Latest on leaky building saga

By - , Build 119

Over the last 9 years, the leaky building crisis has filled numerous press columns. We consider the government’s rescue package along with some recent developments in case law.

In May, the government announced its proposed package to help fix leaky homes. The full details are yet to be ironed out, but this is the proposal so far:

  • Homeowners will have the option of accepting the package. If they do not opt in, they may still pursue the options currently available.
  • If a homeowner opts in, the government and councils will meet 50% of the homeowner’s repair costs (25% each). The homeowner will meet the remaining 50% of the repair bill, but will have the option of suing other parties involved in the construction process for a contribution to that 50%. However, homeowners will lose the right to take any further action against a local council. There would also be no right to pursue the Crown (this course is not currently available anyway).
  • The government may provide financial assistance to homeowners in the form of a loan guarantee.

Current indications are that the package could be available from early 2011. Homeowners who wish to accept the package will have to be eligible claimants under the Weathertight Homes Resolution Services Act 2006, so not all homeowners with a leaky home will have access to the package. Homeowners who are time barred under the legislation will also be barred from the package.

Mixed reception and unanswered questions

The proposal has received a mixed reception. The package may be unlikely to attract those whose principal claim is against a local council. This is often the case where the other players in the process have ceased to trade, are insolvent or are known to have little means to repay any judgment or award against them. If, in these circumstances, a council may ultimately be liable for 100% of an owner’s reasonable repair costs, why settle for half?

On the other hand, there is no certainty in litigation. Court and Tribunal processes can be costly, stressful and time consuming. For some homeowners, these factors may be persuasive incentives for accepting the package.

There are still some unanswered questions. For example, how will the package impact on:

  • homeowners who are already involved in a litigation process?
  • those who have elected to repair their properties before proceeding with claims?

Byron Avenue and Sunset Terraces

The June/July issue of Build (pages 68–69) discussed the Court of Appeal’s decision on council’s liability for two North Shore developments: Byron Avenue and Sunset Terraces. The North Shore City Council has recently announced that it will seek leave to appeal the case to the Supreme Court. Its argument is that it does not owe a duty of care to owners of apartments and investment properties.

These classes make up a large number of affected owners and, potentially, a large financial obligation. If the case proceeds to the Supreme Court, it is unlikely to be dealt with until much later this year. Resolution of this claim is proving protracted for those involved.

Body Corporate 205055 v Prodesigners Architects Ltd

In May, the Courts considered another argument about the commercial/residential divide. The established principle is that councils do not owe a duty of care to owners of defective commercial buildings.

This case involved a holiday resort property made up of multiple units. The owners of individual units were able to live in their units as apartments. This led to an argument that, as some units were residential, council did owe a duty to the owners. However, the building essentially operated as motel-style accommodation, and documentation issued at the time of its application for consent indicated that it had been intended as a commercial property. The Court agreed with the council that it owed no duty of care.

Chee v Stareast Investment Limited

In this decision, the Auckland High Court criticised the Weathertight Homes Tribunal for failing to comply with the principles of natural justice. The High Court has sent the matter back to the Tribunal for rehearing.

At the Tribunal adjudication, the claimant, Mr Chee, represented himself. The Tribunal accepted there was damage to Mr Chee’s property. Mr Chee had argued that a full reclad was required to fix his property at a cost of $443,115.32. However, the Tribunal only awarded $130,000 for targeted repairs. Mr and Mrs Chee appealed this result and the Tribunal’s decision to award general damages of $5,000 instead of the $25,000 that they had sought.

TRIBUNAL MAKES PROCEDURAL ERRORS

The High Court found two significant procedural errors by the Tribunal. First, prior to the hearing, the Tribunal had declined Mr Chee’s request for a witness summons of a council officer. The adjudicator had asked Mr Chee to detail the questions that he wished to put to the officer. Mr Chee responded that he had not prepared his questions but advised the adjudicator of the broad areas he wished to question the officer about. The adjudicator, declining the request, responded that the questions Mr Chee wanted to ask were ‘really legal submissions’ and there would seem to be no benefit in calling the officer.

Justice Wylie said he did not see how the adjudicator could, ‘… some days before the hearing started, properly categorise the matters Mr Chee wished to raise with the prospective witnesses as being legal submissions’. Further, the adjudicator’s view that calling the witness would not benefit Mr Chee’s case was an observation that was ‘… somewhat paternalistic and premature’ and that it was ‘… for Mr Chee to determine how to make out his case, not the adjudicator’.

Another significant concern related to Mr Chee’s opportunity to question the experts on aspects about quantum. At the end of the first day of the hearing, Mr Chee was only given a limited opportunity to ask the experts questions about quantum. The following morning, the solicitor for the council suggested that Mr Chee may not have had a full opportunity to ask his questions. The adjudicator then suggested that, over the morning tea break, Mr Chee could consider whether he wanted to question the expert further and, if he did, the witness could be called back. However, the Tribunal did not revisit the issue again with Mr Chee, so he did not have an opportunity to say whether or not he wanted the witness recalled.

Finally, the Tribunal allowed one of the experts to submit further evidence about quantum after the hearing. The hearing was not reconvened to address this evidence. The High Court found Mr Chee was not given a fair opportunity to test this further evidence or properly respond to it.

Justice not necessarily served by ‘quick fix’

The High Court judgment acknowledged that the weathertight homes legislation seeks to encourage a ‘quick fix’ for those who elect to use it. Parties could not expect the ‘procedural sophistication’ inherent in Court proceedings. However, Justice Wylie said, ‘While it is of course the duty of the Courts to apply legal principles in a way as to best facilitate outcomes which are orderly, predicable and cost-effective, in my view, the Courts should be slow to conclude that the interests of justice can be sacrificed to the seductive sirens of speed and cost-effectiveness.’ The Tribunal was not immune from Court supervision.

It is common for lay litigants to appear in the Weathertight Homes Tribunal. Adjudicators need to be particularly careful to ensure that the principles of natural justice are observed in these instances. Lay litigants are less likely to be aware of irregularities arising during a hearing than are parties who have legal representation. The failure to observe the principles of natural justice, in this case, has not resulted in a swift resolution for Mr and Mrs Chee.

For more

This article is not intended as legal advice. For further information, please contact the Harkness Henry Building and Construction team on (07) 838 2399 or email [email protected].

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