KAY V DICKSON LONERGAN LTD AND ORS HC AK CIV 2005-483-201 [2006] NZHC 605 (31 May 2006)



CIV 2005-483-201


IN THE MATTER OF an adjudication involving the

Weathertight Homes Resolution

Services Act 2002

AND IN THE MATTER OF the District Courts Act 1947







First Respondent



Second Respondent



Third Respondent



Fourth Respondent



Fifth Respondent



Sixth Respondent

Hearing: 28 and 29 March 2006


Appearances: T J Rainey and CM Fairnie for the appellants

P Leman for the first respondent

P Robertson for the second respondent

L C Rowe for the third respondent

J R Sumner for the fifth respondent


Judgment: 31 May 2006



(Appeal from strike out)


Delivery time in accordance with Rule 540(4): Wednesday, 31 May 2006 at 3.45pm




Table of Contents Para No


Introduction [1]

Factual background [3]

The appellants' adjudication claim [16]

Statutory context [22]

Approach to strike out [35]

The claim based on the plaster cladding [38]

Limitation concealment by fraud [ 64]

Estoppel [69]

The cross-appeals other defects [72]

Other matters [84]

Result [88]

Costs [89]




[1] The appellants, Dr and Mrs Kay, filed a claim on 14 December 2002 with the

Weathertight Homes Resolution Service. The claim alleges negligence in relation to

the design and construction of their home. In a decision dated 20 June 2005, the

adjudicator struck out parts of their claim on the basis those parts were out of time in

terms of the Limitation Act 1950.



[2] The appellants say it was wrong to strike out any part of the claim. The

respondents cross-appeal and say all of the claim is time barred.



Factual background


[3] The appellants bought a property at 23 Oakland Avenue, Wanganui, in 1993.

At about that time, they entered into a contract with Dickson Lonergan Limited, the

first respondent. Dickson Lonergan were to design a residential dwelling to be built

on the property and to supervise the construction.



[4] A Building Consent 93/5281 was issued by the Wanganui District Council,

the second respondent, for construction of the dwelling on or about 10 May 1993.



[5] The appellants moved into the dwelling on or about 17 December 1993 and

construction was completed in or around January of the following year. The

plastering of the home was undertaken by Phil Durston Ltd, the third respondent, a

company operated by the fourth respondent, Mr Phil Durston.



[6] In about March 1994, the appellants told Dickson Lonergan of various

problems with their house. Those problems were as follows:


a) Cracks in the stucco cladding;


b) Damp carpet and skirting boards;


c) Water runs on interior linings;


d) Bubbled interior paint;


e) Musty smells; and


f) Water pooling on the garage and cupboard floor (under the stairs).



[7] Dickson Lonergan's reaction was to get the fifth respondent, the Building

Research Association of New Zealand Incorporated (BRANZ) to undertake a site

visit and report their findings. BRANZ duly reported in January 1995. The BRANZ

report was sent by Dickson Lonergan to the appellants along with a letter in which

Dickson Lonergan took issue with aspects of the BRANZ report.



[8] Dickson Lonergan organised for remedial works to be carried out on the house between March and August 1996. The cost of those works was $8,572.90.



[9] Those works were as follows:


a) Quality Decorating Ltd (painting) $196.70;


b) R & P Edmonds Ltd (painting of exterior) $4,736.25;


c) Garth Mason (repairs to shower, glass door and tiles) $2,989.95;


d) Mike Bates Plumbing and Gasfitting (repair shower leak and cap

flashing to rafters to outside porch) $495.00; and


e) Ashamans Roofing (repairs to Butynol roofing) $155.00.



[10] The Council issued a code compliance certificate in relation to the original

building consent on 13 August 1996.



[11] Once these initial remedial works were carried out, the appellants did not

experience any further leaks for a period of over two years. It was not until

about May 1999 that the appellants again noticed cracks appearing in the stucco cladding.

They instructed Joyce Group Ltd, a firm of architects, engineers and building

consultants, to investigate.



