Lee v Whangarei District Council

JurisdictionNew Zealand
CourtCourt of Appeal
JudgeWinkelmann J
Judgment Date15 June 2016
Neutral Citation[2016] NZCA 258
Docket NumberCA656/2015
Date15 June 2016
Between
Olivia Waiyee Lee
Appellant
and
Whangarei District Council
Respondent

[2016] NZCA 258

Court:

Winkelmann, Simon France and Woolford JJ

CA656/2015

IN THE COURT OF APPEAL OF NEW ZEALAND

Appeal against a finding that the appellant's proceeding in negligence in respect of her leaky house was time barred under s4(1)(a) Limitation Act 1950 (LA) (actions shall not be brought after the expiration of 6 years … actions founded on … on tort) — appellant's house was built in 2007 and early 2008 — in January 2008 she commissioned a report into what she described as the standard of workmanship on the building — a follow-up report shortly thereafter noted more deficiencies — the Council refused to issue a Code Compliance Certificate in March 2008 — in April 2008, a significant amount of water came into the house but the appellant did not apply for a assessor's report under s32 Weathertight Homes Resolution Services Act 2006 until August 2008 — the appellant filed her claim in May 2014 saying her claim was in respect of defects that had been discovered in a report in 2011 when the building wrap was pulled back — she said the earlier reports had been commissioned in the context of a payment dispute — whether the applicable limitation period was under s4(1)(a) LA or s393 Building Act 2004 (Limitation defences) — whether the appellant had been sufficiently aware before May 2008 of defects for time to start running for limitation purposes — whether the reports by building consent consultants were hearsay and should not had been admitted into evidence — whether the application for an assessor's report stopped the clock for limitation purposes for all proceedings related to the weathertightness of the house, including the High Court proceedings.

Counsel:

Appellant in person and T Connor (McKenzie Friend)

F P Divich and H E Waldron for Respondent

JUDGMENT OF THE COURT
  • A The application for leave to adduce fresh evidence is declined.

  • B The appeal is dismissed.

  • C The appellant must pay the respondent costs for a standard appeal on a band A basis and usual disbursements.

REASONS OF THE COURT

(Given by Winkelmann J)

1

Ms Lee had a house built for her in 2007 and early 2008. Because of significant defects in its construction, the exterior was not weathertight. On 21 May 2014, Ms Lee issued proceedings against the Whangarei District Council, alleging the Council had been negligent when undertaking inspections during construction. The Council applied for summary judgment against Ms Lee on the ground that her proceeding had no prospect of success as it was time barred under s 4(1)(a) of the Limitation Act 1950. That section provides that actions founded on tort “shall not be brought after the expiration of 6 years from the date on which the cause of action accrued”.

2

Associate Judge Bell entered judgment in the Council's favour. 1 He was satisfied that Ms Lee discovered the damage to her house at least by 21 May 2008. Accordingly, when she commenced proceedings on 21 May 2014, she was outside the statutory time limit for commencing proceedings in negligence. Ms Lee now appeals his decision.

Some background principles
3

The issue for the Associate Judge on the Council's application for summary judgment was whether the Council could establish on the balance of probabilities that Ms Lee's claim against it could not succeed. It was not enough that the claim was merely weak. 2

4

For the Council to show the claim was time barred, it had to prove that before 22 May 2008 Ms Lee knew, or could with reasonable diligence have discovered, that the house had construction defects which resulted in the house not being weathertight. That follows from the fact that a cause of action accrues when each fact which it will be necessary for a plaintiff to prove has occurred. 3 Where the claim is based on negligence, damage is an essential part of the cause of action. Until the damage has occurred, the cause of action is not complete.

5

In Invercargill City Council v Hamlin, the Privy Council described how this rule applied within the context of a claim against a council for negligent inspection when the foundations of a house were found to be defective. 4 The Privy Council said that the plaintiff's loss was not the physical damage to the structure, but the economic loss which arose only when defects were discovered:

Once it is appreciated that the loss in respect of which the plaintiff in the present case is suing is loss to his pocket, and not for physical damage to the house or foundations, then most, if not all the difficulties surrounding the limitation question fall away. The plaintiff's loss occurs when the market value of the house is depreciated by reason of the defective foundations, and not before. If he resells the house at full value before the defect is discovered, he has suffered no loss. Thus in the common case the occurrence of the loss and the discovery of the loss will coincide.

