Causation — the difference between an award of cost for full re-clad and targeted repair

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This case — Chee v Stareast Investment Ltd (2012) NZHC 133 — involved an interim determination concerning an appeal by the Chees against the determination of the Weathertight Homes Tribunal regarding the watertightness of their home.
The Chees claimed $99,704 for the cost of full re-clad. Instead, the adjudicator awarded cost of targeted repairs and $25,000 general damages.

Overview
The Chees bought the house in November 2001 from the developer, Stareast Investment Ltd (Stareast). Stareast had entered into contracts for the construction of the house. The council issued the building consent, inspected the building work during construction, and issued a Code Compliance Certificate on June 26, 2001.
In August 2003, there were leaks into a downstairs living room from a deck above it. Despite attempts to remedy the leaks, they continued to occur from time to time.

In November 2007, the Chees applied for an assessor’s report pursuant to s32 of the Weathertight Homes Resolution Services Act 2006.
After the initial assessor’s report, further leaks occurred in the bedrooms and the garage, and cracks became apparent in the cladding.

The initial adjudication concluded that targeted repairs were appropriate, conditional upon the council issuing the appropriate building consent. The Chees appealed successfully to the High Court, and the case was remitted back to the Weathertight Homes Tribunal for a rehearing.
On rehearing, the adjudicator concluded that the deficiencies in deck construction, installation of a curved window, insufficient ground clearance, splits in lead flashing, squashed valley trays and some vertical and horizontal joints caused damage and, so, the property required repairs.

While the adjudicator considered that the Chees’ desire for a re-clad was reasonable given the cracking to the cladding, she did not consider that that need was caused by the respondents’ negligence.
That is because the Chees could not prove in fact, on the balance of probabilities, that the increased cracking was due to the negligence of any of the respondents.

The claim and decision
If the claim against a respondent is in tort (which is usually the case in leaky home cases), there are three requirements needed to be established before the finding of liability:
• the party must be found to owe the claimants a duty of care,
• the party needs to have breached that duty of care, and
• the claimants need to establish that they have suffered loss as a consequence of the breach.

This article will focus on the third requirement.
In deciding whether or not any of the respondents are liable for the costs of a re-clad, it will be necessary to look at the reasons why the dwelling needs to be re-clad, and ask whether there is a causative link from the negligence of the respondents.

What this means is that the issue is not so much whether the property needs to be re-clad, but whether the necessity for the re-clad has been caused by the negligence of any or all of the respondents.
In the High Court case, the matters which pointed to it being necessary for there to be a full re-clad were the poor quality of the product on the walls, the untreated framing and the cracking and combination of defects as identified by the assessor, Mr Browne.

Further, according to another building expert, Mr Smith, he would not accept that the cladding system was going to perform for the life that it was required to, pursuant to the building code.
However, the adjudicator did not accept Mr Browne’s conclusion that the re-clad was reasonable because of the “combination of defects”. The adjudicator found that the appellants had not established that the need for a full re-clad was caused by negligence on the part of the respondents.

The adjudicator also recorded that the experts (there were three other experts in addition to the two already mentioned) had agreed that the defects could be remedied through targeted repair work.
As a result, the High Court judge could not be persuaded that the adjudicator was wrong to conclude that the respondents should not be required to meet the costs of a full re-clad.

The current position for the Chees is they do not know whether a building consent will be issued for the targeted repairs. Therefore, the High Court directed the Chees to apply for such a consent with the costs associated with the application (estimated to be $10,000) to be incorporated with the claim as consequential damage.
Once the council’s decision as to building consent is known, the matter is to go to the Tribunal for final determination.

Concluding comments
This decision brings to the forefront the principle of causation, namely that claimants cannot just assume that they can claim total re-clad costs after establishing liability. Consideration needs to be given as to whether the need for re-clad is ultimately caused by the respondents’ negligence.
The practical position, at least within the leaky building proceedings that this firm has been concerned with, is that a re-clad is normally required rather than targeted repairs, where there is system failure allowing water ingress.

Note: This article is not intended to be legal advice (nor a substitute for legal advice). No responsibility or liability is accepted by Legal Vision to anyone who relies on the information contained in this article.