[12] Joyce Group finished its report in November 2000. That report confirmed

that there were various construction defects in the dwelling which meant water

penetrated the stucco cladding and affected the structural integrity of the home.

After receiving the Joyce report, the appellants registered their property with the

Weathertight Homes Resolution Service. They did that on 14 December 2002. They

have since obtained various reports which confirm the defects in construction

highlighted by Joyce Group.



[13] After the appellants filed their amended adjudication claim on 2 May 2005

the Council filed an application for orders removing the Council as a party to the

adjudication on the grounds the claim was time barred and that in all the

circumstances it was fair and appropriate to remove the Council.



[14] Next, on 3 May 2005, Dickson Lonergan also applied for orders striking out

the first and second causes of action.



[15] The adjudicator determined the applications in Procedural Order No.6 dated

20 June 2005. The adjudicator decided that claims in negligence by the appellants

which derived from the defective plaster cladding were time barred. Claims deriving

from other defects were not struck out.



The appellants' adjudication claim


[16] The appellants in this case have elected to use the adjudication services

provided under the 2002 Act. Their amended adjudication claim alleges that their

home was built with various design and construction defects which have meant water

has gone into the structure of the building and caused it significant damage. They

also claim that as a result of the defects and resultant damage they have suffered and

will suffer various losses. Damages are sought.



[17] The first claim against Dickson Lonergan is one of negligent design. This

claim focuses on Dickson Lonergan's alleged failure to ensure the designs,

specifications, etc. met the applicable standards.



[18] The second of the claims against Dickson Lonergan relates to negligent

project management. The third claim is based on Dickson Lonergan's

failure to advise the appellants about the defects and their failure to ensure the 1996 repairs

prevented water getting into the exterior cladding.



[19] As against the Council, there is a claim in negligence which relates to an alleged breach of the duty of care owed in respect of the Council's actions in issuing the building consent, inspecting the building work, and issuing the code compliance certificate.



[20] The claims relating to negligence for damage arising from defective plaster

are not, in the present pleading, separated out from the other claims. Obviously, as is

accepted by the appellants, a further amended adjudication claim will be necessary.



[21] The other respondents are, very loosely, third parties who have been joined

on the basis they may attract some liability or contribution.



Statutory context


[22] The Weathertight Homes Resolution Services Act 2002 was passed to provide

home owners of leaky buildings, "with access to speedy, flexible, and cost-effective procedures for assessment and resolution of [their] claims". (s 3; and see the discussion of the statutory scheme by Harrison J in Auckland City Council v Weathertight Homes

Resolution Service (HC AK CIV 2004-404-4407 28 September 2004)).



[23] To achieve that purpose, the Act provides for the matters set out in s 4 (the

overview section) namely, the "Assessment and evaluation of claims in relation to

leaky buildings". Hence, there is a mechanism for home owners to submit their

claim, to have that claim evaluated, and to be given an assessor's report (ss 7 12),

and in particular provision is made under s 4 for the:


(b) Mediation of claims

Sections 13 to 21 make provision for access to a special mediation

service that is available to dwellinghouse owners with eligible claims.

(c) Compulsory adjudication of claims

Sections 22 to 55, and the Schedule, set up a mechanism whereby

dwellinghouse owners can have their eligible claims referred to

adjudicators whose powers and procedures are flexible and whose

deter minations, subject to appeal, are binding and enforceable:

(d) Miscellaneous provisions.




[24] In order to provide the relevant mediation and adjudication services, s 24 of

the Act makes provision for the appointment of adjudicators one of whom is

appointed by the Governor-General as the chief adjudicator.



[25] The jurisdiction of the adjudicators is set out in s 29 as follows:


(1) In relation to any claim that has been referred to adjudication, the

adjudicator is to determine

(a) the liability (if any) of any of the parties .. and

(b) remedies..


