start running, to be able to pinpoint with precision the exact cause of every defect. Indeed, that would frequently mean time could not start running until the remedial work was under way! That would in turn mean that the building owner could not sue the builder in advance of the repair work as no cause of action would have by then accrued. That is not and never has been the law. What one is concerned to ascertain is when economic loss occurred: when was the market value of the building affected? We suspect the market value of this building was affected back in 1997. But it was clearly affected by the time the Barnett report was prepared in December 1998.

[31]     However, Pullar is of limited assistance in the present case.  As the judgment of the Court of Appeal effectively acknowledged, it was not really a case of latent damage at all.  The defects sued on as causative of loss were readily identified and apparent.

[32]     That is not the position in the present case.  The earlier leaks from the deck into the ceiling cavity above the lounge were caused by defective workmanship of a quite different nature to that which led to the underlying “leaky home” issues.  Those “leaky home” issues were not so readily identified and apparent.

[33]     Given that claims of this nature are claims for economic loss rather than physical damage, the focus of the claim in terms of this limitation issue in cases where these issues arise must be on what loss is sued for.

[34]     On Mr Salmon’s analysis, the cause of action in Hamlin itself would have accrued at a much earlier stage and Mr Hamlin’s claim would have been time-barred. The  earlier  defects  that  Mr  Hamlin  had  noticed  over  the  years  would  all  have incurred  some  cost,  albeit  modest,  to  be  repaired.    They  were  not,  however,

significant in context.   Williamson J’s decision in the High Court18  records that

within two years of moving in in 1972 there was a crack in the masonry veneer at the back door and, later, a crack in the corner of the north wall of the kitchen.  Within four to five years the kitchen door stuck.   The back door also stuck.   Both doors needed to be planed so they would open and shut properly.  In subsequent years the toilet, bathroom and bedroom doors also jammed and had to be attended to.  Within seven years (1979) a crack in the eastern wall had developed to such a degree the brick could be moved about.  Within the first five or six years of moving in (1977-

1978) other cracks were apparent and the sill slabs on the west wall became loose. In the early 1980s Mr Hamlin had noticed some cracks in the foundation wall. Despite  all  of  that,  it  was  only in  1989  that  inspection  was  carried  out  which identified the foundations as the problems and the proceedings were issued in November 1990.

[35]     If, as is submitted for Mr Cole, it is sufficient for the cost of repairs (even minor) to constitute sufficient economic loss to complete the cause of action then the early need for repairs to Mr Hamlin’s home would have completed the cause of action well before the 1989 inspection.  However, the Privy Council focused on the

moment  when  the  market  value  of  the  house  is  depreciated  “by  reason  of  the

18     Hamlin v Bruce Stirling Ltd [1993] 1 NZLR 374 (HC).

defective foundations”19.  At each level the Court must have concluded that it was only when the cracks became so bad or the defects so obvious that a reasonable homeowner would realise there was a substantial underlying defect or would call in an expert who, conducting proper investigations, would reveal there were defective foundations which depreciated the market value of the property, that the cause of action would accrue.  So the Hamlin decision itself is an example of the application of a fact and degree approach.  I note that during the course of delivering the advice

Lord Lloyd of Berwick talks of the cause of action accruing:20

... when the cracks become  so bad, or the defects  so obvious, that any reasonable homeowner would call in an expert.

(Emphasis added.)

[36]     The concepts of “so bad” and “so obvious” must raise considerations of fact and degree.  I also note his earlier reference to the loss occurring when the market value of the house is depreciated by reason of the defective foundations, rather than, as Mr Salmon would have it, by reason of the earlier examples of the defendant’s negligence.

[37]     It is not so much the calling in of an expert that is the important point, it is calling in the expert because of the particular problem which is an outward manifestation of the otherwise latent defect.   The issue then in the present case is whether, applying such a fact and degree test, the Pinnocks should have called in an expert in relation to the loss for which they now sue and whether that expert, if called in, should have identified that latent defect and damage.  It is conceded that the Pinnocks’ claim in relation to the costs of repairs of the deck is time-barred by the provisions of the Limitation Act.

