Improving Access to Civil Justice – a Summary

March 2023

Late last year, the Rules Committee (Committee) released the Improving Access to Civil Justice Report (Report). The Report identified a number of impediments to Access to Civil Justice in New Zealand including:

• Financial barriers;

• Psychological barriers; and

• Cultural and Information barriers.

This article outlines some of the most notable recommendations.

Increasing jurisdiction of the Disputes Tribunal 

The Report recognised the Disputes Tribunal serves an important role in providing dispute resolution for smaller claims, at a low cost to the parties involved. Currently, the Tribunal only deals with claims up to $30,000. The Report recommends that the Tribunal’s jurisdiction is raised to be able to deal with claims up to $70,000 as of right and up to $100,000 by consent.

The Committee outlines key reasons for this change, namely:

• to allow Tribunal claims exceeding $30,000 to not be partially abandoned;

• the Tribunal has capacity for more claims;

• larger claims are unlikely to be more complex; and

• inflation has decreased the value of money.

Reinvigorating the civil jurisdiction of the District Court

The Report identifies a loss of confidence in the District Court’s civil jurisdiction. This is illustrated by only roughly 5-7% of filed matters being defended. Factors identified as contributing to a loss of confidence include a decline in expertise amongst registry staff and a lack of resources to provide a timely judgment.

To address this, the Report recommends the appointment of a Principal Civil District Court Judge. The role of the Principal Civil District Court Judge would be to work with judges and the Ministry of Justice to ensure that the civil registry has proper expertise, and that judges have appropriate time allocated for civil work.

The Report also recommends the appointment of senior practitioners, including King’s Counsel, as part-time Judges to better respond to fluctuations in workflow and enhance the civil expertise of District Court Judges.

Changes to High Court procedures

The High Court’s reputation for providing a high-quality civil justice system remains strong. However, cost and delay were identified as barriers to access to justice. At the heart of these barriers, the Report argues, is a ‘maximalist’ approach to litigation. A ‘maximalist’ approach means that all available procedures are utilised, even when they are not necessary or do not provide proportional benefit to the case. To discourage a ‘maximalist’ approach, the Report’s recommendations are focused on changing rules regarding evidence and Court processes, including:

• “Will say” statements will replace briefs of evidence, and unless otherwise directed, those statements are to be served before discovery orders are made.

• Greater emphasis to be placed on the documentary record for establishing facts, and documents included in an agreed bundle should presumptively be admissible to establish those facts without the need for witnesses to traverse them.

• Evidence from witnesses should be limited to issues of fact unless it is expert evidence to stop the making of submissions through the evidence.

For more information on the Report, please contact Grimshaw & Co.

Electronic Casebooks: a step forward for technology in the court

31 March 2022

Casebooks are a vital part of the trial process. Most of the evidence used in a case is contained in the casebook, making a casebook a key tool in litigation. In particular, complex construction cases generate huge numbers of documents, making an accessible and functional casebook fundamental to the running of any trial. For decades, casebooks (formerly known as common bundles) were provided in a hardcopy. Casebooks generated tons of paper carefully organised into files. In document-heavy disputes, these casebooks could span thousands of pages organised into multiple folders.

The use of electronic casebooks has gradually increased in the New Zealand courts. The Court of Appeal began using electronic casebooks in 2014 for criminal appeals, but today, almost every senior court in New Zealand utilises electronic casebooks for their trials. In document-heavy trials, electronic casebooks are the desired medium, with the High Court requiring the use of electronic casebooks in any trial where the casebook is likely to exceed 500 pages.

The benefits of electronic casebooks cannot be overstated. In terms of preparation, the process is much more streamlined, able to be completed in a few weeks depending on size. Further, casebooks are extremely accessible. A judge no longer has to track through thousands of pages. Casebooks utilise hyperlinks. With a click of a button, a judge or counsel can jump to the required documents, resulting in a far more efficient trial process. Efficiency also provides for more persuasive advocacy from counsel as a judge has quick access to the evidence being referred to at all times.

Despite the increase in use of electronic casebooks, they have not yet been entirely accepted by the legal profession. Many judges and counsel will still request a hardcopy casebook, nullifying any positive effect an electronic casebook has on the trial process. More education may be needed on the benefits of electronic casebooks to help increase the rate of acceptance of electronic casebooks in the legal community.

One positive outcome of the COVID-19 pandemic on the New Zealand trial process is the increased use of electronic casebooks, leading to a greater acceptance of their use as we move back to in-person trials. Throughout much of the last two years, the High Court in Auckland has been forced to conduct many trials through video conferencing software. With the trial itself occurring online, the use of electronic casebooks has increased. As we now transition back to in-person trials, there is hope that the use of electronic casebooks will remain a priority for the courts.

