By Frana Divich, Heaney & Partners.
The first part of this century saw a huge volume of claims going through the Weathertight Homes Tribunal (the Tribunal). It is much quieter these days with very few decisions being released.
The Tribunal’s jurisdiction is unique with its own limitation provisions. Provided claimants obtain an assessor’s report within 10 years of the building being constructed it is an “eligible claim” and a proceeding may be commenced in the Tribunal anytime afterwards. In 2017 the Supreme Court extended the limitation provisions to allow “eligible claims” to be brought in the Courts as well as the Tribunal.
There has been speculation about what the Courts would do about claims brought extremely late. We are pleased to report that delay has been the subject of a recent High Court appeal from the Tribunal and the Courts are prepared to remove parties from claims if there has been inordinate and inexcusable delay.
In Gwak & Kim v Sun [2022] NZHC 2296 the claimants purchased a leaky home in 2003. They began adjudication proceedings in the Tribunal in 2020. Mr Sun was one of the defendants to the proceedings. The claimants alleged he built the house.
Mr Sun applied to be removed from the proceedings on the basis of delay by the claimants in prosecuting the proceedings. The Tribunal agreed that there had been inordinate delay; it found the delay was inexcusable and that Mr Sun had been prejudiced by it. He was removed as a party to the proceeding. The claimants appealed the Tribunal’s decision to the High Court.
The claimants first noticed water ingress in 2004/2005.
There was no evidence to suggest they took any remedial steps or called Mr Sun. In mid-2012 the claimants sought an assessor’s report. A report was prepared in July 2012. It recorded a number of cladding deficiencies and deemed the claim to be an eligible one. In October 2012, a full report by an independent building assessor was prepared. It noted the home had widespread and systemic weathertightness defects and unless they were rectified it would likely suffer future damage. The estimated repair cost was $290,000.
The claimants did not do anything to advance their eligible claim, nor did they fix the defects. Instead, in May 2013, they moved to Christchurch and in 2014 they entered into the financial assistance package through MBIE. Periodically between 2014 and 2016, MBIE wrote to the claimants asking what progress they were making with their eligible claim.
The claimants returned to Auckland and moved back into their home in mid-2016. On 13 August 2016 there was a house fire that damaged the interior of the kitchen and the dining room. An insurance claim was lodged, and the claimants said that their insurer, “refused [their] request to repair the [fire] damage due to existing leaky issues …”. There were then protracted negotiations with the insurer.
At MBIE’s suggestion the assessor’s report was updated.
An addendum was issued on 18 November 2016. It recorded that the extent of the remediation required had increased due to additional damage, not from the fire, but from the deficiencies identified in the earlier report. The repair cost increased to $466,000.
In early 2018 the claimants settled their fire damage claim with their insurer. In late 2018 they secured finance to fix their house. The claimants engaged an architect and builder,
and they submitted a remediation plan to MBIE, which was approved in July 2019.
The claimants then decided to demolish the existing house and build a new one. It was completed in mid-2020.
On 6 September 2020, the claimants began their adjudication proceedings in the Tribunal. They sought $528,000 from Mr Sun and the other defendants. This was the estimated cost of the remediation works approved by MBIE and not the actual cost of the rebuild.
Mr Sun first became aware of the alleged problems with the house in early October 2020. He had not been contacted by the claimants at any earlier stage. He had not been given the opportunity to attend to any remediation required. He had not been given the opportunity to inspect the original house before it was demolished.
The Court concluded that a delay finding was inescapable. It went on to consider whether the delay was excusable.
The Court found that once the claimants had obtained the assessors reports in mid- 2012, they could have lodged their claim. The Court said, “… the reality is that little, if anything, was done”. The Court agreed with the Tribunal, that the delay was inexcusable. Finally, the Court considered the issue of prejudice. Any prejudice has to be serious before it can lead to a conclusion that it is fair and appropriate to order that a party is struck out of a proceeding. Mr Sun relied on three primary factors before the tribunal: His inability to access company records; inability to locate parties who carried out work or could be witnesses; and inability to inspect the house.
The Court found that Mr Sun had lost his ability to demonstrate, by reference to documentary evidence held by his company (which was placed into liquidation in 2013), what his role was when the building works were underway.
Nor could Mr Sun now locate relevant parties who carried out work on the house when it was built or who could be witnesses about the role he took in the construction. The Court agreed with the Tribunal that the most persuasive of the arguments was that the house had been demolished and Mr Sun had not had the opportunity to inspect it. That meant the only evidence about the defects and the damage is that of the assessor and that was not ideal.
Finally, the Court commented on one additional point not covered by the Tribunal, but which reinforced the prejudice caused by the claimants’ delay. The Court was concerned about the difference in the repair costs between 2012 and 2016. The extent of the remediation work required had increased due to additional damage caused by the weathertightness defects and that was the claimants’ fault.
This is a useful decision for defendants to weathertightness claims as a vast majority of claims brought now are historical.
Councils are usually the last to undertake a role in the construction process, so the fact the Courts are prepared to deny claims where there has been delay is very helpful.