New Zealand: Supreme Court finds leaky home construction limitation periods are not water tight

Osborne & Anor v Auckland City Council & Anor [2014] NZSC 67

Introduction

After over seven years of litigation the Supreme Court has yesterday held that Mr and Mrs Osborne are entitled to seek relief for a leaky home claim which began in February 2007.

On 10 June 2014 the Supreme Court released a unanimous judgment concerning the limitation period for leaky homes claims under the Weathertight Homes Resolution Services Act 2006 (the "Act"). The effect of the decision is that the limitation period for claims under the Act will extend for 10 years from the date when building work which gives rise to the claim, including the issuing of code compliance certificates by a Council or territorial authority, is completed.

Previously the claims had to be brought within 10 years from when the physical building work was completed in line with the building consents. There can be a significant delay in the issuing of code compliance certifications and the decision provides a longer limitation period for home-owners wanting to sue their local authority for negligently issuing code compliance certificates.

The issue on appeal was the interpretation of section 14(a) of the Act and, particularly, the extent to which that section constrains the ability of a leaky home owner to take action and seek remedies under the Act.

The portion of section 14(a) which is the subject of the Supreme Court decision provides that a claimant will be eligible to make a claim under the Act where, amongst other matters, the dwelling house in question:

"...was built (or alterations giving rise to the claim were made to it) before 1 January 2012 and within the period of 10 years immediately before the day on which the claim is brought: and..."

Parties to the proceeding made submissions on how this provision relates to section 393 of the Building Act 2004 (the "Building Act") which similarly provides at that "...civil proceedings relating to building work may not be brought against a person after 10 years or more from the date of the act or omission on which the proceedings are based"

Background

The Osbornes purchased their home on 26 April 1997, a new building being substantially constructed by 15 August 1996. Code Compliance Certificates ("Certificates") were not issued by the Auckland City Council (the "Council") until 19 February and 18 April 1997. The house began to leak in late 1997 and repairs (for which building consents were not obtained) were carried out. The repairs were not effective. On 14 February 2007 the Osbornes took steps under the Act to sue the Council for loss suffered as a result of its negligently issuing the Certificates.

In June 2007 the Osbornes' claim was ruled ineligible under s14, by which time the 10 year period under s393 of the Building Act had elapsed from the date when the Certificates were issued by the Council. The Council argued that the Osbornes were consequently time barred from taking action against it under s393 for liability arising out of it issuing the Certificates on their leaky home.

The Decision

The Council contended that section 14(a) operates separately from (and more restrictively than) s393. The Osbornes argued that the words in s14(a) should be construed so that a claim is eligible under s14(a) if it is, or may be, within the s393 limitation period.

The Supreme Court considered the broad purposes of both statutes and their respective predecessors (the Weathertight Homes Resolution Services Act 2002 and the Building Act 1991), as well as the interpretation of s14(a) that had prevailed to date.

Prior to this decision, s14(a) had been interpreted as providing a constraint on being eligible to bring a claim under the Act and is, in some cases, particularly where the focus of liability is on the issuing of a Certificate, more strict than the ten year long-stop period provided for under the Building Act. On this interpretation, a claim becomes ineligible at the expiry of ten years from when it is built which, in a case of a dwelling house, is to be determined primarily by when it has been completed to the extent required by the building consent (commonly at the time of final inspection) which will be before a Certificate is issued.

In the Osbornes' case, their house was deemed habitable around August 1996 and was thus outside the s14(a) criteria by the time steps were taken in February 2007.

Court of Appeal Decision

The Court of Appeal largely upheld the existing interpretation and rejected that s14(a) should be construed as a paraphrase of s393. The Court of Appeal commented that Parliament deliberately adopted the narrower term "built" in s14(a) rather than the broader term "building work" in s393 which would include the issuing of Certificates. The Court was concerned that extending the commencement date for the 10 year period to the time when the Certificate is issued would unreasonably prolong the eligibility period in cases where the issuing of the Certificate is delayed, or never issued at all.

In keeping with the current interpretation of s14(a), the Court of Appeal conclude that a dwelling house will be "built" for the purposes of that section when it has been completed up to building consent standard, which in most cases will be when the dwelling house has passed its final inspection and before Certification.

Allowing the Appeal

The Supreme Court found a number of difficulties with this approach that would see s14(a) construed as imposing an independently operating limitation period which is virtually, but not exactly, the same as the s393 limitation period.

First, the Court held the date a house passes its final inspection is a strange starting point for a limitation period. In most instances it will be after the relevant acts or omissions of the builder but before the date the Certificate is issued, which will almost always be the last relevant act of any Council or territorial authority.

Second, the policy reasons behind the Act (for quick and facilitated resolution or adjudication of claims about leaky homes) are just as appropriate for the Osbornes' claim against the Council in February 2007 as they would have been if made six months earlier (and prior to the ten years lapsing from the final house inspection). In other words, the policy reasons outlined by the Court of Appeal do not justify drawing a distinction between the limitation periods in the two statutes.

Third, the Supreme Court found it inconceivable that Parliament would have intended s14(a) to bring different results than s393. Indeed, the previous interpretation was inconsistent with the legislative history and with what the Supreme Court took to be the purpose of maintaining consistency with the 10 year long-stop provision under the Building Act.

Summary

Section 14(a) of the Act, and the term "built", is to be interpreted by reference to the term "building work" in s393 of the Building Act and operate only to exclude claims which are necessarily barred by s393 of the Building Act. The effect of this decision is that the limitation period under s14(a) will now be extended for 10 years from the date when building work which gives rise to the claim, including the issuing of code compliance certificates by a Council or territorial authority, is completed.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Authors
Jeremy Johnson
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