Body Corporate 202692 v Auckland Council

• Jurisdiction: New Zealand
• Judge: R M Bell
• Judgment Date: 27 September 2019
• Neutral Citation: [2019] NZHC 1976
• Court: High Court
• Docket Number: CIV-2017-404-2087
• Date: 27 September 2019

[2019] NZHC 1976

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA

TĀMAKI MAKAURAU ROHE

CIV-2017-404-2087

In The Matter of the Retro Apartments

Between

Body Corporate 202692

First Plaintiff

Jamac Holdings Limited & Ors

Second Plaintiffs

and

Auckland Council

Defendant

Omaha Investments No 1 Limited

First Third Party

Maurice John Harris

Second Third Party

Appearances:

T Rainey, J Heatlie and JP Wood for Plaintiffs

T Weston QC and C Fairnie for Defendant

K Harkess for First and Second Third Parties

Leaky Building, Limitation, Statutory Interpretation, Tort — claim in negligence — application of the different limitation periods under the Building Act 2004 and Weathertight Homes Resolution Services Act 2006 in a proceeding where there were other defects besides water penetration

Application by the Auckland Council (“the Council”) for strikeout of the plaintiff's pleadings of defects and application to strike out the Councils claims against the third parties who were a structural and civil engineering consultancy and its director on the grounds they were out of time pursuant to s393 Building Act 2004 (“BA”) (limitation defences – 10 years). The plaintiffs were the body corporate and the owners of residential apartments in a leaky building complex. They were suing the Council for negligence in inspecting work and issuing a code compliance certificate. The engineer was joined by the Council and were sued for negligence in giving a producer statement. The parties agreed that s37 Weathertight Homes Resolution Services Act 2006 (“WHRSA”) (application of limitation Act 2010 to applications for assessor's report) applied to the plaintiffs claims for weathertightness defects and therefore those claims were not out of time. However, the plaintiffs had sued for other defects relating to structural integrity and fire safety. They had added those defects to their claim long after the end of the 10 year longstop period in s393 BA. Section 37 WHRSA relaxed the time for starting leaky home proceedings, time stopped running when owners of leaky homes apply for an assessor's report under s32 WHRSA (application for assessor's report), they could begin a proceeding long after the end of the longstop period in s393 BA. Both limitation rules could not work together, Parliament had not stated which limitation rules applied where there was an eligible claim and other defects besides leaks.

The issues were: whether the limitation period under s393 BA or s37 WHRSA applied, if s393 BA applied, whether the pleading should be struck out for non-compliance with r7.77(2) High Court Rules (“HCR”) (filing of amended pleading – introducing a fresh cause of action, which was not statute barred).

The Court held that as a matter of statutory interpretation, it was not possible to read the WHRSA as applying to defects additional to water penetration. The focus of the WHRSA was on weathertightness exclusively. The longstop in s393(2) BA operated in the same way as other limitation rules. If a fresh proceeding made claims out of time, the limitation under s393(2) BA could not be defeated by adding a new cause of action. Where a building was a qualifying home under the WHRSA and had only water penetration damage, the owners had the benefit of the clock stopping under s37(1) if they made a qualifying claim under s32(1) WHRSA. If any building had defects that were outside those caught by the WHRSA, the time for starting proceedings for those defects was governed by s393(2) BA. When owners took a coordinated approach to remedy both leaks and other defects in their homes, there were difficulties with applying both limitation rules at the same time.

Notwithstanding s393 BA, in some cases claims for building defects may be made more than 10 years after the work was completed. In weathertight homes litigation, the courts had expressed a concern not to allow plaintiffs' claims to become procedurally difficult. The owners could hardly bring a proceeding in this court alleging unspecified non-weathertightness defects. The council would attack the inadequate pleading. These considerations pointed to the owners of leaky homes with eligible claims under the WHRSA being able to sue defendants alleged to be liable for both weathertightness and other defects, even if the longstop period under s393(2) BA passed. Allowing s37 WHRSA to prevail was more sensible, just and practical than rigidly applying the longstop under s393 BA. That applied when a defendant was sued for both weathertightness and other defects. The decision did not deal with a defendant sued only for other defects, the reasons did not apply in that case

Because time stopped running under s37 WHRSA, any amended pleading could add a new cause of action without any limitation difficulties (so long as the application under s32 WHRSA was lodged in time). It was therefore not necessary to consider the plaintiffs' argument that their new pleading had not added a new cause of action. In building defects litigation, decisions had allowed extra defects to be pleaded without the new defects counting as a new cause of action.