[38]     It is not, as Mr Salmon submitted, that there is a separate claim for each individual defect, but rather where the case involves a latent defect, the outward manifestation must relate to that defect, so that a reasonable property owner or their expert should be aware of it.  The leaks through the overhead deck were as a result of

defective  workmanship.    The  cause  was  identified  and  fixed.    The  other  leaks

19     At 526.

20     Ibid.

discovered as a result of the invasive testing were not apparent before 2003.  Both the cause and the loss associated with them were of a quite different nature to the earlier leaks.  It is inherent in the nature of these cases that the underlying problem, the latent defect, may take some time to manifest itself to the extent the problem is so bad, or so obvious, that a reasonable person would take steps to address them, either by calling in an expert or otherwise.

[39]     For example, if the problem in the present case had manifested itself as cracks in the eastern side wall and an expert had discovered (or should have discovered) there were leaks around the windows on that wall, then time would start to run for a cause of action in relation to not only the defective workmanship in relation to the eastern wall but also in relation to leaks in all other walls from the same causes.  In the present case the issue is whether the problems identified with the leaking in the ceiling and the deck at the time of Water Leak Solutions’ report should have led a reasonable person to discover the other systemic defects.

[40]     In that regard I note the state of knowledge regarding the “leaky home” syndrome and the reasons for it was more limited in 2001 than even two years later, in 2003.  Asher J noted in Burns:21

The limitation issues need to be considered in the light of detailed evidence, against the backdrop of the fundamental change of understanding as to the cause of leaks in monolithically clad buildings between 1997 and 2004.

[41]     Also, as William Young P observed in North Shore City Council v Body

Corporate 188529 [Sunset Terraces]:22

Prior  to  widespread  recognition  of  the  leaky  building  problem  around [2004], there was no occasion to reconsider the continuing applicability of Hamlin in light of the [Building Act 1991] ….

[42] The answer to Mr Salmon’s argument that such an approach could lead to potentially unlimited liability if the limitation period is postponed lies in the 10-year longstop provision in s 393(2) of the Building Act 2004. In the present case that

would have prevented a claim being brought against Mr Cole after at the latest 19

21 At [63].

22     North Shore City Council v Body Corporate 188529 [Sunset Terraces] [2010] NZCA 64, [2010]

3 NZLR 486 at [144](b).

October 2009, that date being 10 years after his services were effectively terminated. Also, the Supreme Court made observations to the same effect in Sunset Terraces:23

(And in relation to limitation, the statutory “long-stop” provided by s 91(2) of  the  Building Act  1991 answers  any floodgates  arguments  raising the spectre of successive limitation periods.) ... Difficult cases of causation may arise in the future, but should be resolved in context.

[43]     The submissions for Mr Cole are based on the premise that both the duty and the breach are the same in relation to all the damage and the only difference is in the loss claimed as a result.

[44]     In  the  present  case  the  Pinnocks  claim  Mr  Cole  owed  a  duty  to  take reasonable  care  and  skill  in  carrying  out  building  work  and  supervising  the tradesmen AWB had engaged, to ensure the work was carried out in accordance with sound practice, complied with the code and Council requirements so as to ensure a watertight building fit for use as a dwelling.

[45]     The Pinnocks then claim that Mr Cole was negligent and breached that duty in that:

the  renovations  were  not  constructed  in  accordance  with  the  building

consent;

the work did not follow recognised  and acceptable practices resulting in flashings and control joints at the deck balustrade and walls, roof and walls/fascia boards, windows and walls, doors and walls, gutters and walls, existing building and new addition and the concrete block garage and room

above it being omitted;

he  did  not  request  or obtain  drawings  and  specifications  specifically  for

plaster coating;

23     At [10] (footnotes omitted).

appropriate and sufficient flashings, control joints and diverters at locations where  balustrades,  gutters  and  pipes  penetrated  the  cladding  were  not

installed;

the plaster was taken to ground level;

noeffective flashings were installed at the junction of the wall and the timber kitchen window; and

the step height from the study to the upper deck was only 25 mm when it

should have been 100 mm.

