Stop the clock

By - , Build 159

A claimant is free to proceed following a ruling that applying for an assessor’s report under the Weathertight Homes Resolution Act 2002 stops the clock for court proceedings.

IN DECEMBER 2016, the Supreme Court overruled a High Court decision that a leaky home claim was statute barred (Lee v Whangarei District Council.)

Initial dispute with builder

Mrs Lee’s home was built in 2007–2008. In February and April 2008, she obtained two reports from a building surveyor as she was in dispute with her builder about making final payment under the building contract.

She argued her home was not weathertight and she was reluctant to pay, initiating unsuccessful adjudication proceedings under the Construction Contracts Act 2002.

Subsequent claim with installer

She was later involved in further dispute resolution steps including arbitration with her builder and defending District Court proceedings against a cladding installer for non-payment.

Mrs Lee was unsuccessful in the District Court proceedings (which she also appealed) because she had not proven the cladding installer was responsible for the defects at her home. She would later receive an award of over $770,000 against her builder in the arbitration proceeding, but the builder did not pay.

Report and adjudication under WHRS Act

Mrs Lee had also applied for an assessor’s report under the Weathertight Homes Resolution Act 2002 (WHRS Act) in August 2008.

She later commenced an adjudication proceeding under the WHRS Act, but this was terminated. It was found that the subject matter of that claim was like the arbitration proceedings brought against her builder and the counterclaim raised in the District Court proceedings with the cladding installer.

Under s 60(5) of the WHRS Act, a person cannot commence or continue claims to the extent they are the subject of an existing arbitration or other legal proceedings brought by that person. Mrs Lee appealed the decision not to allow her to bring adjudication proceedings under the WHRS Act, but again her resort to an appeal was unsuccessful.

Claim found to be out of time

Her remaining option was to file a claim in the High Court, which she did in May 2014. The defendant was the Whangarei District Council, which successfully obtained summary judgment in the High Court against Mrs Lee that her proceeding was out of time.

By May 2014, it was over 6 years since Mrs Lee had obtained her February 2008 and April 2008 builder’s reports identifying the problems with her house. The Council argued, therefore, that the proceedings were barred by the Limitation Act 1950. A party has 6 years to bring a claim in tort once damage is discovered. The reports revealed problems with the house more than 6 years before May 2014.

Argued time stopped with assessor’s report

Mrs Lee argued time stopped when she sought the assessor’s report in August 2008. The Court of Appeal also agreed with the High Court’s interpretation of s 37(1) of the WHRS Act. The High Court found, however, that an application for an assessor’s report under the WHRS Act in August 2008 did not stop time running in relation to the High Court proceedings. It found that s 37(1) of the WHRS Act only stopped time running for proceedings under the WHRS Act.

Section 37(1) of the WHRS Act simply says: ‘For the purposes of the Limitation Act 1950 (and any other enactment that imposes a limitation period), the making of an application under section 32(1) has effect as if it were the filing of proceedings in a Court.’

WHRS Act scheme found to support argument

The Supreme Court did not agree. It noted that s 37(1) could have stated that it only applied to the WHRS Act but that it did not do so. It also found that the scheme of the WHRS Act supported Mrs Lee’s argument. Part of that scheme was to stop the clock while a house was being assessed, allowing homeowners time for decisions about options including what forum to pursue a claim in.

There was a concern this could mean defendants may not learn of claims for years. However, the Supreme Court noted that under s 56 of the WHRS Act a chief executive could terminate a claim if no application for adjudication was filed following an assessor’s report or they believed a claimant was not making enough effort to resolve a claim.

Not statute-barred from proceeding

The result is, that although Mrs Lee’s odyssey may not be over, she is not statute-barred from proceeding. The Supreme Court concluded that, in her case, the WHRS Act had not lived up to its purpose. This is to provide ‘speedy, flexible, and cost effective (or even readily understandable) procedures for the resolution of her leaky home problem’. Applying for an assessor’s report under the WHRS Act stops time running for court proceedings. This decision removes one technical limitation argument that had previously been successful for defendants.

Note

This article is not intended as legal advice. For further information, contact your legal advisor or Harkness Henry on (07) 838 2399.

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