Relaxed limitation rule allows defects claims older than 10 years

0
124
Tim Bates

Timothy Bates of Auckland law firm Legal Vision runs the rule over a recent case where defects claims outside a 10-year limitation period were allowed.

This month’s article reviews the recent September 2019 High Court case involving the Retro Apartments in Ponsonby, and Associate Judge Bell’s decision on a strike out application.

The key issue at stake in the context of a limitation defence was the breadth of the application of section 37 of the Weathertight Homes Resolution Services Act 2006 (“WHRS Act”), to construction defects claims. 

Background

In November 1999, the Auckland Council granted a building consent for the apartments, and construction started the following month. The council conducted a final inspection in January 2002.

In April 2002, the engineer issued a producer statement (construction review) to the effect that the apartments had been built in accordance with the building consent and the Building Code. A Code Compliance Certificate (CCC) was issued that very same day.

By 2009, the body corporate had instructed consultants to investigate defects with decks. Repair work started, but it was found that the problems were more extensive than first thought.

On June 9, 2011, the body corporate applied for a full assessor’s report under section 32 of the WHRS Act. In May 2013, the assessor’s report found that the body corporate had an eligible claim.

At this point, 10 years had lapsed since the council had issued the CCC. By this date, the plaintiffs had found there were other defects going to structural integrity and fire safety.

The Auckland Council required those defects to be remedied as a condition of the building consent to fix weathertightness issues. A scheme of repair under section 74 of the Unit Titles Act 2010 was settled by the High Court.

The repairs were commenced in November 2016 and are now complete. The proceedings in the High Court were commenced in September 2017 against the council. The council joined the engineers as a third party.

In March 2019, the plaintiffs filed an amended statement of claim that included structural and fire safety defects which could not be classified as weathertightness defects.

The council and the engineer brought strike out applications on the basis that the claims brought in respect of structural and fire safety defects had been commenced more than 10 years after the building works were completed.

They argued that the 10-year limitation period expired in 2012. The value of the works involved in remedying the defects that fall outside the 10-year long stop limitation period is $3.3 million.

Central argument for plaintiffs  

In response, the plaintiffs argued they were entitled to rely upon the relaxed limitation rules that apply to leaky building claims pursuant to section 37 of the WHRS Act.

In this way they argued that once an application was made for an assessor’s report, the clock stopped ticking as far as limitation periods were concerned.

By that method, the plaintiff argued that all defects, including those related to structural and fire safety, were not statute barred.

Whilst a combination of different arguments were put to the court by the plaintiffs, ultimately Associate Judge Bell recognised that the two statutes involved were unhelpful in resolving the problem identified — namely, whether non-leaky building defects got the benefit of the relaxed limitation rules that applied to leaky building defects.

He recognised that the purpose behind having a long stop limitation period (10 years), pursuant to section 393 of the Building Act 2004, was to address the problem of construction defects claims arising many years after their creation, where records of jobs may no longer sensibly exist.

But he also noted that pursuant to section 37 of the WHRS Act, the long stop limitation did not apply.

Ultimately, the court was persuaded by the fact that defendants to leaky building claims are already required to retain records well beyond the usual 10-year long stop period as a result of section 37 of the WHRS Act.

At paragraph 50 he stated:

“Those considerations point to the owners of leaky homes with eligible claims under the WHRS Act being able to sue defendants alleged to be liable for both weathertightness and other defects, even if the long stop period under section 393(2) has passed. Those defendants stand to be sued for weathertightness liability anyway. The usual purpose of the long stop limitation will not apply.  Given their ongoing exposure to liability and the need to hold records and keep insured because of that, they do not have a compelling case that they should not be sued for other defects once the long stop has passed.”

The court ruled that the non-leaky building defects were also brought within time by operation of the relaxed limitation rules applied by section 37 of the WHRS Act.

The court seemed influenced by the usual wish to take a co-ordinated approach in dealing with all defects by remedial works and litigation.

It went on to state that working to different limitation deadlines for different deadlines would make litigation even more challenging.

Postnote

It remains to be seen whether the decision will be appealed, but such is the sum of money at stake, that this may well be the case.

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 or Building Today to anyone who relies on the information contained in this article.