Duty of care to commercial property owners and limitation periods.

R v Mike Barns & Associates Limited & Ors

Written November 2006

The Crown is the owner of Ruatoki Area School. In the later part of 1994, the Ministry entered into a contract with the first defendant (being the Architect) for the design of a new library and administration building for the school.

On 21 August 1995 the Ministry entered into a contract with Mr and Mrs Pullar trading as JW Building Contractors for the construction of the new building. JW Pullar subcontracted out different parts of the work to the subcontractors.

The building work was completed in August 1996. Subsequently the school experienced problems with the new building. The Ministry commissioned an investigation into the problems. A further report was commissioned which was in turn sent to JW Pullar. It identified four different faults:

Between December 1999 and November 2000 the Ministry engaged alternative contractors to rectify the defects in the building that had been identified in the earlier reports. JW Pullar received no formal notice of this. The next contact the Ministry had was on 17 May 2005, when the Ministry issued this proceeding to recover the cost of the repair work. The causes of action against the defendants were that they were in breach of their respective contracts and a duty of care owed to the Ministry.

This case concerned the use of the summary judgment process in the Auckland High Court, by the Second Defendants, to dismiss claims brought against them by the Crown.

The onus was upon them to establish to the balance of probabilities that the Ministry could not succeed. It was submitted on their behalf that they could do so on two grounds:-

Dealing firstly with a) above, while considering a number of cases dealing with whether in fact a duty of care is owed by a builder to a commercial property owner, such as the owner of a school, Associate Judge Abott was unwilling to come to a summary decision. He commented however that there was precedent to the effect that no duty of care will be owed, but also suggested that every decision has to be considered in isolation to its own factual matrix.

Of particular interest is his strong statement of principle to the effect that "there is, of course, no duty in tort to take reasonable care to perform a contact."

In response to the argument about the application of s4 of the Limitation Act 1950, again Associate Judge Abbott was unwilling to decide on a summary basis, whether in fact as at the date of the Ministry receiving its first report, all of the damage was reasonably discoverable at that point, and therefore the limitation period ran from then. In short he concluded that "he was not satisfied that the Ministry will be unable to prove at trial that this cause of action arose later than the time of receipt of the December 1998 report". He concluded that there was not sufficient certainty on the facts for this issue to be properly decided by summary judgment.

Accordingly the application for summary judgment failed however costs were reserved.