Building repairs that fail

By Karen Shaw - 1 April 2018, Build 165

Defective repair work is in the spotlight, including cases about Christchurch earthquake damage repairs and owners of leaky homes enduring a second round of repairs. What’s the situation when the fixes fail?

IT IS WELL ESTABLISHED that claims for negligent building work become statute-barred after 10 years from the date of the work. However, what is the situation where repair works have been carried out and those works also fail to fix a building defect? Is a new claim needed? Are those works time-barred as part and parcel of the original building defects, or is there a new claim for the failed work?

Claims regarding repairs can be more complicated to resolve due to such issues.

10 years from when repair work done

In 2003, the Court of Appeal considered this issue in Johnson v Watson. Mr and Mrs Johnson had engaged Mr Watson to build their home. In the years after their build, they noticed defects in the form of leaks and had Mr Watson return to the property several times to fix them.

Eventually, however, the Johnsons brought a claim against Mr Watson for his negligent work. By this stage, it had been more than 10 years since their home was completed.

The Court of Appeal found the original work was time-barred.

However, the Court also acknowledged that the repair works could be a cause of loss alongside some of the original defects. The Court of Appeal said that it was sufficient if negligent prevention work was a substantial and material cause of loss. That work could be a new default that runs with the earlier fault so as to cause, or at least contribute to, the further damage that it was meant to prevent.

The result for the Johnsons was that parts of their claim against Mr Watson were not statute-barred. They could still make a claim for the negligent prevention works that had been carried out within 10 years of their issuing their proceedings. The onus was on them to prove that the losses flowed from that negligent prevention work as opposed to the original statute-barred work.

When repairs didn’t cause more damage

In another decision, however, certain repairs had failed to fix defects and damage to units in a body corporate property.

The Court of Appeal found that the contractor involved was not liable for failing to carry out a proper survey of the damage to the property. The contractor had expressly excluded liability for that in its contract with the body corporate.

The building contractor was, however, responsible for failing to carry out the work that was completed with due skill and care and for failing to consult with the architects on design issues.

In this case, the subject units had been repaired by installing an overclad system over the original cladding. Although that system had not repaired the damage, it had not exacerbated the damage or caused any new damage to the building either. As a result, not all of the unit owners were entitled to the full repair costs.

Owners could claim wasted costs

Unit owners who owned their properties at the time that the ineffective overclad system was installed were only entitled to claim:

the wasted cost of installing that system
the costs of removing it
the increased costs of carrying out the final remedial works at a later date.

In other words, the remedial work was ineffective and a waste of money for those owners but not the reason why they had to repair. Those owners were always going to face the cost of repairing their properties.

When property sold, claims varied

The owners who had sold their units after the failure of the remedial works was identified were in a similar position. Their loss was the difference in the value of their units had the repairs been effective and their sale cost (sold as a defective property) less the costs of the repairs they would have had to carry out anyway.

However, new owners with no prior knowledge of the defects were entitled to the full costs of repair. They had relied on the Code Compliance Certificates issued for their properties after the repair works. But for the negligent repair works, they would not have had to carry out any works on their properties.

Builders, leave design to designers

Builders involved in remedial works need to take particular care if they wish to exclude any responsibility for the remedial solutions put forward. Often solutions will have been proposed by architects or building surveyors. To exclude any responsibility, contractors should go back to the architects and building surveyors on design matters during construction.

Where remedial works fail, a key issue will be whether the remedial work is causing new damage, making existing damage worse or simply an ineffective waste of money.