Friday, 18 December 2009

Weathertight Home Damages

The recent decision in White v Rodney District Council, 19 November 2009, Woodhouse J, High Court Auckland, CIV 2009-404-1880 has attracted some public attention because of the approach of the High Court on appeal to the damages awarded in the Weathertight Homes Tribunal. The essential issue in the High Court was mitigation and the correct legal approach to the duty to mitigate damage. In the Tribunal, damages had been reduced by 45%, although this was set aside in the High Court and the full award restored. In addition, the general damages were increased from $10,000 for each Plaintiff to $25,000 for each.

The claim before the Tribunal was a reasonably familiar set of circumstances. The house had been built starting from June 1993, with a Code Compliance Certificate obtained in November 2001, which appears to have coincided with a sale to Mr & Mrs White in January 2002. Mr & Mrs White obtained a report on the house which contained a number of recommendations as to remedial work. The Whites obtained quotes from builders and endeavoured to get their chosen builder to do the work. He proved elusive, apparently because he was such a good builder that he was very busy. In the meantime, the Whites wrote to the Vendors and sought payment of the remedial work which had been quoted. The Vendors were strongly opposed to any contribution as was the Rodney District Council, the local council..

In the meantime, the Whites attempted to get alternative builders to do the work, which apparently they anticipated being able to pay with savings.

Regrettably, both Mr & Mrs White were made redundant, and without jobs, used all of their money they had set aside for the remedial work. By the end of November 2003, they filed an application with the Weathertight Homes Resolution Service. In the usual way, an assessor from the service inspected the property and provided a report in February 2004. This report then identified a substantial number of new issues and it became apparent that the damage would require far more extensive work than earlier suggested in the report obtained in 2002. The claim appears to have followed a leisurely path through the Tribunal and it was not until 2007 that the Whites discovered that the claim for the work now had ballooned out to $401,000. The amount which was eventually awarded was $281,250, largely because of difference between experts as to the scope of the work required. That sum was reduced by 45% because the adjudicator considered that the Whites should have got on with the repairs in 2002 – 2003 rather than wait until the time of the hearing.

Woodhouse J considered that the Tribunal was in error in application of the law as to mitigation. He stated the principle from the case of British Westinghouse v Underground Electric Railways [1912] AC 673 that the onus was on the defendant to establish what reasonable steps could and should have been taken by the plaintiff, and that those steps were not taken. This includes a requirement that the defendant must demonstrate other damage would have been reduced if the reasonable steps to mitigate had been taken. Importantly, that duty of taking all reasonable steps has to take into account all of the circumstances of the case, and does not require the application of hindsight. The Judge considered that it was important to note that the standard of reasonableness and of the steps taken to mitigate, were not high tests. This is of considerable importance to parties before the Tribunal, because in many cases they will not necessarily have the funds or the ability to raise funds to undertake the work at the time when best building practice may require the remedial work to be undertaken. Effectively, you have to consider the position of the plaintiff/applicant as it exists in the real world, or using the Latin phase “the wrong doer must take his victim talem qualem” or as he finds him. The other factors considered relevant to application of those principals were the steadfast refusal by the vendors to accept liability, and this combined with Mr & Mrs Whites’ employment problems meant they were in a difficult position.

Woodhouse J considered that the adjudicator was in error on a question of law in relation to the way in which the duty to mitigate applied to the decision. He considered that the adjudicator had set the standard too high and on the facts in this case, the other parties to the adjudication did not meet the onus required by the legal principle, to prove that Mr & Mrs White failed to act reasonably. The combination of denial of liability and redundancy meant that they were not in a position to meet the costs and had to rely upon the process before the WHRS to work the course. There is an implied criticism by Woodhouse J as to the time that the matter took from November 2003, the date of filing of the claim, up to the Hearing in March 2009. The Court did not alter the other findings other than removing the reduction for failure to mitigate. However, Woodhouse J then went on to increase the award for general damages based on a review of the awards made in similar cases. Effectively, he considered that the standard award should be around $25,000 each having regard to other recent decisions.

The decision will be of some comfort to claimants. Mitigation is commonly raised by other parties to claims before the Tribunal, and the considered and learned approach from Woodhouse J to the principles as to application of mitigation, make application of the test in the further cases somewhat easier. In addition, the increase in the general damages also sets a benchmark.

There was considerable criticism of the Tribunal in the general press. This is to some extent unfair to the Tribunal because it was only in two specific areas that the High Court was prepared to intervene. While those interventions are reasonably significant, there is no criticism of the analysis and the approach to calculation of the damages per se.

In addition to Weathertight Home claims, the case will have some significance in contractual claims where failure to mitigate is pleaded. The principles apply in contract and tort and again demonstrate that while, in many cases, leaky homes are a tragedy for the parties involved, they have certainly added to the body of jurisprudence in New Zealand.

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