Body Corporate 204464 v Waitakere City Council HC Auckland CIV 2008-404-7428
[2010] NZHC 2121
•1 December 2010
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2008-404-007428
BETWEEN BODY CORPORATE 204464
First Plaintiff
ANDGAYLENE YVONNE BACKHOUSE & ORS
Second Plaintiffs
ANDWAITAKERE CITY COUNCIL First Defendant
ANDARROW INTERNATIONAL LIMITED Second Defendant
ANDSIMON KENNETH HOLLOWAY Third Defendant
ANDDAVID JAMES FOSTER Second Third Party
ANDVERO INSURANCE NEW ZEALAND LIMITED
Third Third Party
ANDQBE INSURANCE (INTERNATIONAL) LIMITED
Fourth Third Party
CIV-2009-404-002124
AND BETWEEN BODY CORPORATE 204474
First Plaintiff
ANDMAY ELIZABETH VON DINKLAGE & ORS
Second Plaintiffs
ANDWAITAKERE CITY COUNCIL First Defendant
BODY CORPORATE 204464 AND ANOR V WAITAKERE CITY COUNCIL AND ORS HC AK CIV-2008-
404-007428 1 December 2010
ANDARROW INTERNATIONAL LIMITED Second Defendant
ANDKRIS INGLIS & KARL ADLAM Third Defendants
ANDSIMON KENNETH HOLLOWAY Fourth Defendant
ANDDARYN PETER MCDONALD Fifth Defendant
ANDDAVID JAMES FOSTER & ORS First Third Party
ANDHEADLAND HOLDINGS LIMITED Second Third Party
ANDPLASTER OPTIONS LIMITED Third Third Party
ANDQBE INSURANCE (INTERNATIONAL) LIMITED
Fourth Third Party
ANDJAMES HARDIE NEW ZEALAND LIMITED
Fifth Third Party
Hearing: 11 November 2010
Counsel: TJ Rainey and DA Cowan for the Plaintiffs
M Grant for the First Defendant
DG Hurd and S Stokes for the Second Defendants
HJH Glennie for the Fifth Third Party (Jamies Hardie New Zealand
Limited) in proceeding CIV-2009-404-002124
Judgment: 1 December 2010 at 4.00 p.m.
JUDMENT OF RODNEY HANSEN J
This judgment was delivered by me on 1 December 2010 at 4.00 p.m., pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date: ………………………….
2
Solicitors: Rainey Law, P O Box 1648, Shortland Street, Auckland 1140 for Plaintiffs
Heaney & Co, P O Box 105391, Auckland 1143 for First Defendant
Dawson Harford & Partners, P O Box 106347, Auckland 1143 for Second
Defendant
Introduction
[1] The second defendant, Arrow International Limited (Arrow), applied for orders transferring these proceedings to adjudication in the Weathertight Homes Tribunal under s 120 of the Weathertight Homes Resolution Services Act 2006 (the Act). After hearing argument, and having formed a clear view of the outcome, I advised the parties that the application would be declined. My reasons now follow.
Background
[2] These are consolidated proceedings in which the body corporate and certain unit owners of two adjacent apartment complexes at 8 and 10 Crown Lynn Place, Waitakere City, claim damages for losses arising from the alleged defective design, construction and certification of the buildings. Many of the defects have resulted in what Mr Rainey describes as “moisture ingress from the exterior of the building”, more commonly known as leaky building syndrome.
[3] The first defendant, Waitakere City Council (the Council) is the responsible local authority. Arrow was the head contractor on both developments, although it did not in fact carry out any of the work itself. Arrow’s application to transfer the proceedings to the Weathertight Homes Tribunal (the Tribunal), was prompted by the government’s announcement of a financial assistance package to facilitate the repair of leaky homes. The scheme proposes that central government and the responsible local authority will each meet 25 per cent of the cost of repair of eligible leaky homes. Under the scheme the government would guarantee borrowings by affected home owners to finance the remaining 50 per cent of the repair costs. Home owners would retain the right to sue parties other than the Crown and the local authority to recover the 50 per cent of repair costs not met by central government or the responsible local authority.
[4] In order to acquire the right to participate in the scheme, a home owner must establish eligibility under the Act. As the plaintiffs have declined to apply for their
claims to be declared eligible under the Act, Arrow applied for the transfer of the proceedings in order to preserve the parties’ rights to participate in the scheme.