But the plaintiff cannot postpone the start of the limitation period by shutting his eyes to the obvious. In Dennis v Charnwood Borough Council, a case decided in the Court of Appeal before Pirelli reached the House of Lords, Templeman LJ said at p 420 that time would begin to run in favour of a local authority:

“… if the building suffers damage or an event occurs which reveals the breach of duty by the local authority or which would cause a prudent owner-occupier to make investigations which, if properly carried out, would reveal the breach of duty by that local authority.”

In other words, the cause of action accrues when the cracks become so bad, or the defects so obvious, that any reasonable homeowner would call in an expert. Since the defects would then be obvious to a potential buyer, or his expert, that marks the moment when the market value of the building is depreciated, and therefore the moment when the economic loss occurs. Their Lordships do not think it is possible to define the moment more accurately. The measure of the loss will then be the cost of repairs, if it is reasonable to repair, or the depreciation in the market value if it is not …

6

Therefore, time did not begin to run against Ms Lee as the owner of the defective building until those defects were discovered, or could with reasonable diligence have been discovered. 5

Factual background
7

In late 2006 Ms Lee entered into a contract with Rob Littlejohn Builder Ltd (the builder) for the construction of her home. The house was to be built using external aluminium cladding imported by Ms Lee from China. Construction took place throughout 2007. During construction the Council carried out inspections.

8

In around October and November 2007 Ms Lee saw leaking at the top of an internal staircase, which she raised with the builder and the waterproof contractor.

9

In December 2007 she and her family moved into the house, although construction was not yet complete.

10

In January 2008 the builder requested final payment of the contract sum. Ms Lee refused payment on the basis that she had concerns regarding the standard of workmanship. She sought legal advice and engaged an expert consultant, Mr Ian Beattie of Kaimamaku Consultancy Ltd, to investigate what was still then an incomplete dwelling.

11

On 5 February 2008 Mr Beattie issued a report identifying numerous deficiencies observed throughout the exterior and the interior of the still-incomplete dwelling, and suggesting further investigation.

12

Mr Beattie conducted a further inspection of the property. Subsequently, on 12 March 2008, Ms Lee's lawyers wrote to the builder's lawyer communicating that the most recent survey established numerous deficiencies in the construction of the house, and that it had not been constructed in accordance with the consented plans. Ms Lee's lawyer noted that the remediation identified as necessary by Mr Beattie would result in quite significant costs. Ms Lee therefore continued to refuse to make the final payment to the builder.

13

On 26 March 2008 the Council carried out a final inspection of the property. The Council declined to issue a Code Compliance Certificate. In its report dated 2 April 2008 it identified a long list of issues requiring rectification to bring the house into compliance with the consented drawings. The Council also sought confirmation in regard to the installation of membranes in the balcony and decking areas. It required a producer statement for the installation of the external cladding to ensure that it complied with the Building Code.

14

On 28 April 2008 there was a major rainfall event in Northland. Ms Lee saw a great deal of water entering into the house from the ceiling on one level of the house. During the hearing of the appeal Ms Lee challenged Associate Judge Bell's finding that she also saw water coming in from around window frames. 6 We do not

see this as material for the purposes of the issues in this appeal, and therefore proceed on the basis that as at that date she only saw water coming in from the ceiling on one level of her house
15

It was following this event that Ms Lee's lawyer advised her she should go to the Weathertight Home Resolution Services (WHRS). She did not follow that advice at that point.

16

On 30 April 2008 Mr Beattie issued his second report providing a further assessment of the construction of the house, confirming, in essence, his earlier report.

17

On 18 May 2008 Ms Lee wrote to the company that had installed the aluminium composite cladding system to the exterior of the property in response to its requests for payment. She said that she understood from her independent building consultant that the cladding needed to be removed because the cladding workmanship was poor, the cladding was incorrectly installed, and it did not comply with the requirements of the Council.

18

On 19 May 2008, with the assistance of her lawyer, Ms Lee wrote to the...

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