The engineer's strike-out application against the Council and the Council's strike-out application against the plaintiffs were dismissed.

JUDGMENT OF ASSOCIATE JUDGE R M Bell

This judgment was delivered by me on 27 September 2019 at 4:00pm pursuant to Rule 11.5 of the High Court Rules.

Deputy Registrar

Solicitors:

Rainey Law ( Jeanne Heatlie), Auckland, for the Plaintiffs

MinterEllisonRuddWatts (Charlene Fairnie), Auckland, for the Defendants

McElroys (Kiri Harkess/Darren Turnbull), Auckland, for First and Second Third Parties Copy for:

Tim Rainey, Auckland, for the plaintiffs

Tom Weston QC, Christchurch, for the Defendants

Introduction

1 This is a limitation decision in a building defects case. Section 37 of the Weathertight Homes Resolution Services Act 2006 relaxes the time for starting leaky home proceedings. The question is how it works in a proceeding in this court where there are other defects besides water penetration.

2 The case concerns the Retro Apartments in Ponsonby, Auckland. There are 23 units, all but one of them residential. The plaintiffs are the body corporate and the owners of the residential apartments. They sue the Auckland Council for negligence by the former Auckland City Council in inspecting work and issuing a code compliance certificate under the Building Act 1991. The third parties, a structural and civil engineering consultancy and its director, are sued for negligence in giving a producer statement. 1 The limitation question arises in applications to strike out pleadings of defects, which have nothing to do with leaks.

3 Under s 393 of the Building Act 2004, those involved in the design, construction, alteration, demolition or removal of any building and those performing functions under the Act, such as the council issuing a code compliance certificate, have the benefit of a ten-year longstop period for any civil proceeding running from the date of the act or omission on which the proceeding is based. That applies generally to claims for all defects and for all buildings. There is another rule for claims under the Weathertight Homes Resolution Services Act: claims for weathertightness defects in residential buildings (including multi-unit complexes such as the Retro Apartments). When owners of leaky homes apply for an assessor's report under that act, s 37 stops time running. Owners are given time to investigate, deliberate and begin a proceeding in the Weathertight Homes Tribunal or any court of competent jurisdiction with only a minimal check to ensure that they sue promptly. They may begin a proceeding long after the end of the longstop period in s 393.

4 The parties agree that s 37 applies to the plaintiffs' claims for weathertightness defects and therefore those claims are not out of time. The plaintiffs have, however, sued for other defects going to structural integrity and fire safety. They added these defects to their claim long after the end of the longstop period in s 393 of the Building Act. The council and the engineer say that these are out of time.

5 Superficially it might seem that s 393 of the Building Act and s 37 of the Weathertight Homes Resolution Services Act can be reconciled. One limitation rule applies to weathertightness defects in homes and the other to all other defects. But in practice they cannot be made to work together. Where a home has weathertightness and other defects and the owners co-ordinate repairs and proceedings, one of the rules has to give. Parliament has not said how this is to be solved. Deciding which one is not so much a matter of statutory interpretation as making a judgment by considering the purposes of the inconsistent provisions and the weight to be given to them to work out which should prevail. In my judgment s 37 applies to all cases of eligible claims under the Weathertight Homes Resolution Services Act in proceedings in this court against those defendants alleged to be liable for both weathertightness and other defects, even if the limitation period under s 393 of the Building Act has passed.

Background

6 In November 1999 the Auckland City Council granted a building consent for the apartments and construction started the following month. The council conducted a final inspection in January 2002. The engineer, who had prepared structural plans and structural calculations for the apartments, carried out a construction review to check that the apartments had been built in accordance with the building consent and the Building Code. In April 2002 it issued a “producer statement/construction review”. On the same day the council issued a code compliance certificate.

7 By 2009 the body corporate had instructed consultants to investigate defects with decks. Repair work started, but it was found that the...