[5] It was necessary for transfer of the proceedings to take place before
28 November 2010 in order to meet the eligibility requirement that a claim be brought within 10 years of construction (s 16). The right to participate in the scheme would have been irretrievably lost if Arrow had not applied for transfer at this stage.
Legal test
[6] If the parties to the proceedings do not agree to a transfer, a Judge may make an order if he or she believes that the transfer is in the best interests of justice. Section 120 of the Act provides:
Transfer of proceedings from court
(1)If proceedings relating to a claim have been commenced in a District Court, a District Court Judge may, on the application of any party, or on the Judge's own motion, order that the proceedings be transferred to adjudication.
(2)If proceedings relating to a claim have been commenced in the High Court, a High Court Judge may, on the application of any party or on the Judge's own motion, order that the proceedings be transferred to adjudication.
(3)If proceedings are transferred under subsection (1) or (2), the tribunal may have regard to any notes of evidence transmitted to it by the Judge, and it is not necessary for that evidence to be given again in the adjudication unless the tribunal requires it.
(4)An order to transfer proceedings under subsection (1) or (2) may be made only if—
(a) the parties to the proceedings agree to the transfer; or
(b)the Judge making the order believes that the transfer is in the best interests of justice.
[7] Mr Hurd submitted that an assessment and balancing of the competing factors is required to determine whether the proposed transfer is in the best interests of justice. He contended that the benefits of transfer would greatly outweigh any drawbacks.
[8] Mr Rainey rejected such an approach. He submitted that if, as the plaintiffs assert, a transfer would have the effect of denying them substantive legal rights available in this jurisdiction, it could not be in the interests of justice to order a transfer. If a balancing exercise is undertaken, he submitted it would clearly favour leaving the proceeding in this Court.
[9] It may be that in determining what is in the best interests of justice, a particular factor will turn out to be decisive. But that should not foreclose a careful review of all relevant circumstances. Whether or not a transfer is in the best interests of justice must require an evaluation of its implications for the parties and any other affected interests. Each case will turn on its own facts and circumstances. This is consistent with the approach taken in other decisions of this Court referred to me,
Girvan v Briggs[1] and Phillips v Petrou.[2]
[1] Girvan v Briggs [2009] 19 PRNZ 230.
[2] Phillips v Petrou HC Auckland CIV-2007-404-001771, 5 October 2007.
[10] There is, however, a threshold issue raised by the plaintiffs which calls for separate consideration. That is Mr Rainey’s submission that the Tribunal would have no jurisdiction to award the plaintiffs damages as they do not have an eligible claim. Plainly, if that were the case, a transfer of the proceedings could not be in the best interests of justice.
Eligibility
[11] The Tribunal is unable to give a remedy unless a building owner has an eligible claim.[3] An eligible claim is one by the owner of a dwelling house that has been evaluated under section 48 by the chief executive or reconsidered under section
[3] Weathertight Homes Resolution Services Act 2006, s 50.
49 by the chair as meeting the eligibility criteria. In the case of a multi-unit complex such as numbers 8 and 9, the criteria for eligibility are set out in s 16 of the Act. In summary:
(a) The claimant must be the representative of the owners of the dwelling houses in the multi-unit complex to which the claim relates;
(b)The complex must have been built within the period of ten years immediately before the day on which the claim is brought;
(c) Water must have penetrated the complex because of some aspects of its design, construction or of materials used in its construction; and
(d)The penetration of water must have caused damage to the complex.
[12] In order to determine whether the criteria for eligibility have been met, the claimant must apply for an assessor’s report under s 32. Such an application constitutes bringing a claim. It is sufficient to meet the time requirements in s 16 and stop time running for the purpose of the Limitation Act 1950 and any other
enactment that imposes a limitation period.[4] Once the assessor has determined that
the property meets the eligibility criteria, the claimant has the option to commence adjudication or mediation. Adjudication cannot proceed unless either the claimant has a full assessor’s report in respect of the claim or the work necessary to repair the property has been completed and the claimant holds all relevant receipts.[5]
[4] Ibid, ss 37 and 32.
[5] Ibid, s 60(8).
[13] The plaintiffs’ position is that this Court does not have the power under s 120 to order transfer unless the plaintiffs have established an eligible claim. It is, of course, the case that the plaintiffs have not taken the steps necessary to establish an eligible claim although, in my view, it cannot be sensibly contended that, as long as the time limit in s 16 is met, they would fail to establish eligibility. Mr Rainey’s contention is that unless and until the plaintiffs take that step, s 120 cannot be invoked.
