Invercargill City Council v Southland Indoor Leisure Centre Charitable Trust

Territorial Authority not liable for negligent misstatement to a commercial building owner

The duty established by Spencer on Byron is restricted to owners of combined residential

“Commissioning owners” of commercial buildings will have difficulty establishing reliance in negligent misstatement claims against Territorial Authorities

In September 2010 the Southland Stadium roof partially collapsed following a heavy snowstorm. The Stadium required extensive repairs costing over $15 million.

Southland Indoor Leisure Centre Charitable Trust (Trust), the owner, brought proceedings against AS Major, the engineer responsible for the Stadium’s structural design, and Invercargill City Council (Council).

In the High Court Dunningham J held that the Council was liable to the Trust in negligent misstatement for a 20 November 2000 Code Compliance Certificate (CCC), all prior acts/omissions being statute-barred under the Building Act’s 10 year longstop.¹ The Court of Appeal disagreed.² In 1999 the Trust leased the Stadium land from the Council and contracted directly with the architect, Major, and the builder for the Stadium’s design and construction. In late 1999, during construction, the steel trusses spanning the roof above the community courts sagged.

An engineering peer review identified that Major’s structural design was deficient and recommended remedial work. The Council issued an amended building consent for the remedial work with conditions requiring Major to provide measurements of the trusses and a Producer Statement (Construction Review) (PS4) for the remedial work.

The remedial work was not carried out in accordance with the peer reviewer’s recommendations or the amended building consent. The Council issued the CCC before receiving Major’s truss measurements and PS4.

In 2006 the Trust was concerned about ongoing issues with the roof. It sought a further report from the peer reviewer. The Trust did not implement the peer reviewer’s 2006 recommendations.

In 2010 the roof partially collapsed due to defective remedial work to the steel trusses in 2000.

The Court of Appeal declined to follow the Supreme Court in Spencer on Byron, which extended the duty of care to all premises regardless of nature.³

Harrison and Cooper JJ, the majority, held that Spencer on Byron was not determinative as the rule was limited to cases where a local authority was exercising its statutory functions of inspection of construction of a building combining commercial and residential uses.⁴ Miller J distinguished Spencer on Byron on the facts. Their Honours all agreed that Spencer on Byron confirmed that claims based on CCCs were to be considered under the tort of negligent misstatement, for which specific reliance is an essential element.

The majority held it was not reasonable to impose a duty of care on the Council to protect the Trust from its own negligence and that of its agents, who were the direct cause of the Trust’s loss. Their negligence was attributable to the Trust as commissioning owner within the policy inquiry into duty.⁵ The Trust relied on its agents, not the Council, to control the design and construction process. It therefore did not have a special relationship with the Council in respect of the CCC sufficient to amount to proximity.

Miller J imposed a duty on the Council. However, the duty was limited to checking that an appropriately qualified person had supplied adequate evidence that the consent conditions were met.⁶ He considered that the Council breached even this limited duty as it issued the CCC without any evidence that the consent conditions were met.

None of the Judges considered that the Trust relied on the CCC. The Trust opened the Stadium to the general public before the consent conditions were satisfied and without the CCC for the remedial works. Instead, the Trust relied on its agents for assurances that the remedial work complied with the Building Code. In 2006, with concerns about the safety of the roof, the Trust did not rely on the CCC in deciding not to take any action.

On the particular facts before the Court the outcome of this appeal is probably correct. However, the narrowing of the rule in Spencer on Byron will create considerable uncertainty for commercial building owners. It would not be surprising if the Trust sought leave to appeal to the Supreme Court.

1. Southland Indoor Leisure Centre Charitable Trust v Invercargill City Council [2015] NZHC 1983
2. Invercargill City Council v Southland Leisure Centre Charitable Trust [2017] NZCA 68 (Southland Stadium)
3. Body Corporate No 207624 v North Shore City Council [2012] NZSC 83, [2013] NZLR 2 NZLR 297 at [22], [26] [215]-[216]
4. Southland Stadium at [165]
5. Southland Stadium at [178]-[185]
6. Southland Stadium at [98]

For any further information regarding this please contact Peter Hunt or Andrea Challis.