Time Limits and Leaky Homes revisited

Time limits are frequently in issue in building and construction cases.  Defendants will take any opportunity to argue that a claim is statute barred by either the Limitation Act 1950 or the Building Act 2004.  Defective building work, however, is often latent.  Once revealed, claimants may only have a limited amount of time to respond to a defect.  In the worse case scenario their claim may even be time barred.

There are two key statutory time-frames:

• Under the Limitation Act 1950, a claimant has six years from the date of any breach of contract or tortious act, to bring proceedings in Court.
• Under the Building Act 2004, a claimant cannot bring proceedings in relation to any building work - more than 10 years after that building work was carried out.

The Building Act "longstop" period was introduced in 1991 (by the Building Act 1991).  It was introduced to cap extensions of the time limits under the Limitation Act and resulting from the Courts applying a 'reasonable discoverability' test to building cases.  Under this test, time only began to run under the Limitation Act, once a claimant had 'reasonably discovered' defective work.  Now, if a defect is only uncovered 10 years after the work was carried out, there will be no claim.

Limits in WHRS Act

In relation to leaky homes, one option that homeowners appeared to have to halt time was to lodge an application with WHRS.  Section 55 of the Weathertight Homes Act 2002, provided:

    (1) For the purposes of the Limitation Act 1950, and any other provision that imposes a limitation period, the making of an application under section 9(1) is deemed to be the filing of proceedings in a court.

Note: s37 of the Weathertight Homes Act 2006 makes the same provision.

This provision appeared to stop the running of time for the purposes of Court proceedings.  However, the Auckland High Court has recently rejected this interpretation of the section.  In the Bunting case, the homeowners applied for an assessor's report from WHRS on 13 June 2006.  WHRS subsequently found that their claim was ineligible.  So, on 13 April 2007, they issued proceedings in the High Court.  By that date, the 10-year longstop period in the Building Act applied (the Auckland City Council had issued a code-compliance certificate for the property on 4 October 1996).  The High Court found that the making of an application for an assessment from WHRS was not a procedure that could be viewed as the commencement of "proceedings" in Court and reasoned that the time limits in Limitation Act and Building Acts only apply to claims brought by way of Court proceedings.  Associate Judge Doogue said that the purpose of s55 of the Weathertight Homes Act 2002 was to set a time limitation in relation to claims brought in the WHRS forum.  This was, of course, all bad news for the claimants.  They found themselves statute-barred from taking any further steps.

Focus

• As soon as you become aware of any building defect, it is important to take immediate legal advice in order to assess whether time limits are an issue for you and whether you need to take any urgent steps to preserve your position.
• Homeowners lodging a claim under the WHRS may also need to file proceedings in court to preserve their position.  This will be an especial concern if the 10-year longstop is looming.

Email: Karen Shaw
Website: www.harkness.co.nz

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