(2) In relation to any liability determined under subsection (1)(a), the

adjudicator may also determine

(a) the liability (if any) of any respondent to any other respondent; and

(b) remedies in relation to any liability determined under

paragraph (a).



[26] The adjudicator is given various other powers in relation to the conduct

of the adjudication. First, with the written consent of all parties, claims may be

consolidated (s 32). Second, the adjudicator may order joinder of parties as

respondents under s 33(1) if the adjudicator considers that -


(a) the person ought to be bound by, or have the benefit of, an order of the

adjudicator; or

(b) the person's interests are affected by the adjudication; or

(c) for another reason it is desirable the person be joined as a respondent.



[27] Third, there is power to remove a party. Section 34 states:


34. Removal of party from proceedings

An adjudicator may, on the application of any party or on the

adjudicator's own initiative, order that a person be struck out as a party

to the adjudication proceedings if the adjudicator considers it fair and

appropriate in all the circumstances.



[28] The adjudicator has the duties set out in s 35, namely to:


(1) ..

(a) act independently, impartially, and in a timely manner; and

(b) avoid incurring unnecessary expense; and

(c) comply with the principles of natural justice; and

(d) disclose any conflict of interest to the parties to an adjudication;


(e) if paragraph

(d) applies, withdraw from the adjudication unless those parties agree otherwise.



[29] The powers of the adjudicator under s 36 include the following:


(a) conduct the adjudication in any manner that he or she thinks fit,

Including adopting an inquisitorial process; and ..

(e) appoint an expert adviser to report on specific issues ..

(f) call a conference of the parties; and

(g) carry out an inspection of the dwellinghouse ..

(h) request the parties to do any other thing during the course of an

adjudication that he or she considers may reasonably be required to

enable the effective and complete determination of the questions that

have arisen in the adjudication; and

(i) issue any other reasonable directions that relate to the conduct of the




[30] Section 42 relevantly provides that -


(1) An adjudicator may make any order that a court of competent

jurisdiction could make in relation to a claim in accordance with

principles of law.

(2) However, if an adjudicator makes an order under subsection (1) that

requires a person to take any action other than the payment of

money, the adjudicator must also determine an amount of money

that is payable by the person required to take the action, and a date

by which that amount is payable if that person fails or refuses to take

the action before that date. ..



[31] Section 63 enables the Governor-General to make rules regulating the

practice and procedure of District Courts in proceedings under the Act.

Section 63(3) provides that -


In the absence of any rules under this section, or in any situation not covered

by any of those rules, the rules in relation to civil proceedings for the time

being in force under the District Courts Act 1947 apply, with all necessary

modifications, to proceedings under this Act.



[32] The right of appeal to this Court is on a question of law or fact "that arises

from the determination" (s 44(1)).



[33] In terms of s 46, in determining the appeal,


(1) .. the court may do any 1 or more of the following things:

(a) confirm, modify, or reverse the determination or any part of it:

(b) exercise any of the powers that could have been exercised by the

adjudicator in relation to the claim to which the appeal relates.

(2) A determination under subsection (1)

(a) has effect as if it were a determination made by an adjudicator for

the purposes of this Act; and

(b) is a final determination of the claim.

(3) Subsection (2)(b) does not prevent any proceedings between the

claimant and respondent to the adjudication to which the appeal relates

from being heard and determined at the same time as the appeal.



[34] Finally, s 55 provides that for the purposes of the Limitation Act, proceedings

are deemed to be filed when an application is made under s 9(1) of the 2002 Act for

an assessor's report.



Approach to strike out


[35] In their notice of appeal, the appellants said that the adjudicator had no power

to strike out parts of a claim. This was based on the submission that s 34 of the Act

only gives the adjudicator power to remove a person as a party. The appellants did

not pursue this and so I do not deal with that question. The focus of the appeal has

been on whether the power to strike out was properly exercised.



[36] It is common ground that the relevant principles for the strike out equate

with those applying to a strike out in either the District or the High Courts, in other words

as the adjudicator accepted, the power is to be exercised sparingly and in clear cases.