Given the efficiency and improved advocacy skills with the use of these casebooks, the benefits of their use far outweigh the learning curve required for legal practitioners.

If you are interested in knowing more about the use of electronic casebooks and/or the 2019 Senior Courts Civil Electronic Document Protocol (amended on 16 September 2021), please get in touch with the team at Grimshaw & Co.

Grimshaw & Co

Welcome to the Team

Grimshaw & Co are pleased to welcome three new members of staff to the team: Sabrina, Oliver, and Connor.

Sabrina Liu: Law Graduate

Sabrina joins us from the University of Auckland, where she is about to graduate in Law, having previously completed a Bachelor of Science (Hons) in Psychology. She also holds a Bachelor of Business from AUT. Prior to joining Grimshaw & Co, Sabrina spent nearly a decade working in marketing for leading global brands in both Shanghai and New Zealand. She has lived in New Zealand for about 15 years but grew up in China and is fluent in Mandarin. In her spare time, she enjoys yoga, reading and spending time with her family.

Oliver Harding: Law Graduate

A Wellingtonian, Oliver has moved to Auckland after spending the past five years at the University of Otago, where he completed a degree in Law and Arts (History and Politics). His interest in tort and evidence law attracted him to the idea of working in litigation and he is excited by the prospect of representing homeowners and body corporates. Outside of work, Oliver enjoys watching sport and playing it socially. His interests include skiing, music and travel and he is looking forward to exploring his new city and region.

Connor McKenzie: Summer Clerk

Connor is from Auckland originally but currently studies at the University of Canterbury, where he is in his second year of working towards a degree in Law and Criminal Justice. He joins Grimshaw & Co for the summer months and is looking forward to being exposed to the different facets of the law and experiencing the law in practice. Connor plays cricket and football and enjoys surfing in the summer and snowboarding in the winter, as well as spending time with friends and family.

Buddy System

With lots of new faces, names, and systems to learn, starting a new job can easily feel overwhelming. This is often heightened for graduates who join us fresh from University with little to no prior full-time work experience. To assist with the transition into a new role, we allocate a workplace buddy to all new team members. Sabrina, Oliver, and Connor have all been paired with an existing member of the team who can help to provide invaluable guidance and support during the first six months in a new environment. We have found that lasting relationships are often formed through the buddy system, the benefits of which are noticed well past the initial six months.  

If you have any questions or are interested in getting to know our newest team members a little bit better, please reach out to them directly through their contact details listed below.

Contact Details

Sabrina Liu: sabrina.liu@grimshaw.co.nz

Oliver Harding: oliver.harding@grimshaw.co.nz

Conner McKenzie: connor.mckenzie@grimshaw.co.nz

Residential Tenancies Amendment Act 2020: Its place in the unit title ecosystem

On 11 August 2020, substantial reforms to the Residential Tenancies Act 1986 (the Act) became law through the passing of the Residential Tenancies Amendment Act 2020 (the Amendment Act). The changes were made to modernise tenancy laws and align them with the present-day realities of renting, while striking a balance between the rights and obligations of both landlords and tenants.

The Ministry of Housing and Urban Development provides a summary sheet of the changes brought by the Amendment Act. Although the Act relates to tenancy relationships within single dwellings, the Amendment Act brings changes that will inevitably affect neighbouring properties. This will be particularly true in unit title developments. As such, body corporate members, managers, and stakeholders alike should be aware of these changes and plan their affairs accordingly.

This article will discuss provisions that will come into force on 11 February 2021, namely the provisions for ‘minor changes’ and installation of fibre. It will then emphasise the importance of body corporate rules that are up to date, amended lawfully and fit for purpose.

Minor changes

The Act currently prevents tenants from making changes to their properties without their landlords’ consent and landlords could not object to changes ‘unreasonably’. However, it is unclear what would be unreasonable in practice so landlords effectively have the sole discretion to deny changes.

Section 42A(1) will continue to prevent landlords from unreasonably objecting to changes, but s 42B(1) will make it unreasonable for landlords to prohibit ‘minor changes’. Section 42B(2) lists the elements that will form a minor change. The Ministry’s summary sheet provides examples of minor changes such as adding fire alarms, door bells, curtains and baby-proofing. Section 42B(2)(d) will be particularly important to unit title stakeholders. It implies that a change will be ‘more than minor’ if it “compromises the structural integrity, weathertightness or character of any building”.