[14] This submission is at odds with the wording and apparent purpose of s 120. There is nothing in the section to indicate that confirmation of an eligible claim is a prerequisite to the exercise of the Court’s power under subs (4). To imply such a requirement would plainly fetter the Court’s discretion to order transfer and effectively allow the plaintiffs in a proceeding to dictate whether the power could be exercised. Manifestly that is not what is intended by the section.
Other factors
[15] I proceed to consider the various factors that were raised as bearing on an assessment of the best interests of justice.
Benefits of scheme
[16] The first factor is the benefits that would flow from participation in the scheme.
[17] The scheme has obvious benefits for affected home owners. They would be assured of recovering at least 50 per cent of the costs of repairs. The remaining 50 per cent of the repair cost is backed by a loan guarantee underwritten by the government. The home owners will retain the right to pursue their claims against other responsible parties. The scheme would enable home owners to undertake remedial work sooner and, arguably, make it easier for them to achieve a settlement with other parties whose overall exposure will be less.
[18] There are obvious benefits for those involved in the design and construction of a leaky building. Their exposure is reduced by 50 per cent. The result should be, as submitted by Mr Hurd, a greater impetus to settle disputes and significant reduction in costs and delay.
[19] The scheme is not, however, yet in force. There has been an announcement of an intention to develop the scheme in consultation with local authorities. The scheme is clearly government policy and a commitment to implement it may be
assumed. But the details of the scheme have yet to be finalised. It will require the passage of empowering legislation or regulations. There are indications that the scheme may not be operational until mid-2011. There is force in the plaintiffs’ submission that a transfer would require them to give up known rights in exchange for participation in a scheme, the benefits of which remain to be finally settled. The plaintiffs also say that, even if the scheme is implemented as proposed, they would face the prospect of an uncertain claim against those responsible for construction and design of their buildings while foregoing the prospect of holding the local authority jointly and severally liable for the full amount of their loss.
Limited jurisdiction
[20] The plaintiffs say a transfer would deny them the ability to pursue claims which do not arise from water ingress. Mr Hurd questioned whether this was the case, relying on s 50 of the Act which relevantly provides:
What remedies may be claimed
(1) As long as it is an eligible claim, a claim under this Act may be for any remedy that could be claimed in a court of law in relation to, or for consequences of, all or any of the following:
(a) deficiencies that enabled the penetration of water into the building concerned:
(b) the penetration of water into the building concerned:
(c)damage or loss of value caused by the penetration of water into the building concerned:
(d)loss of value caused by the fact that there are deficiencies in the building concerned:
(e) deficiencies that are likely in future to enable the penetration of water into the building concerned.
[21] Mr Hurd argued that a remedy for non-weathertightness claims would be available under subpara (d). That submission cannot, however, stand against the definition of “deficiency” in s 8:
deficiency, in relation to a building, means any aspect of its design, construction, or alteration, or of materials used in its construction or
alteration, that has enabled (or, as the case requires, is likely in future to enable) water to penetrate it.
I am in no doubt that there is no jurisdiction to entertain claims for non- weathertightness defects under the Act.
[22] Part of the plaintiffs’ claim, as presently formulated, could not be pursued if the proceedings were transferred. Bathroom leaks are a substantial cause of damage to one of the units at 8 Crown Lynn. Mr Rainey said the detriment to the plaintiffs arising from transfer could be greater if further non-weathertightness defects come to light during remediation works.
Procedural issues
[23] It is common ground that the scheme of the Act and the procedures adopted by the Tribunal are effective to achieve its purpose of providing:[6]
[6] Ibid, s 3.
... owners of dwelling houses that are leaky buildings with access to speedy, flexible and cost-effective procedures for assessment and resolution of claims relating to those buildings.
These include simplified pleadings, a restricted approach to discovery, evidence in chief not being required to be read, restrictions on cross-examination, and convening conferences of experts. Practice directions issued pursuant to s 114 of the Act make detailed provision for streamlining procedures for processing multi-unit claims.[7]
[7] Weathertight Homes Tribunal “Chair’s Directions (for Multi Unit Claims)” 13 October 2008
[24] While effective to expedite the inexpensive and speedy processing of claims, the Tribunal’s processes lack many of the procedural safeguards that are available as of right to litigants in this Court. The Evidence Act 2006 does not apply to proceedings in the Tribunal.[8] Rights of discovery are limited.[9] The Tribunal has power to order a party to pay costs only where the party has caused costs and
[8] Chee v Stareast Investment Ltd, HC Auckland CIV-2009-404-005255, 1 April 2010 at [78].
