Does your construction contract prevent you being sued in negligence?

The Court of Appeal has recently considered this question, albeit at a very preliminary level.1

In 2006, the Grey District Council built an aquatic centre in Greymouth. Unfortunately, the roof of the centre was built with deficiencies. Untreated timber was used for the roof beams and at the point where aluminium and steel fixings were attached to the beams, the steel nails had corroded.

The council sued its engineering company, a second engineering company (engaged by the first engineers to peer review the construction design), and an employee of the second engineering company who issued a producer statement for design to the council (the "defendants").

The council sued the defendants in tort for the cost of the repairs. That is, the council alleged that the defendants owed the council a duty to exercise reasonable skill and care in the design and construction of the aquatic centre and that the defendants were negligent in not performing that duty, because of the roof defects. The defendants weren't sued for breach of any contract.

The council didn't sue the builder with whom it had a construction contract. That contract incorporated the Conditions of Contract for Building and Civil Engineering Construction (NZS 3910:2003), commonly used in commercial construction contracts.

The defendants, though, joined the builder to the proceedings. They alleged that the builder also owed the council a duty to exercise reasonable skill and care during the construction, in addition to the builder's obligations under the contract. The reason the defendants joined the builder to the proceedings was that if they were all found to have breached that duty and were negligent, then liability would be shared between the defendants and the builder.2

The builder objected before the High Court to being joined and the High Court agreed with the builder.3 The defendants appealed that decision to the Court of Appeal.

It's important to bear in mind that the joinder application didn't require the Court to decide whether the builder was in fact negligent, i.e. whether it did in fact owe the particular duty of care in tort, outside of, or in addition to, the terms of its contract with the council. Such a decision could only be made at a full trial at a later stage. At this stage, the court simply needed to decide whether there was an arguable case so the court only had limited information before them for that purpose.

The Court of Appeal believed that it was possible that...