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Presumed Built When Certified

Written by Anya Reardon on June 30th, 2014.

John Anthony Osborne and Helen Osborne v Auckland Council
 
On 10 June 2014, the Supreme Court delivered a decision on the eligibility criteria under s 14(a) of the Weathertight Homes Resolution Services Act 2006 (the WHRSA).  The practical effect of this decision is that what is in effect a ten year limitation period (governing the time by which an assessor’s report must be sought in order for a claim to be eligible for a WHRSA determination) starts running from the date of issue of the code compliance certificate by the local authority.
 
Introduction
 
The Osbornes, owners of a leaky home, applied for an assessor’s report to the Weathertight Homes Resolution Services (WHRS) on 14 February 2007.  An eligibility assessor’s report of 8 March 2007 concluded that the house became habitable on or around 15 August 1996 and was therefore outside the eligibility criterion specified in section 14(a) of the WHRSA.  On the basis of this report, the chief executive determined on 29 June 2007 that the claim was not eligible. On the re-evaluation of this decision, the chair of the Tribunal concluded that the claim was eligible as to the work carried out after 13 February 1997, but was otherwise ineligible.
 
Nevertheless, the Osbornes made a claim in the Tribunal naming the Council as a respondent.  In a decision made on 10 September 2010, the Tribunal removed the Council as a respondent.
 
The Osbornes then challenged the removal decision and sought judicial review of the chair’s determination that the claim was ineligible. They were unsuccessful in both proceedings and appealed to the Court of Appeal against the judgment in the review proceedings. The Court of Appeal declined an application for leave to appeal against the dismissal of the appeal against the removal decision. 
 
The appeal to the Court of Appeal was dismissed.  That Court largely affirmed the existing reasoning as to the operation of s 14(a) and rejected the view that s 14(a) should be construed as a paraphrase of section 393 of the Building Act (BA).  The Court concluded that a house should be presumed built when completed to the extent required by the building consent, which in most cases would be at the time of the final inspection.
 
Discussion
 
The Supreme Court disagreed with the view that the ten year long-stop limitation in s 14(a) should be construed as operating independently from the ten year long-stop limitation period imposed by s 393 of the BA.  It gave the following reasons:
 
  1. It would be an odd principle for what in essence is a limitation period, if the date a house is completed to building consent requirements (presumably, the date of the final inspection) was considered the starting point for the kick-off of the ten year period.  In many instances the relevant acts or omissions of those involved in defective construction would pre-date the date of the final inspection.  However, the date upon which the code compliance certificate is issued would come after it, which will almost always be the last relevant act of the territorial authority.
  2. There is no logic as to why a claim that is within the time provided for by s 393 of the BA should not be eligible under the WHRSA. The policy reasons behind the processes specified by the WHRSA – quick and facilitated resolution or adjudication of claims – are just as fitting for the claim which Mr and Mrs Osborne had against the Council as at 14 February 2007 as they would have been if the claim had been initiated six months earlier (and thus before the final inspection of the house).
  3. The informality and ex parte nature of the eligibility assessment process and the absence of any intra-statute mechanism for challenge by a respondent (meaning that any such challenge can only be by way of judicial review) suggests that s 14(a) was not intended to bestow substantive rights on respondents.
  4. Unless s 37 of the WHRSA (application of Limitation Act 2010 to applications for assessor's report) is of general application, s 14(a) will operate as a trap for lay people when seeking an assessor’s report at a time when a claim against a party is still within the long-stop limitation period. The ten year long-stop limitation period could potentially elapse by the time they are notified that the claim is ineligible.
  5. Considering these reasons, such interpretation does not support any legislative intent behind s 14(a) and it is inconceivable that those responsible for the drafting of the WHRSA could have envisioned such an outcome.
  6. The interpretation is inconsistent with the legislative history and the objective of maintaining uniformity with the ten year long-stop provision in s 393 of the BA.
Following this reasoning, the Supreme Court saw s 14(a) as operating only to exclude claims which are barred by s 393 of the BA, providing that this outcome can be balanced against the statutory text.  The Supreme Court was of a view that such balance can be arrived at.
 
Upon analysis of the three subsections of section 393 of the BA, the Supreme Court came to a decision that the subsections must be read together. On this basis, it was clear that a claim against a territorial authority in respect of the issue of a code compliance certificate was, for the purposes of subsection (2), a claim “relating to building work” and that the issue of a code compliance certificate therefore amounted to “an act”. The structure of s 393 thus appeared to be rested on the basis that the issue of a code compliance certificate was “building work”.  Under s 393, no claim can be brought once ten years has elapsed from the completion of all such “building work”, including certifications.  This is because a claimant in this situation will not be able to point to any relevant “act or omission” which occurred within the previous ten years.  The Supreme Court considered that the purpose of s 14(a) was to exclude only such claimants.
 
The Court found the expression “it was built” in s 14(a) clumsy but understandable. The apparent omission in relation to certification was resolved once it was recognized that the word “built” must have been intended to be construed by reference to the expression “building work” in s 393 of the BA, which did encompass certification.
 
The Supreme Courted noted that the decision that a claim was eligible did not impose any rights on the parties and a respondent with a limitation defence was not affected by such a determination. The Court thought it consistent with the structure of the WHRSA that decisions as to eligibility are made with understanding that the essential function of the Act is of a screening nature and that the process provided by the WHRSA was not anticipated to determine closely balanced issues.
 
A post-hearing conditional settlement
 
After the hearing, the Supreme Court was notified that Mr and Mrs Osborne and the Auckland Council entered into a settlement on the proviso that the Court agreed not to release a judgment.  The Court invited and received further submissions as to whether it should release its judgment and it decided that it should do so.
 
The general approach taken by the courts is that a court may determine a case even though it is settled and there were cases in which judgments have been released despite post-hearing agreements.  In one of these cases, Voss v Suncorp-Metway Ltd (No 1)[1], the Queensland Court of Appeal noted that the case involved issues of general importance beyond the interests of the parties and the judgment of the court below warranted correction.
 
In the present case, leave to appeal was granted and questions of public importance were raised during the hearing, which were likely to affect people other than the Osbornes. The Court was of opinion that the public interest in releasing the judgment outweighed the advantages to the Osbornes of confirming the settlement.
 
Disposition
 
The appeal was allowed and the eligibility determination of the Tribunal chair was set aside. The Court declared the Osbornes’ claim eligible.  In relation to this appeal, the Osbornes were awarded costs of $25,000 and reasonable disbursements against the first respondent. They were also awarded costs on the judicial review proceedings in the High Court and on the appeal to the Court of Appeal, in sums to be fixed by those courts.
 
Conclusion
 
The Supreme Court decision overturns High Court and Court of Appeal decisions that the clock should start ticking from the time the building work was done.  Rather, the starting point is the issue date of the code compliance certificate.  It also clarifies the meaning of the word 'built' in relation to claims bought under the Weathertight Homes Resolution Services Act and equates that meaning to the meaning of the term “building work” in s 393 of the Building Act, which includes certification.  The reasonable possibility that building work, including certifications, took place within ten years of the application for an assessor’s report should now be enough to lead to the conclusion that the claim is eligible.
 
 
 
[1] Voss v Suncorp-Metway (No 1) [2003] QCA 252, [2004] 1 Qd R 211
 
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