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PLEASE NOTE: This article was published on the date listed below and may now contain information that has since been updated or changed. We have retained this article as it may still contain helpful comments. However, we advise you to make an appointment to see us for the most up to date information on this topic.

May 2007

Weathertight Holmes

The Weathertight Homes Resolution Services (“WHRS”) Act 2002 was passed to deal with building defects claims in what became commonly known as the “leaky home crisis”. 

The WHRS Act 2002 set up a two tier process to resolve claims, being mediation (which is a voluntary meeting to attempt to settle by compromise) and then adjudication (which is like a full Court hearing with witnesses etc).  These remedies were in addition to a Claimant’s rights to issue District or High Court proceedings against the relevant parties.  The WHRS Act 2006 was passed to deal with many perceived inadequacies in the WHRS Act 2002 procedures and now replaces the 2002 Act.  The new Act makes a number of procedural changes as well as expanding the jurisdiction of the WHRS generally.

Key changes

The key changes in the new Act are as follows:-

  • A new streamlined process involving pre-hearing conferencing and time-limited mediation before claims automatically move to adjudication.

  • Beefed up assessment reports for all WHRS claimants so people can claim for potential as well as actual weathertightness-related damage.

  • The establishment of a new Weathertight Homes Tribunal (“WHT”) to provide independent adjudication services.

  • A new streamlined process for lower-value claims.

  • Changing the voting thresholds to make it easier for a class action approach to be taken by owners of units within apartment blocks.

  • Requiring territorial authorities to place WHRS notices on affected property files and to make that information available on Land Information Memorandum (LIM) reports.

  • Clear objectives for adjudicators to take a more investigative approach.

  • Enhancing the power and authority of adjudicators, including new offence provisions when parties fail to appear when summoned or disobey an order of the Tribunal.

In terms of making a claim, affected homeowners first apply to the Department of Building & Housing (via the WHRS) to have their claim assessed for eligibility under the Act.  The WHRS continues to provide the assessment, negotiation & mediation services for leaky homes claims.

As with the WHRS Act 2002, the two procedures that are available to Claimants under the Act are mediation and adjudication.  However, there are new processes, and time limits, with respect to each of these options.  Each of these options will need to be carefully considered by Claimants, in conjunction with appropriate legal advice.

If an owner’s claim is found eligible, and the repairs required are assessed at over $20,000.00, the Claimant may pursue mediation in the WHRS, and if mediation is unsuccessful, then apply to the WHT for adjudication.  Claims for $20,000.00 or less follow a more streamlined process within the WHRS and do not proceed to the WHT.

Alternatively, a Claimant may choose to apply immediately for adjudication, and by-pass mediation.  Adjudication decisions are legally binding and will determine who is responsible for the damage, who should pay, and how much.

If a party is a Respondent to such a claim, (ie, an entity that is potentially liable for the damage to the property), then careful consideration will need to be given as to whether to agree to attend at mediation, or to decline with the inevitable result that an adjudication hearing will be held at some later point.  It is often the case for Respondents that the input of legal and building experts’ opinions are required in making any such decisions.

An important recent decision

A recent decision that has considered a number of the issues that arise from leaky homes cases is the High Court decision of Dicks v Waitakere City Council, where it was found that:-

  • The Claimant in that case, Mrs Dicks, would receive full damages to enable her property to be repaired.  She would also receive costs from the other parties, although these costs would not be a full indemnity of all legal costs she spent.
  • The director of the building company (“the builder”) that constructed the property was held personally liable as he had supervised and undertaken building works on the property.  The building company itself was no longer in existence and was insolvent.
  • The Waitakere City Council (who undertook inspections, and issued the Building Consent) would be liable to pay 100% of the damages to Mrs Dicks although they, in turn, could seek to obtain 80% of that amount directly from the builder.  As the builder may not have the financial means to meet any Judgment, the Court was willing to apply the joint tortfeasor principle (more commonly known as “last man standing” principle) to this case.  This means that the Council has to pay the full amount owed to Mrs Dicks, although the Court found that the proper apportionment of the damages was 80% builder, 20% Council.  The Council can now seek to recover 80% of the amount it has to pay from the builder.  This aspect is important, as it confirms the Courts will commonly find Councils 20% liable for the damage, but that the amount they actually have to pay depends upon the solvency of the other parties who are liable.

Conclusions

There are many complicated issues arising out of this type of claim, although the literature from the Government suggests that parties can conduct their own claims through the WHRS & WHT, the area remains fraught with difficulties, and legal advice is appropriate for all claims.