Tauranga City Council vs Harrison Grierson and Constructure

This week the High Court of New Zealand publicly released Justice Tahana’s decision on the ongoing High Court case between Tauranga City Council (TCC) and Harrison Grierson Holdings Limited first defendant (responsible for the structural design) and Constructure Auckland Limited as the second defendant (engaged to review the structural design) where TCC claimed a loss of more than $20 million due to a partially built transport hub in Tauranga. The case involves liability issues and breach of duty under the Building Act 2004 (Building Act), as well as claims of breach of the Fair Trading Act 1986 (Fair Trading Act) and negligent misstatement.

ACE and its members have a particular interest in the outcome of this case, because the engagement contracts used by TCC are the ACE New Zealand/Engineering New Zealand/Institute of Public Works Engineering Australasia NZ Conditions of Contract for Consultancy Services, 2009 3rd edition (CCCS) and ACE New Zealand/Engineering New Zealand Short Form Agreement (SFA), and part of the action taken by TCC required the Court to assess whether the contractual liability set out in each of these contracts applies where actions are taken against the design consultant and the peer reviewer under legislation (specifically if limitation of liability clauses are illegal under the Building Act and the Contract and Commercial Law Act 2017 (CCLA)) and also whether any limits of lability set out in the producer statements issued as part of the project attracted their own liability limits.

Her Honour Justice Tahana noted in her judgment that the drafting in the CCCS and the SFA “indicates a clear intention that the limitation will apply to all types of liability and therefore liability for all the causes of actions pleaded by TCC. The words “or otherwise” indicate that the source of any liability is not constrained to causes of action in contract or tort.” [reference paragraph 230] and went further to state “I therefore do not consider that the limitation clauses agreed by TCC can be said to be in breach of the Building Act” [reference paragraph 293, and confirmed at paragraph 309].

Her Honour also considered the liability arising from any issued producer statement, and made the distinction between TCC as the building owner and TCC as the building consent authority. ACE and its members will have particular interest in her Honour’s confirmation that the limitations of liability to the Building Owner in each of the CCCS and SFA contracts were to be read as inclusive of any liability arising from the individual producer statements, regardless of individual statements of liability set out in those documents. Her Honour confirmed that any limitation of liability set out in the producer statement was given to the building consent authority (confusingly in this scenario both parties were TCC; but often we would expect a consultant to be working for an individual building owner and submitting a PS to local authority consent granter).

Justice Tahana's thorough examination and decisive rulings in the Tauranga City Council case not only provide clarity on the interpretation of contractual liability clauses in ACE’s standard templates but also establish important precedents regarding liability attribution in the construction industry. ACE and its members, alongside other stakeholders, will undoubtedly scrutinise the implications of this judgment, which not only impact ongoing legal disputes but also provide comfort and certainty in the use of CCCS and SFA for future contractual engagements and risk management strategies within the sector.

• Court reference: CIV 2020-404-002282 [2024] NZHC 714
• Written by Hannah Bryce, ACE New Zealand General Manager of Engagement