[46]     The Pinnocks claim that as a consequence of those breaches they suffered the various losses.

[47]     It is apparent that, while the claim for negligence is, at a general level, for defective  workmanship  and  oversight,  the  breach  relating  to  the  deck  is  quite different to a number of the other breaches alleged.  It must be a matter of fact and degree in the particular case whether the outward manifestation of the problem would lead a reasonable homeowner (or an expert appointed by them) to discover the underlying latent defect.   For example, the difficulties with the flashing, control joints and the failings in relation to the plastering might first manifest themselves by excessive cracking in the plaster coating.  The issue is, as noted in Hamlin, when the cracks become so bad or the defects so obvious that a reasonable homeowner would appoint an expert to inquire into it and an expert thus appointed would then identify the actual cause of the obvious symptoms.

[48]     The defects at the heart of the economic loss which the Pinnocks sue for in this case include defects relating to the cladding and flashings generally.  They are not limited to the leaks flowing (in both senses of the word) from the deck defects.

[49]     The relevant issues identified prior to 19 August 2002 related to the leak originating from the deck above the lounge ceiling.  It is apparent from Water Leak Solutions’ report of 20 September 2001 that the problem was identified as a leak

from the ceiling in the centre of the dining area.   The solution proposed was to modify the drain to allow water flow onto the roof and block off the existing internal downpipe.   An alternative solution was to apply a membrane.   While the report identified there could be secondary causes culminating in water leaks they were said to be at the “same locations”.   Further, while the report recommended further monitoring of the situation to confirm there were no secondary problems, those secondary problems were clearly identified as leaks through the ceiling above the dining room in the same area.  The report did not identify that the problem was more widespread  or was  systemic as  was  later identified  and  which  was  the damage underlying the loss sued for.

[50]     Mr Salmon referred to the correspondence that Mr Jacobson, the Pinnocks’

solicitor, had engaged in with the liquidators.  Mr Jacobson referred in his letter of

26 June 2000 to the fact that numerous attempts had failed to locate the leak into the ceiling and suggested the options were demolishing and rebuilding or progressive repairs.  The Tribunal accepted that Mr Jacobson’s prose was effectively hyperbole and that it did not mean the Pinnocks were aware of the extent of the problems.  That finding was open to the Tribunal, having had the advantage of seeing and hearing the witnesses in the case.

[51]     As in Hamlin, the homeowners, the Pinnocks, made attempts to address the obvious issues that presented themselves.  In Hamlin the doors were planed so they could open and shut.  In the present case the leaking deck was repaired.  In neither case was the substantial cause, in Hamlin the cracked foundations, and in the present the structural defects, identified initially.

[52]     That the initial problem was separate and was resolved is supported by the evidence from the first Prendos report which noted that there were old stains on the wood in the relevant area but that they were dry.  There were no leaks in the area previously repaired.

[53]     Mr Salmon also argued that the difficulty with rejecting his submission that the cause of action was complete when the first loss was incurred by the cost of repairs to the deck was highlighted by the Tribunal’s finding:

[71]     The main defects which have contributed to water ingress are:

Inadequate cover to junction of fascia and barge boards;

Inadequate installation of, or failure to inadequately waterproof around, apron flashings;

Gutters embedded into cladding;  and

Failure to install flashings at junctions between old and new.

[54]     Mr Salmon submitted that at the least, the leak in the deck raised the issue of the flashings.  But I do not see that as causing any particular difficulty.  To the extent the reference is to the flashings about the deck area, then they related to the deck repairs and the loss claimed in relation to them would be time-barred.  The Pinnocks would not be able to recover them.   However, to the extent the flashings in other areas were associated with the general watertightness problem which manifested itself later, then the claim would not be time-barred.  Again, it would be a question of fact whether the expert should have realised the extent of the issue at the time of the investigation into the deck leaking.   The Tribunal did not consider he should have.   The first investigation was a focused one. That finding was open to the Tribunal.