[37] The appellants say the adjudicator was wrong to strike out the claims relating

to the plaster cladding. The respondents say the claim relating to the other defects

should have been struck out. I take each in turn.



The claim based on the plaster cladding


[38] In reliance on the Privy Council's decision in Invercargill City Council v

Hamlin [1996] 1 NZLR 513, the adjudicator said the issue on the strike out application was whether more than minimal damage had occurred in a form which

ought to be reasonably discoverable by an ordinary prudent homeowner.



[39] The adjudicator said that on the appellants' own evidence they were aware of

cracked plaster cladding and water penetration in or about March 1994 and certainly

by January 1995 when they received a copy of the BRANZ report. The adjudicator

concluded that, by then, they were aware or ought to have been aware that the plaster

cladding had been applied inappropriately and was causing water to penetrate their

home. In other words, the adjudicator said, "it must have been obvious to [the

appellants] that there was a significant problem with the plaster cladding." They

then "shut their eyes to the obvious". The adjudicator said Dr Kay's actions in

discussing the BRANZ report with Dickson Lonergan, pressing for remedial work to

be done, and then instructing solicitors to assist in resolving the issues, showed

the appellants knew they had a problem with the plaster cladding.



[40] The parties all say the test is that set out in Hamlin at 526 in the following



Once it is appreciated that the loss in respect of which the plaintiff in the

present case is suing is loss to his pocket, and not for physical damage to the

house or foundations, then most, if not all the difficulties surrounding the

limitation question fall away. 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

discover ed, 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 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. The measure of the loss will then be the cost of repairs, if it is

reasonable to repair, or the depreciation in the market value if it is not: see

Ruxley Electronics and Constructions Ltd v Forsyth [1995] UKHL 8 ; [1995] 3 WLR




[41] Their Lordships continued, at 526 527, saying:


This approach avoids almost all the practical and theoretical difficulties to

which the academic commentators have drawn attention, and which led to

the rejection of Pirelli by the Supreme Court of Canada in Kamloops. The

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. For in the case of a latent defect in a

building the element of loss or damage which is necessary to support a claim

for economic loss in tort does not exist so long as the market value of the

house is unaffected. Whether or not it is right to describe an undiscoverable

crack as damage, it clearly cannot affect the value of the building on the

market. The existence of such a crack is thus irrelevant to the cause of

action. It follows that the Judge applied the right test in law.


Their Lordships repeat that their advice on the limitation point is confined to

the problem created by latent defects in buildings. They abstain, as did

Cooke P, from considering whether the "reasonable discoverability" test

should be of more general application in the law of tort.



[42] The Court of Appeal more recently in Murray and Ors v Morel & Co Ltd

CA86/04 22 December 2005, observed that what the Privy Counsel emphasised in

Hamlin is that,


the owner of a house which is found to contain defects sues not for physical

da mage to the house or foundations but for loss to his or her pocket. The

plaintiff's loss occurs when the market value of the house is depreciated by

reason of the defective foundations. If he or she resells the house at full

value before the defect is discovered, he or she has suffered no loss. Thus,

as the authors of Todd (ed) The Law of Torts in New Zealand (4ed 2005) say

at [27.5](3)(a), "in the common case the occurrence of the loss and the

discovery of the loss will coincide". They say: "Once this point is

appreciated the difficulties surrounding the limitation question fall away."

Hamlin, therefore, far from being authority for a general proposition that

"reasonable discoverability" is or ought to be the norm, in fact is authority

for the contrary (traditional) view. (See also, Weston "Limiting Limitation"

[2006] NZLJ 85.)



[43] The appellants also rely on the application of Hamlin by Chisholm J in

Andrew Housing v Tutbury (HC INV AP 34/97, 28 November 1997). In that case,

the respondent had noticed cracks in the brickwork of her home and found that some

of the doors were sticking. She complained to the City Council and to her insurers

but nothing happened. Her next step was to consult solicitors which she did

in April 1989. They arranged for a firm of engineers to be engaged. The engineers, in

reports provided during April and July 1989, assessed the physical defects but did

not establish the cause.



