Case review: Invercargill City Council v Southland

Case review: Invercargill City Council v Southland

Case review: Invercargill City Council v Southland

Wednesday 17 May, 2017

This case looks at the obligations a Council may have when issuing Code Compliance Certificates, particularly in relation to the extent of any duty of care that may be owed to property owners.

Background

In 2010 the Stadium Southland roof collapsed under heavy snowfall, and the Invercargill City Council (“the Council”) was sued for negligently issuing a Code Compliance Certificate (“CCC”) for remedial works on that roof.  The owner, the Southland Indoor Leisure Centre Charitable Trust (“the owner”), won in the High Court, recovering approximately $15 million from the Council.  On 21 March 2017 the Council succeeded on appeal, and the award was set aside.

The Facts

It was discovered during construction that the owner’s engineer had miscalculated the loading on the roof support beams, causing them to sag. Remedial works were required to strengthen these beams.  The remedial works were competently designed by an independent engineer, however the steel fabricators failed to complete the works as they had been designed.  There were missing top welds, side strengthening plates were not continuous, stitch welds were inadequate and weld preparation had been unsatisfactory.  It was not disputed that the collapse was caused by the defective remedial works.

The Claim

The owner sued the Council in negligence and in negligent misstatement.  It claimed the Council owed a duty of care when issuing building consents, when inspecting the works, when ensuring compliance with the consents and building code, and when issuing code compliance certificates.  The owner claimed to have relied on the Council, and to have suffered loss as a result.  The main question before the Court was whether the owner would have identified and remedied the defective remedial work, but for the Council’s negligence.

It was also not disputed that the CCC was issued negligently.  It was issued in 2000 without the remedial works being inspected by the Council or the owner’s engineer.  The Council therefore had no way of knowing whether the work was in fact code-compliant.  The Council did however promptly advise the owner that despite the CCC, they would still require the final producer statement (“PS4”) from the owner’s engineer, which would certify that the works had been completed in accordance with the building consent.  The PS4 was eventually provided, however, the required final measurements did not include the roof beam precamber measurements, which was a specific requirement of the building consent.  The Council apparently did not check for these measurements.  Had they insisted on precamber measurements, it would have been clear that the beams still sagged, indicating that the remedial works had not been installed in accordance with their designs.  It also transpires that the owner’s engineer had not detected the steel fabricator’s defects, because he did not actually inspect the work before issuing the PS4.

First Determination

The Court determined that the Council ought to have required the precamber measurements, however, they did not go so far as to say the Council was negligent for failing to do so.   The Court did however imply that the Council should have been able to rely on the owner’s engineer’s PS4 because the Council lacked the in-house expertise to inspect the work themselves.  The engineer was qualified and subject to the disciplinary control of a professional body (IPENZ).

Additional Facts

For several years the roof continued to leak.  In 2006 the owner sought further engineering advice, which confirmed that the remedial works had been designed correctly, but recommended an inspection to make sure they were also installed correctly.  The owner did not follow this advice, relying instead on the Council’s CCC and the engineer’s PS4 that (incorrectly) certified that the remedial works had been installed correctly.

Final Determination

At all times the owner relied on its own agents.  The owner (via its agents) controlled the design and construction.  The owner knew the Council was not continuously present on site, and that the Council relied largely on the owner’s agents’ advice about the nature and quality of that work.  The owner had sophisticated governance, and was in a position to properly protect itself against the risk of loss caused by its agents.  The owner was aware that the Council would not be inspecting the works themselves, rather, the Council would be relying on the owner’s engineer to supply a PS4 confirming that the work was code compliant.  In 2006 the owner obtained further engineering advice, despite the CCC, demonstrating that the owner relied on its own expert advice and not on the CCC itself to confirm that all was well with the building.

The owner’s claim failed on two main grounds.  While it was not in dispute that the CCC was originally issued negligently, the owner did not prove that the Council owed a duty of care to the owner when issuing the CCC, and failed to prove that they actually relied on the CCC.  Because the owner relied on its own agents, and not on the CCC itself, the owner’s claim in negligence and negligent misstatement failed.

Closing comments

In overturning the award, the Court chose to specifically avoid considering exactly what steps a Council should take before issuing a CCC or relying on a PS4, but did imply that the Council should have been able to rely on this PS4, given the engineer was a duly qualified expert in his field.  While this appears to be a significant case in terms of how far a Council’s liability may extend, it is worth noting that the fact scenario is rather narrow, which will make it hard to apply in future.  It is still possible, therefore, with different circumstances, for a duty of care to be owed by a Council issuing CCCs.