[55]     After the first Prendos report on 16 December 2003 disclosed a number of elevated moisture levels,24  the Pinnocks and their advisers at that time should have made further inquiries, particularly given that the state of knowledge about “leaky homes” had moved on by that time.  But, as noted, the Pinnocks brought their claim within six years of that report.

[56]     The appeal insofar as it relates to the limitation issue cannot succeed.

24     That report identified elevated moisture levels at and around windows on the eastern face of the house that appeared to be leaking, a classic symptom of a leaky home.

Contributory negligence/mitigation

[57]     Mr Cole says the Pinnocks contributed to their own loss in a number of ways or otherwise failed to properly mitigate their loss.   They removed the architect employed to supervise construction well before the project was finished.  They then dismissed AWB and Mr Cole before completion of the project and the issue of a code compliance certificate.   Finally, when the Pinnocks took expert advice on managing the defects they did not properly follow it.

The dismissal of Mr Wood

[58]     An architect, Mr Wood, was engaged to prepare the plans and specifications. At the outset of the project Mr Wood was also contracted to supervise construction, which Mr Salmon submitted was an important role.  If he had remained on site Mr Salmon submitted the architect would no doubt have faced a claim as well.  Once the Pinnocks terminated the architect’s involvement they effectively chose to take on that role themselves and should have been held to have had a contributory role in the construction defects.  Mr Salmon submitted the Tribunal was wrong to conclude that the architect’s role was only administrative.

[59]     The answer to the submissions on behalf of Mr Cole lies in the terms of the contractual  structure  for  the project.    The  building contract  signed  between  the Pinnocks and AWB confirmed that in exchange for the contract sum, AWB would carry out the work in accordance with the attached drawings, specifications and schedules.   The scope for the works was stated to be as set out in the contract documents (architect’s and engineer’s drawings and specifications and the builder’s quotation  and  price  schedule)  and  such  other  work  as  agreed  in  writing.    The building contract did not expressly provide for supervision by the architect.

[60]     Mr Wood was engaged separately by the Pinnocks on the basis that he would prepare sketch plans, contract and consent drawings and specifications and carry out contract administration.   Mr Wood defined contract administration as dealing with the tender process, attending the site weekly to check progress against the builder’s programme,  to  ensure  the  work  was  being  carried  out  in  accordance  with  the

drawings and to issue monthly progress payment certificates for the Pinnocks to pay the  builder.     Mr  Wood  offered  an  alternative  service  to  the  full  contract administration  if  the  Pinnocks  wished  to  run  the  contract  themselves.    If  the Pinnocks wished to run the contract themselves, Mr Wood proposed that he charge on an hourly rate basis for any further attendances by him, either on a regular basis or whenever it was thought a visit was necessary.   It is apparent from those arrangements that Mr Wood did not contemplate a full supervisory role for himself as architect.

[61]     Although the Pinnocks initially agreed for Mr Wood to carry out the contract administration,  within  a  relatively short  time  they  determined  to  administer  the contract themselves.  They confirmed that on 3 June 1999 with Mr Wood.   In the same letter they confirmed that they wished to engage Mr Wood on an hourly rate basis to carry out whatever inspections might be necessary on completion of each stage of the project in order to certify the builder’s payments were properly due.  Mr Wood confirmed he was happy to carry out the work on that basis.  It was only later, towards the end of June, that he expressed some reservation about signing payment certificates when he had not been on site to see the work.  In context the Tribunal was correct to categorise the architect’s role as administrative.