[44] Proceedings were issued on 20 September 1991. Chisholm J noted that "even

at that stage" there remained uncertainty about the cause of the physical defects and

the engineers carried on with investigations. It was not until 1995 that the engineers

decided that the physical defects were caused by problems in the piles and their




[45] The appellant in that case argued the District Court Judge was wrong to

consider the causes of the damage. The respondent knew about the damage well

before December 1989 and should have realised economic loss would result.



[46] Chisholm J said that it was significant that the Privy Council in Hamlin

upheld the "reasonable discoverability" test applied by the trial Judge. The trial

Judge in Hamlin had concluded that the reasonably prudent homeowner would not

have discovered that "the true cause" of the defects was the subsidence of the

foundat ions until they received expert advice. On that analysis, Chisholm J upheld

the District Court Judge's reliance on causation issues.



[47] The appellants in the present case say it is at least arguable that

the defects causing the problems they experienced were neither discovered nor reasonably

discoverable until May 1999. That was when the cracks re-appeared and the

appellants instructed Joyce Group. The appellants base this submission on the nature

of the defects noticed in 1994 and on the context in which they raised these matters

with Dickson Lonergan. As to the first aspect, the appellants say the remedial work

was minor in nature. Further, while the appellants were well aware of the symptoms,

they did not know about the cause. Hence, the appellants say the situation is

analogous to that considered by Chisholm J in Tutbury.



[48] On the second aspect, the context in which Dickson Lonergan was asked to

address the problems, the appellants emphasise two matters. One, the defects were

raised in the course of the three month defects liability period provided for in their

contract with Dickson Lonergan. Two, Dickson Lonergan's response to the BRANZ

report was such as to stop any further duty of inquiry on the part of the appellants.

The appellants concede that if they had received the BRANZ report directly, i.e. if

they had engaged BRANZ themselves, the situation would be different. Here, they

only received the BRANZ report in the context of Dickson Lonergan's response.



[49] The respondents say this is not a case of latent defects. Rather, by the time

the appellants saw the cracks and experienced water damage or at the latest by the

time of the BRANZ report, the Hamlin test was met. In other words, by then the

damage was discovered. Further, the damage was so obvious that the appellants did

in fact call in an expert. The advice given by BRANZ and by Dickson Lonergan

does not then postpone the limitation period.



[50] The relevant evidence comes from Dr Kay who says that soon after moving

into the house (mid December 1993), he noticed dampness in the living room and in

a bedroom. He also saw some cracks had begun to appear in the stucco cladding.



[51] Dr Kay then says that he contacted Dickson Lonergan about the cracks and

leaks in March 1994. He continues:


[Dickson Lonergan] were dismissive of my complaints saying that the cracks

in the plaster exterior were just due to house movement and could be

expected with a new house. [Dickson Lonergan] then asked me to test one

wall with water from the hose and see if the water soaked the carpets inside.

I did this and again experienced damp carpet. [Dickson Lonergan] then got

PCL to put in a novofill drain along the base of the wall on the exterior.



[52] Dr Kay says that this did not stop the leaks. Again, over the

next few months, when there was moderate to heavy rainfall, they experienced,

damp skirting boards, water runs on the interior lining of the walls and bubbled interior paint. .. Water had begun pooling on the garage floor and in the cupboard under the stairs.



