‘Long stop’ provisions: Making sense of the 10-year limitation period in leaky building claims

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1991

The very recent Auckland High Court decision of Kells and Kells v Auckland City Council & Others (CIV-2008-404-1812) had to consider whether the Weathertight Homes Tribunal (the “Tribunal”) was correct when it refused to strike out two respondents joined to the substantive leaky home proceedings based on limitation periods specified in the Building Act 2004, and the Weathertight Homes Act 2006.

The two respondents seeking to be struck out were allegedly involved in the building of a townhouse, now suffering water ingress issues, through the developer company, KCM Ltd (in liquidation).

Through KCM Ltd, both Martin and Craig Kells allegedly developed 10 townhouses at Monteith Crescent, Remuera, seeking the original building consent for the development on 29 November 1995.

The claimants, the current owners of the townhouse now suffering water ingress issues, bought the home in September 2004. In December 2004 they became aware of problems with the home, and on 2 March 2005 they had applied to have the property assessed for weathertightness.

The assessor’s report was issued on 19 May 2005, and it concluded that there were design and construction problems in the building which led to water ingress and consequent damage.
On 21 November 2005, the claimants filed a notice of adjudication, and a statement of claim with the Tribunal.

On 19 November 2007, the first respondent, the council, applied for Martin and Craig Kells to be joined as respondents. The council claimed that given the control the Kells had over the development, they were likely to owe the claimants, as subsequent owners of the home, a non-delegable duty of care to ensure that the construction was carried out properly and complied with the Building Code.

On 4 March 2008 the Kells applied to be struck out from the claim on the basis that the 10-year “long stop” limitation period imposed by s 393(2) of the Building Act 2004 (the “Act”) prevented either of them being joined to the proceeding.

The Kells’ allegation was that the application to join them was not made until 19 November 2007, some 10 years and six months after the date the limitation period is alleged to have started to run — that is, since the date when the code compliance certificate was issued by the council.

In essence, Justice Asher had to consider whether commencing a claim within the 10-year limitation period in s 393(2) of the Act meant there were no further limitations on the joinder of parties at a later date.

Section 393 (2) of the Act provides that proceedings relating to building work shall not be brought after 10 years from the date of the act or omission on which the proceedings are based. It therefore acts as a “long-stop” provision.

The council submitted to the court that by s 37, the Weathertight Homes Act (the “WHA”) creates its own limitation period. Under s 37 of the WHA, “the making of an application . . . has effect as if it were the filing of proceedings in a court”, and only once an application is made for an assessor’s report, does it stop the running of the 10-year limitation period specified in s393 of the Building Act 2004.

Section 37 of the WHA then essentially gives a claim filed under the Act the status of a “civil proceeding” for limitation purposes.
In the Tribunal, it was held that the date of the commencement of the initial proceedings in the Tribunal, rather than the date of joinder of any additional parties, was the relevant date for measuring compliance with the limitation requirement.

On appeal, the High Court agreed that the relevant date is the date that the claim is initiated — in the Tribunal a claim is initiated on the date an informal request for an assessor’s report is made. Once a request for an assessor’s report is made, the statutory limitation timer stops.

So, in this case it was on 2 March 2005 that the claimants requested a report into the weathertightness of their home. Time therefore stopped on that date, which was well within 10 years of the date that the Kells (through KCM Ltd) sought a building consent for the development, that the council issued the consent, the development of the townhouses, and the issue of a code compliance certificate.

It follows then that the date that the joinder application was made against the Kells is irrelevant with respect to limitation. The position of the joinder of parties in respect of claims under the WHA is entirely different from that which applies in civil proceedings in court. The WHA clearly contemplates that the necessary parties to a weathertight claim in the Tribunal will not be identified at the time an assessor’s report is requested.
No parties are, in fact, joined at this initiating step, and so it is apparent that it is only the making of an application for an assessor’s report that is the critical time for limitation purposes.

Conclusion

Justice Asher determined in this case that the relevant limitation period for the filing of claims under the WHA is 10 years, and that the filing of a claim by requesting an assessor’s report stops time running as against all parties.

Provided the claimants request an assessor’s report within 10 years of the cause of action, further parties can be joined at a later date without any limitation concerns.