Body Corporate 378351 v Auckland Council & Ors [2020] NZHC 1701

In October 2019, Bell AJ declined to strike out the Retro Apartments Owners’¹ claims for non-weathertightness defects as it was time-barred under the Building Act longstop. Bell AJ’s judgment was an unabashed policy decision.² Bell AJ and the Court of Appeal subsequently declined leave to appeal the strike out judgment due to the proximity of trial.³

Undeterred, the Council applied for strike out in Washington Apartments.⁴ Smith AJ struck out the claims for non-weathertightness defects, deciding that s 37 only applies where the defendant’s act or omission has caused or contributed to water penetration.

In both cases the Owners applied to the WHRS for an assessor’s report within 10 years of the Council issuing the CCC and had an eligible claim under the WHRSA. The Owners elected to bring proceedings in the High Court, relying on Lee v Whangarei District Council that s 37 “stops the clock” for limitation purposes.⁵

The Owners’ original pleadings against the Council alleged only weathertightness defects. However, whilst undertaking repairs the Owners discovered structural and fire defects. They amended their claims to plead the new defects more than 10 years after the issue of the CCC. The Council sought contribution from various third parties for the structural and fire defects.

Bell AJ decided that the limitation provisions in s 393 of the Building Act and s 37 of the WHRSA could not work together in practice. He held s 37 “stopped the clock” in the High Court, both in terms of weathertightness and other defects.⁶

Despite agreeing with the Council and Engineer that the WHRSA focused solely on weathertightness and rejecting the Owners’ submissions to the contrary, Bell AJ decided that restricting s 37 to weathertightness defects would disadvantage owners with eligible WHRS claims. They would lose the benefits conferred on them by s 37⁷ as they would not be able to take time to investigate and consider their options, and they ought to be able to take a coordinated approach to remedial work and litigation.⁸ He concluded that this was a more sensible, just and practical approach than rigidly applying s 393.

Bell AJ considered that s 37 meant defendants with exposure to leaky building claims had to maintain records and insurance cover for more than 10 years in any event and so having to do so for other defects was not too onerous, nor did it defeat the purpose of a longstop, which was to avoid stale litigation. Liability insurers might justifiably disagree with this aspect of Bell AJ’s judgment.

Smith AJ was able to distinguish Retro Apartments because the Retro Owners’ post-strike out amendments raised factual issues about the inter-connectedness of the defects, not present in the Washington claim.⁹

Smith AJ differed from Bell AJ on the essential question of whether s 37 WHRSA and s 393 Building Act were irreconcilable or could be read sensibly together.¹⁰ Smith AJ found that s 37 does not create a separate limitation period but imposes a statutory rule overlaying existing limitation laws.¹¹

Smith AJ held that:

• A claim brought after the s 393 longstop period is only saved by s 37 WHRSA if and to the extent that the defendant’s acts or omissions have caused or contributed to a defect in the design, construction or alteration work that has caused water penetration and consequent damage.
• Policy considerations do not displace this analysis.
• Parliament did not intend the WHRSA to alter limitation periods for claims that have nothing to do with water penetration.
• Applying s 37 to all legal claims relating to the dwelling does not serve the WHRSA’s purpose.¹²
• The convenience to owners of dealing with all defects together and Council requirements that they repair the defects at the same time are not a proper basis for abrogating the defendants’ limitation rights.¹³

The Washington Owners have appealed Smith AJ’s judgment.

We agree with Smith AJ’s conclusion in Washington: section 37 does not alter existing limitation law for claims outside the scope of the WHRSA and water penetration is an essential element of the claims deemed filed by s 37.

In our view s 37 is an exception to limitation enacted for the specific statutory purposes of the WHRSA: assessment and resolution of residential weathertightness claims. This approach is consistent with the WHRSA scheme, Lee and other High Court decisions interpreting s 37 as conferring exceptions to limitation. Section 37 is straightforward in the WHRS, which can only resolve weathertightness claims. In all other jurisdictions, the s 37 exception must be restricted to claims that owners could have brought under the WHRSA, i.e. weathertightness claims. The s 37 exception does not apply to all the owners’ claims relating to the dwelling, as that is not what Parliament intended.

1. Body Corporate 202392 v Auckland Council [2019] NZHC 1976 [Retro Apartments HC # 1].
2. Retro Apartments HC # 1 at [35] and [39].
3. Body Corporate 202962 v Auckland Council [2019] NZHC 2696, Auckland Council v Body Corporate 202692 [2019] NZCA 635.
4. Body Corporate 378351 v Auckland Council & Ors [2020] NZHC 1701 [Washington Apartments].
5. Lee v Whangarei District Council [2016] NZSC 173, [2017] 1 NZLR 401 at 402.
6. Retro Apartments HC # 1 at [5].
7. As articulated by the Supreme Court in Lee, FN 5 above.
8. Retro Apartments HC # 1 at [34]-[36], [49].
9. Washington Apartments at [68]-[72].
10. At [78].
11. At [103].
12. At [105].
13. At [94] and [100].

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