[53] Dr Kay's evidence is that he "repeatedly" contacted Dickson Lonergan about

the leaks. He understands that Dickson Lonergan commissioned BRANZ to

undertake a site visit and report their findings. In January 1995, he explains that

Dickson Lonergan wrote to them enclosing a copy of the BRANZ report. He says

when he first received the report he did not read it in "any great detail." Rather, he

said he relied on the letter accompanying it from Dickson Lonergan and Dickson

Lonergan's knowledge and expertise. He said it was "obvious" from this letter that

Dickson Lonergan had reviewed the BRANZ report and researched the suggested

remedial work. Dr Kay continues:


To ensure that I had a correct understanding of [Dickson Lonergan's] letter I

contacted them. In a telephone discussion with Barry Lonergan .. he advised

that the BRANZ report indicated that the "job was alright" and requested me

not to talk to other people about the issue. However, [Dickson Lonergan]

acknowledged to me that there was a problem with the application of the

plaster that was needed to be remedied.


While I was aware that the BRANZ Report stated that there were defects

with my home, I accepted [Dickson Lonergan's] position when it criticised

the BRANZ report and accepted that these defects would be remedied with a

new coat of paint as suggested by [Dickson Lonergan].



[54] The BRANZ site visit report is dated 9 January 1995. It explains that the

reason for the visit was to determine the causes of water penetration onto the floor at

the base of stucco clad external walls.



[55] The "diagnosis" set out in the report is

as follows:


6.1 The details on the drawings and used on site do not comply with

NZS 3604 Appendix G, Fig G1. The cavity between the wall framing

and stucco has been omitted.


6.2 The specified 3:1 plaster mix is stronger than that recommended in

NZS 4251 Code of Practice for Solid Plaster. A stronger mix results in

higher shrinkage.


6.3 The work consists of two coats, while three were specified. This

makes it difficult to form proper movement control joints.


6.4 No control joints have been provided.


6.5 The "drummy" areas are due to the second coat being stronger than the

first coat and inadequate curing.


6.6 The curing has not been in accordance with the specifications. This is

clearly evident from the more severe cracking on the sunny sides of the

house, whilst the shaded side has very few cracks.



[56] The report identified the main cause of the problem as the lack of proper

curing and the strong plaster mix. The report also identified the absence of proper

control joints and the omission of the cavity between stucco and wall framing

as permitting water to reach the floor inside.



[57] The report contained a number of recommendations, in the following terms:


8.1 In one of the areas of water penetration cut the interior wall lining for

the full height of the wall. Hose the outside of the wall working up

from the bottom and observe where the water penetrates. If there are

defects in the building paper, repair them.


8.2 On the outside of the wall scrub off the lime wash. When completely

clean apply to the wall a "Sikagard 550 Elastic" system. Follow the

manufacturers instructions exactly .., except that the "Modocryl" can

remain on the wall.


8.3 Allow the system to cure for at least one week before applying the lime-




[58] The associated letter from Dickson Lonergan made the following



Please note there are a number of inaccuracies in their "diagnosis".


Essentially the curing and application of the plaster is at fault.


BRANZ's questioning of the construction detail is their view, the local

building inspectors do not agree with them as do a large number of people in

the industry. Much discussion of this has been held through nationwide



At present there has been no published conclusion from the seminars



P.S. The suggested remedy of Sikagard 550 turned out to be quite wrong.



[59] In these circumstances, the appellants say they were entitled to conclude that

the defects they had seen were minor in character. The defects were not then

reasonably discoverable in 1994. Even if they were, the appellants say they have

separate claims arising from the failed repair. Those claims, the appellants argue, are

so linked to the claims relating to the plaster cladding that it was wrong to strike

out the plaster cladding claims.



[60] I consider the adjudicator was right that at the time the appellants called in

Dickson Lonergan, the Hamlin test was met. At that point, the damage was so

obvious a reasonable homeowner would have called in the expert.

The situation is different from that in Tutbury. Here, at least in terms of the plaster cladding, both damage and cause was known once the BRANZ report was obtained.



[61] The fact the resultant advice from one of the experts may have downplayed

the problems was not such as to stop the limitation period running. That advice

and/or the resultant remedial work may give rise to another claim and, indeed, that

does form the basis of the appellants' third claim which is still extant. Nor does the

fact the matter was raised within the three month defects liability period alter the

position. The evidence of Dr Kay puts matters more bluntly with his reference

to repeated contact with Dickson Lonergan.