[62]     If AWB or Mr Cole needed architectural direction then they should have raised that.  There is no evidence that was the case.  Rather, in his evidence about Mr Wood’s involvement, Mr Cole said:

Q.        So  both  yourself  and  Mr  Rawson  and  you’ll  give  evidence  that you’re quite commonly onsite because of your preference to do building work, we understand that.  Mr Woods is in the room and he was  the  architect,  did  you  deal  with  him very  much  during  the project?

A.       No.

...

Q.       If there was a part of a plan that wasn’t clear to you, you’d ask Mr

Wood for assistance as to how to complete that part of the house?

A.       That  would  be  the  proper  procedure,  if  there’s  a  deviation  or

whatever.

Q.        Would you call Mr Wood direct, or would you call Mrs Pinnock up first?

A.       Because you are spending the clients money. Q.    Yes.

A.       You would have to notify the client.

Q.        And right down to the end of the project if Mr Wood indicated there was  a  deviation  from  his  plans  or  a  workmanship  issue,  you would’ve listened to his concern and taken action if necessary?

A.       Absolutely.

...

Q.        Just moving through the project, there’s correspondence which you would’ve  heard  about,  in  the  course  of  the  project  where  Mrs Pinnock said that she was taking over the coordination of the project, do you remember that happening?

A.       No, I’ve got no recollection of that.

Q.        Do you recall that Mr Wood had less involvement after a particular part of the project and that Mrs Pinnock had more involvement is that your understanding?

A.       Well yes, what I’ve heard, yes.

Q.       Well was that your recollection as to how it went? A.       No.

Q.       Mr Wood, he visited the site once only and then didn’t really come

back, is that your understanding, is that your recollection?

A.       Well I honestly didn’t see Mr Wood.

[63]    The evidence does not support the submission that there was a major realignment of roles when Mr Wood’s services were dispensed with.   Nor does it suggest that Mr Cole relied on the architect to actively supervise the construction.

[64]     In summary, the submission that Mr Wood was dismissed once a contractual structure was in place which assumed the architect would supervise  the project overlooks that the building contract between the Pinnocks and AWB did not provide for supervision by the architect.   The arrangement between the Pinnocks and the architect was a quite separate arrangement to the building contract with AWB pursuant to which Mr Cole became involved.

Dismissing AWB/Mr Cole

[65]     AWB and Mr Cole were dismissed in October 1999, some 16 months before the code compliance certificate was obtained in February 2001.   Mr Salmon submitted that the Pinnocks, rather than AWB or Mr Cole, should have carried the responsibility for the risk during that period of 16 months as AWB and Mr Cole were unable to control events after they were dismissed.

[66]     He noted that at the time Mr Cole and AWB were removed from the site there were a number of matters that were identified as incomplete, including the leak in the ceiling and damp patches in the garage.   The Pinnocks’ own solicitor, Mr Jacobson, had noted there was a vast amount of remedial work required.

[67]     Mr Salmon referred to Findlay v Auckland City Council.25    In that case the High Court concluded that the property owner, Mr Findlay, was contributorily negligent  in  failing  to  appoint  a  project  manager  and  that  this  increased  the probability he would suffer loss.

[68]     I agree with the Tribunal’s finding that the present case can be distinguished from Mr Findlay’s case.   Mr Findlay had entered a labour only contract with the builders and  directly engaged  all  other subcontractors.    Unlike Mr  Findlay,  the Pinnocks had a full build contract with AWB.  They were entitled to rely on AWB (and Mr Cole given his assumption of personal responsibility) to project manage and supervise the construction work they were responsible for under the contract.

[69]     Mr Salmon also criticised the Tribunal’s conclusion that:

Eastridge’s brief was to attend to the outstanding requirements in order for the work to obtain a CCC.  I do not consider that either Eastridge or Dr and Mrs Pinnock can be criticised for not extending the scope of work to include checking all the work done by AWB.   The balance of the work had been passed by the Council inspectors and there was no reason at that time for Dr and Mrs Pinnock to question the quality of the workmanship of AWB and its contractors other than in the isolated areas which have been identified by the Council.