[9] See Chair’s Directions (for Multi Unit Claims) above at n 7 at [8.1] and Weathertight Homes Resolution Services Act 2006, s 15.
.
expenses to be incurred unnecessarily through bad faith or allegations or objections that are without substantial merit.[10]
[10] Weathertight Homes Resolution Services Act 2006, s 91.
[25] The significant restriction on the ability to recover costs has important ramifications for the plaintiffs who have incurred substantial costs to date and, if successful at trial in this Court, could expect to recover a significant proportion of their actual costs. This was seen as a decisive factor weighing against transfer in Phillips v Petrou[11] and Girvan v Briggs[12].
[11] At [39].
[12] At [11].
[26] The plaintiffs also question whether the Tribunal can effectively accommodate and adjudicate on complex multi-party claims. Mr Rainey said there is doubt whether a former and present owner of a property can both pursue a claim, as is occurring in relation to one of the affected properties. He also maintained that, by virtue of s 90 of the Act, there is no ability for the Tribunal to determine liability between a respondent and a third party unless the third party also has direct liability to the claimant.
[27] In reply, Mr Hurd referred to ss 26 and 29(2) of the Act which permit additional owners to be added to representative claims and which would appear to meet the plaintiffs’ concern. He did not accept that the Tribunal is unable to deal with third party claims, pointing to s 72(2) and s 111 of the Act which give the Tribunal wide powers to join a person as a respondent. Mr Hurd pointed out that in
Body Corporate 19988 (Ridgeview Apartments) v Clarke[13] the Tribunal observed
that it would have been possible for the respondents to join another party and claim contribution.[14] Mr Hurd also referred to Body Corporate 81738 v Auckland City Council,[15] although that does not appear to be a case in which relief was granted to respondents against third parties.
[13] Body Corporate 199883 (Ridgeview Apartments) v Clarke [2010] NZWHT Auckland 22
[14] At [103].
[15] Body Corporate 81738 v Auckland City Council [2010] NZWHT Wellington 15.
[28] This is not the time to attempt to resolve these issues. In the context of this application, they raise hypothetical questions which were not fully argued. I incline
to the view that the power in s 72(2) for the Tribunal to determine the liability of any respondent to any other respondent will enable the Tribunal to determine third party claims.[16] But whether the procedures of the Tribunal will effectually accommodate a defended multi-party claim of the scale and complexity of these proceedings (three defendants and three third parties are joined to one claim and five defendants and five third parties to the other) has yet to be tested. The cases relied on by Mr Hurd were largely uncontested.[17] In contrast, complex multi-party claims have been
determined in this Court.[18]
[16] See also Kells v Auckland City Council HC Auckland CIV-2008-404-1812 and CIV-2008-404-002903, 30 May 2008 at [38].
[17] In Body Corporate 81738 v Auckland City Council only one party appeared and in Body Corporate 199883 v Clarke only one of the claimants in person and an unrepresented respondent appeared.
[18] See for example, Body Corporate 188529 v North Shore City Council [2008] 3 NZLR 479 and Body Corporate 189855 v North Shore City Council HC Auckland CIV-2005-404-005561, 25 July 2008.
[29] This is not to suggest (as Mr Rainey attempted to argue) that the Tribunal lacks the competence to hear and determine claims such as the present. It is merely to acknowledge that a transfer would entail the plaintiffs leaving what Mr Rainey described as the safe harbour of this jurisdiction for the uncharted waters of the Tribunal.
Best interests of justice
[30] A transfer to the Tribunal would clearly bring benefits to all parties. There would likely be advantages in future costs. A final resolution could be expedited. Assuming the government scheme is implemented as proposed, a transfer would replace the open-ended risks of litigation with a measure of certainty.
[31] On the other hand, a transfer would come with the potential for material disadvantage to the plaintiffs. Their election to bring the claim in this Court knowing that it has unrestricted jurisdiction to determine their claims, subject to known evidential and procedural rules, must be respected. A transfer would require that they forego the right to litigate all claims; to lose the right to recover a contribution to their costs, including what has been incurred to date; and to face the
risks associated with having their claim heard in a jurisdiction which has yet to be tested by complex representative claims.
[32] I am satisfied that the best interests of justice would not be served by denying the plaintiffs their choice of forum in these circumstances.
Result
[33] For these reasons, I declined the application.
[34] The second defendant must pay the plaintiffs’ costs in relation to the application on a category 2 band B basis.
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