[62] It cannot realistically be said the damage and/or the remedial works were so

minor as to equate with, for example, the sticking doors in Hamlin. Indeed, as

Mr Leman for Dickson Lonergan put it, the problems here were "not hidden but

patent". Finally, the BRANZ report did recommend a further investigation but the

appellants chose not to carry out that exercise.



[63] The Supreme Court is to consider aspects of the doctrine of reasonable

discoverabilit y in Trustees Executors Limited v Murray and Ors (see

[2006] NZSC 23). This case, in the end, does not turn on the scope of the doctrine.

The facts are such that the damage and its cause were discovered, at least in relation

to the plaster cladding.



Limitation concealment by fraud


[64] The appellants also say it is at least arguable that Dickson Lonergan

fraudulently concealed the appellants' right of action. The allegation relates to

Dickson Lonergan's actions on receiving the BRANZ report. If the appellants are

right that s 28(b) of the Limitation Act applies, this would mean the appellants'

cause of action against Dickson Lonergan was not time barred. Section 28(b)

provides that where the right of action is "concealed by fraud", the limitation period

does not begin to run until the plaintiff has discovered the fraud or could "with

reasonable diligence" have discovered it.



[65] Fraud in s 28(b) includes conduct which amounts to equitable fraud.



[66] The appellants submit there is an inconsistency between Dickson Lonergan's

claim now that the damage was discoverable and the suggestion Dickson Lonergan

did not conceal the seriousness of the problem. The adjudicator took the view there

was no evidence of either wilful concealment or that Dickson Lonergan "turned a

blind eye" to the problem. Nor was there any evidence that Dickson Lonergan

knew what they were doing may be a wrong and kept the appellants ignorant.



[67] I agree with the adjudicator there is no basis for a finding of concealment by

fraud. Indeed, as Dickson Lonergan submit, their actions suggest the opposite. They

engaged BRANZ and sent the BRANZ report to the appellants. While they took

issue with the report they did not challenge the finding that the curing

and applicat ion of the plaster was at fault.



[68] As to the suggested inconsistency in Dickson Lonergan's approach, the two

aspects are different. Dickson Lonergan can say the appellants were on notice

without necessarily having acted to conceal at the time.





[69] Finally, the appellants say it is at least arguable that Dickson Lonergan is estopped from raising the limitation defence.



[70] The appellants say that Dickson Lonergan cannot now seek to resile from its

representation that re-painting would fix the leaks.



[71] The problem for the appellants is that Dickson Lonergan do not resile from

that view. Estoppel is inapt in that context. Therefore, I do not need to go on to

consider the adjudicator's conclusion there had been reliance on an incorrect

representation. The adjudicator was plainly right to query how the appellants had

suffered any detriment, in any event. The appeal is accordingly dismissed.



The cross-appeals other defects


[72] Dickson Lonergan and the Council cross-appeal against the decision not to

strike out the whole of the first and second causes of action but only to strike out the

claims concerning the original external plaster cladding. The third and fifth

respondents filed submissions which support the cross-appeals.



[73] The adjudicator was not satisfied that the appellants were aware or ought

reasonably to have been aware prior to 14 December 1996 of the other problems

which are now claimed to cause, or contribute, to water coming into the house. The

account from Ashmans Roofing was, the adjudicator considered, minimal ($155.00)

and was not evidence of major remedial work being done in relation to defective

roofing in 1996.



[74] The adjudicator took the view that time in relation to other damage ran from

May 1999 which was the point when the appellants instructed Joyce Group Ltd to

investigate and prepare the report about the leaks they saw in the ceiling over

the entrance area. The adjudicator continued:


It is a question of fact and degree whether later damage was sufficiently

distinct to result in a separate cause of action and notwithstanding

Mr Robertson's submission that following Hamlin, the relevant damage is

the loss in value of the house and any further physical damage is not "fresh

damage" and will only increase the loss in value of an existing claim, there

needs to be factual findings as to the cause and nature of the [appellants']

loss and that enquiry is a matter that will be resolved at the hearing.



