Grimshaw & Co v Body Corporate 207624 [2025] NZCA 392

In Grimshaw & Co v Body Corporate 207624 the Court of Appeal has overturned the High Court’s judgment in favour of the Body Corporate Plaintiff against Grimshaw & Co, its former solicitors in building defect litigation.¹ The High Court had awarded the Body Corporate (BC) $3,268,201 on the basis that Grimshaw & Co had been negligent in failing to amend a Conduct and Distribution Agreement (CDA) after the introduction of the Unit Titles Act 2010 (UTA10). The Court of Appeal has overturned that decision on two grounds:

1. Grimshaw & Co were not negligent for failing to amend the CDA as the causes of action against the defendants in the building defects litigation had accrued prior to UTA10.
2. Any advice to amend the CDA would not have avoided delays in releasing the settlement funds and therefore would not have avoided the higher construction costs.

Grimshaw & Co acted for the BC and unit owners of the Spencer on Byron apartment block in Takapuna in relation to a leaky building claim. In 2010 Grimshaw & Co drafted a CDA which was signed by the majority of the unit owners and the BC. The CDA apportioned any settlement in accordance with unit entitlement.

In January 2014, the defendants in the building defects litigation paid $20,050,000 to the BC in full and final settlement. Distribution of those funds was delayed until April 2016 as a result of a dispute as to who should receive the settlement funds. Owners who were not involved in the litigation (non-plaintiffs) and who were not party to the CDA claimed they were entitled to receive that portion of the settlement sum that related to common property.

The BC, through litigation funders, then brought a claim against Grimshaw & Co. It alleged that the passing of the UTA10 rendered the CDA invalid and ineffective. That claim was based on the ownership of the common property changing from unit owners to the BC under the UTA10. The BC said that the change in the UTA10 should have been incorporated into the CDA so that non-plaintiffs received a share of any settlement to reflect their proportion of the ownership of common property. The BC said that the failure to amend the CDA caused the dispute which delayed the release of the settlement funds and led directly to increased remediation costs of over $10 million.

In the High Court, Justice Tahana found Grimshaw & Co was liable for failing to advise on an amendment to the CDA. Further, changes to the CDA would have been agreed and implemented without delay. This would have avoided the dispute and the consequent increase in remediation costs.

The Court of Appeal found Grimshaw & Co was not negligent. The key finding on breach was that the causes of action in the building defects litigation had accrued to the unit owners prior to UTA10. It said that accrued rights were not affected by UTA10 as reflected in s 18(1) of the Interpretation Act 1999. That provides:

The repeal of an enactment does not affect the completion of a matter or thing or the bringing or completion of proceedings that relate to an existing right, interest, title, immunity or duty.

In other words, legislation does not have retrospective effect.

The Court also found that any variation to the CDA would not have avoided the delay in releasing the settlement funds. Key findings in relation to this were:

1. The non-plaintiffs were not party to the CDA. So, any amendment to the CDA would not have bound them, leaving them free to challenge the distribution of the settlement funds regardless of how it was drafted.
2. In any proposed variation to the CDA, the unit owners who were plaintiffs in the building defects litigation would not have agreed to give up their rights to the non-plaintiffs who had elected not to be part of the litigation and some of whom had impaired claims in the building defects litigation. The impaired claims related to issues such as purchasing with knowledge.
3. It would have been disruptive to the building defects litigation to attempt to amend the CDA prior to settlement negotiations.

The Court of Appeal rejected Grimshaw & Co’s appeal, and the BC’s cross appeal, on the question of the quantum of damages.

The BC has applied for leave to appeal to the Supreme Court. We will let you know the outcome of that application.

1. 1. McElroys represented Grimshaw & Co in this litigation

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