25     Findlay v Auckland City Council HC Auckland CIV-2009-404-6497, 16 September 2010.

[70]     AWB and Mr Cole could not be held responsible for any of the subsequent work by Eastridge to the extent such work was defective but the Tribunal did not consider that Eastridge’s work was defective.   Equally, however, Eastridge’s brief was to obtain a code compliance certificate, not to reinspect AWB and Mr Cole’s earlier work.  Its involvement with the work carried out by AWB through Mr Cole was limited to addressing identified matters that required remediation.   Neither Eastridge nor the Pinnocks were required to review the previous work carried out by AWB and Mr Cole to discover the latent defects in that work.

Failure to monitor/follow expert advice

[71]     Finally, Mr Salmon submitted that the Pinnocks were contributorily negligent or had failed to mitigate their loss by failing to follow the advice or heed the warnings given by the various experts they had engaged.  He referred to the Water Leak  Solutions  report  which  identified  various  flashing  issues  and  the  Prendos reports of 2003 and 2004.  In particular he noted that, while the Tribunal rejected the submission the Pinnocks had failed to mitigate by failing to implement the Prendos recommendation to reclad, it had nevertheless disallowed recovery of the Prendos costs.  He submitted that was not a sufficient deduction.

[72]     The ultimate recommendation by Water Leak Solutions was that, after the recommended remedial repairs, further monitoring should be carried out to confirm there  were  no  secondary  problems.    The  repairs  were  undertaken  (and  were apparently successful) and the Tribunal found that the Pinnocks carried out the recommended monitoring.  When Mr Cressey of Water Leak Solutions was brought back on site in 2003 and recommended further inspections, the Pinnocks engaged Prendos who at that time carried out destructive testing.

[73]     While Prendos recommended a full reclad rather than targeted repairs Mrs

Pinnock’s evidence was that:

44.Overall, Prendos recommended a complete re-clad with a ventilated cavity system.  In discussions with Mark Williams however, when I questioned him about undertaking targeted repairs instead, he told me that it was the policy of Prendos only to recommend complete re-

claddings   for   fear   of   incurring   future   legal   liability   if   it recommended anything less.

45.Mark Williams wanted to undertake more extensive destructive investigations, but we did not have a builder who could then remedy whatever sections of the building were opened up.  We immediately began to look for a builder who was prepared to undertake repairs because  we  wanted  to  see  whether  they  would  be  adequate  to address the issues identified by Prendos.

...

47.Our plan was to have [Marty Malone, director and shareholder of Malone Contracting Limited] do regular maintenance and monitor the  situation,  to  see  whether  a  complete  re-clad  was  in  fact necessary.

[74]     The Tribunal found:

[156]    While Dr and Mrs Pinnock did not at that time undertake a full reclad, as recommended in the Prendos report, I accept they were advised that  Prendos  always  recommended  a  reclad  but  that  other  options  were viable. The damage at that stage was not thought to be wide spread. ...

[157]    In addition even if the targeted repair approach was unreasonable, the respondents have not established how failing to undertake a reclad at an earlier stage would have reduced the damages sought by anything more than the amount spent on failed targeted repairs.  In particular they have produced no evidence that the costs of a full reclad have increased significantly in the intervening period.

[158]    I therefore conclude that the respondents have failed to establish that the trustees have not acted reasonably in trying to mitigate their loss.  It was not unreasonable for the trustees to carry out targeted repairs in 2004 and

2005.  …

[75]     The findings were open to the Tribunal on the evidence before it.   The appellant has not shown the Tribunal was wrong in that conclusion.

Findings/result

[76]     The cause of action sued on by the Pinnocks for the loss sustained by them as a consequence of the house being a leaky home did not accrue prior to the Prendos report of 2003.  The claim is in time.

[77]     The Pinnocks have not been contributorily negligent and have not failed to mitigate their losses.

[78]     The appeal is dismissed.

Costs

[79]     Costs to the respondents on a 2B basis together with disbursements as fixed by the Registrar.

Venning J