[75] Although the adjudicator considered there may be causation issues for the

appellants, he was not satisfied the Council had discharged the onus of showing on

the balance of probabilities that the appellants could not succeed with their claim

based on negligence or that the claim was so untenable so as to be incapable of

success. The adjudicator noted that while the amended adjudication claim describes

a single cause of action it was clear this allegation arose in three ways:


a) Issuing the building consent; and


b) Inspecting all building work carried out under the building consent;



c) Issuing the code compliance certificate.



[76] The adjudicator said that the Council could attract liability to the extent that

its involvement with the building had caused loss in any respect other than in

relation to the original plaster cladding.



[77] The adjudicator applied the same approach to the claim against Dickson




[78] The respondents essentially say there is only one cause of action. The first

respondent also observes the appellants in their claim make no differentiation

between water coming in from one cause as opposed to another.



[79] The respondents say this is not a case of latent defects. Rather, the appellants

noted the leaking and sought expert advice. Further investigation should and

could have detected these other issues. The other issues are, in any event, only particulars

of damage rather than a new cause of action.



[80] The Council also submits that after the issue of the code compliance

certificate on 13 August 1996, everything had happened which was necessary to

bring the claim in negligence against the Council.



[81] The third respondent also submits that there is no evidence or any claim that

it was involved in anything other than the application of the plaster cladding. Any

part of the claim relating to the cladding, other than the advice given by Dickson

Lonergan and BRANZ in or about 1994 to 1996, is statute barred.



[82] In my view, in the context of a strike out, the adjudicator was right to say it

was appropriate to go to a hearing on this. Whether the claim in this respect is time-

barred is a question of fact and degree. That is illustrated by the submission

of the third respondent which deals with the claim relating to the failure of sealants in the

roof. The third respondent's primary submission is that this failure was known

before December 1993 but, the third respondent continues by noting that the extent

to which the failure of adhesives or construction could be called a "latent" defect is

"highly debatable" given the "associated criticisms of matters such as the design and

fall of the roof and guttering system which has allowed ponding on the roof over

areas where adhesive has been applied." My point is that there are some factual

questions here which can only be resolved in the context of a hearing.



[83] There has been no error in approach by the adjudicator in this regard. The

cross-appeals are not successful.



Other matters


[84] In the context of the hearing of the appeal, the Council sought to amend its

notice of appeal. It wanted to also challenge the adjudicator's decision not to

remove the Council on more general grounds.



[85] This relates to the adjudicator's power to remove a party where that is fair

and appropriate in all the circumstances (s 34). In this context, the Council says that

the passage of time, the uncertainty of any situation in which the Council owes a

duty of care in relation to the issue of a code compliance certificate, and the

intervening remedial work, are relevant factors.



[86] The appellants opposed the grant of leave to amend and said, in any event,

the adjudicator's decision was correct.



[87] The adjudicator has a broad discretion in this regard. No error in approach in

the exercise of that discretion has been identified. Accordingly, while leave to

amend is granted, there is no basis for interfering with the decision of the adjudicator

to decline to remove the Council as a party.





[88] Both the appeal and the cross-appeal are dismissed.





[89] The parties are agreed costs on a 2B basis should follow the event but note that some parties played a lesser role in the appeal. As matters have transpired, success is fairly evenly divided. For this reason, I have concluded costs should lie where they fall and I make no order as to costs.





Ellen France J






T J Rainey, Grimshaw & Co, PO Box 6646, Auckland

P Leman, Phillips Fox, PO Box 2791, Wellington

P Robertson, Heaney & Co, PO Box

105391, Auckland

L C Rowe, Armstrong Barton, PO Box 441, Wanganui

J R Sumner, Ford Sumner, PO Box 25 299, Wellington