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APS Fleet Street CA Summary

07-Mar-2017

A Builder’s “Duty to Warn”: Andrews Property Services Limited v Body Corporate 160361

Introduction:

Doug Cowan Barristers & Solicitors and barrister Josh McBride have together won an important decision at the Court of Appeal in the case of Andrews Property Services Ltd v Body Corporate 160361. [1] The decision is likely to attract considerable debate regarding its findings that a builder is not required to:

(a) Second-guess decisions made by the architects and engineers; or

(b) Enquire into the state of the building that the builder is working on, beyond doing the work that is the subject of the consent.

Disappointingly, the Court did not accept some of the more factual submissions made on behalf of APS, who must now defend the allegation that their screw fixing work was negligent and caused loss. What that loss could be is still indeterminate as there was no evidence before the High Court.

The facts:

Water damage was first found in the Fleetwood apartments in 2003. Babbage Consulting Ltd (“Babbage”) was commissioned by the Fleetwood Body Corporate to undertake a review of the building for moisture damage. The resulting report detailed significant moisture in the sub frames and Babbage was engaged to prepare a tender for the remediation works.

Babbage suggested three options for the repair. The first two comprised a full “reclad”, in which all the Harditex and sub-framing was removed and a new cladding system installed. The third option was an “overclad” system comprised of aluminium rails sitting over the existing façade with fibre cement sheets affixed to the outside.

Babbage provided a specification for the work which required that the contractor, in conjunction with Babbage, remove areas of the exterior cladding to determine the level of deterioration to affected timber or steel studs.

APS provided a tender for the “overclad” which in turn was recommended to the Body Corporate by Babbage as the cheaper option. When work commenced in 2005 APS discovered rusted steel under the windowsills. APS sent a fax to Babbage seeking instructions as they were obliged to do under its tender document. Babbage visited site, took photographs and noted that contrary to prior assumptions the framing under the original cladding was light steel and not timber. Babbage advised APS that it had inspected the extent of the rusting and recommended that repairs be confined to the rusted steel that had been exposed under the windowsills.

The High Court judgment:

 

The owners brought proceedings in respect of the defective remediation against Babbage, APS and the Auckland Council. The Council cross-claimed against Babbage and APS seeking a contribution in respect of its liability to the owners.

Whata J found all three defendants at fault, and, in relation to APS specifically the Judge held:

  • That while APS’s tender for the remediation had successfully transferred to Babbage the obligation to undertake a survey of damage, APS was nevertheless obliged to be satisfied that Babbage had undertaken a proper survey.
  • That APS failed to correctly install the new exterior cladding by failing to obtain design details for the fixing of the panels and for failing to use clearance holes for the screws resulting in cracking in the cladding panels.
  • That APS’s producer statement misled the Council into thinking that the new cladding had been properly affixed.

The Court of Appeal judgment:

The Court of Appeal declined to recognise a duty to protect the owners from the negligent omissions of Babbage, noting that the courts have historically found such a duty only where the defendant had some control over the actions of the wrongdoer. Quite clearly APS had no such power, contractual or otherwise, to decline any direction from Babbage. The Court noted that it would introduce considerable uncertainty into the performance of construction contracts if contractors and sub-contractors were under an obligation to second-guess the instructions issued by an engineer or an architect. The question for the Court was whether APS owed a more indirect duty to the owners to warn of an omission on the part of Babbage.

Consideration of a duty to warn in the setting of construction contracts by the higher courts in New Zealand is very limited. After tracing overseas authorities the Court of Appeal intimated that New Zealand law ought to recognise a duty to warn. However, Brown J noted that such a duty will generally only arise where there is some appreciable relationship between the plaintiff and defendant. The existence of a duty must be incidental to the contractual relationship between APS and the owners. The Court gave a list of features which released APS from liability for such a breach of duty, including;

  • APS had transferred responsibility for the inspection to Babbage;
  • APS was only obliged to complete work under instruction from Babbage;
  • When it came to light that the structure was mainly steel, Babbage made decisions regarding remediation of the structure and secured an amendment to the building consent reflecting this; and
  • APS’s tender contained a guarantee exclusion for the weathertightness of work completed.

It seems likely that in appropriate circumstances, contractors will be held liable failure to warn but what those circumstances are, and when they arise will be for future litigation to determine. What is clear from this decision is that a contractor such as APS, when undertaking a discrete remediation task, has no duty to undertake remedial work outside of its contractual responsibility to ensure the entirety of a building will be code compliant.

Conclusion:

Adverse findings notwithstanding, APS is elated to have liability set aside for their failure to survey the building in what has been a trying and lengthy process. Potential appeals to the Supreme Court are still possible but both Doug Cowan and Josh McBride are confident that the Court of Appeal has reached the best decision on the facts in this case.

FDP



[1] Andrews Property Services Ltd v Body Corporate 160361 [2016] NZCA 644.

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