In unit title developments, such changes will likely affect neighbouring units and potentially the entire development. Section 42A(1) will prohibit landlords from objecting to minor changes, but it is silent on what will happen if the proposed changes are more than minor. The wording of s 42A(1) arguably gives landlords the option to allow any changes that are more than minor. For example, landlords can choose to allow works that require a building consent and make the tenant pay for the application. They can also allow changes to their properties even if they cannot be returned to the same condition once the changes are made. However, as established below, landlords must prohibit changes that will cause a breach of the Building Code.

The Building Code contains the structural and weathertightness standards that need to be achieved by all buildings. The Building Act 2004 requires unit owners to ensure all building work (e.g. renovations, alterations or additions) comply with the Building Code, whether they be to their principal units or common property (as owners through their bodies corporate). Similarly, the Unit Titles Act 2010 requires bodies corporate to repair and maintain common property, and building elements and infrastructure that relate to or serve more than one unit. Owners will be liable to their bodies corporate for repair costs incurred because of any defective works they (or their tenants) undertake. Section 42A(1) must therefore be interpreted consistently with these imposed duties and owners must continue to take steps to ensure compliance.

Installation of fibre

Section 45B(1) will require landlords to allow the installation of fibre if they do not have to pay for the installation and none of the exceptions in s 45B(2) apply. For example, ss 45B(2)(a) and (b) will allow landlords to object to fibre if it would compromise the structural integrity or weathertightness of any building. Similar to s 42A(1), the wording of s 45B(2) will arguably give landlords the option to allow fibre to be installed even if an exception applies. However, the reasoning in the previous section applies; landlords should prohibit work that would breach the Building Code.

Unlike s 42B(2)(d), s 45B(2)(a) will only allow landlords to object to fibre if it would ‘materially’ compromise the weathertightness of any building. This acknowledges that in most cases a fibre installation will require a cable to penetrate the exterior weatherproofing fabric of the building. As long as the affected wall would continue to “prevent the penetration of water that could cause undue dampness, damage to building elements, or both” (performance requirements of Clause E2 of the Building Code), a landlord will unlikely have valid grounds to object.

Body corporate rules

Bodies corporate may choose to amend their operational rules to provide certainty for their members. For example, rules could be amended to identify prohibited changes to unit property. This will avoid issues as to what a minor change is or whether tenants could install fibre, and will allow owners to withhold consent under ss 42B(2)(g) and 45B(2)(c). With the guidance of lawyers and experts, updating the rules will assist bodies corporate in identifying works that will breach the Building Code. It will also give them certainty when recovering costs from owners who consent to non-compliant works.

Conclusion

This article serves to remind stakeholders of unit title developments that the duties imposed by the Building Act and Unit Titles Act still apply despite the changes in the Act. In summary, the new provisions should be interpreted consistently with these duties and owners should only allow tenants to alter their units if the proposed works comply with the Building Code. Bodies corporate can also amend their rules to guide owners on the changes they can allow their tenants to make. 

Alphonso Sales, Solicitor
Grimshaw & Co

Unit Titles: Paying for the actions of former owners

There are many things a purchaser of an apartment in a unit title complex needs to consider. The Clearwater Cove Court decision highlights the risks for purchasers arising from historic costs awards against the body corporate.

In 2008 the Clearwater Cove body corporate commenced a representative claim in the Weathertight Homes Tribunal against the Auckland Council and Fletchers in relation to building defects. The claim was unsuccessful. The Auckland Council and Fletchers sought costs. The Tribunal found the claims in relation to the majority of the units lacked substantial merit and there was bad faith on the part of the body corporate in the conduct of the claim. It ordered the body corporate to pay costs to the Auckland Council and Fletchers in the sum of $894,000. The body corporate did not pay and the Court appointed an administrator to manage the affairs of the body corporate.

A lengthy dispute then ensued as to which owners should pay the costs award. In 2020 the High Court considered whether the costs should be paid by the owners of the units whose conduct resulted in the adverse costs award or the owners as a whole. The Court found the costs should be apportioned to those units at fault under section 127 of the Unit Titles Act.

However, in some cases the units of the owners at fault had sold and the new owners purchased without knowledge of the misconduct of the previous owners. The Court held the body corporate should first seek to recover the costs from the former owners who were at fault, but if the funds could not be recovered from those parties, the correct interpretation of section 127 is that the current owner must pay.

Gareth Lewis, a Grimshaw & Co Partner advises the decision “is a reminder that the way in which a body corporate is required to manage historic liabilities under the Unit Titles Act can result in recent purchasers incurring significant costs that were not anticipated”. He states “the disclosure requirements under the Unit Titles Regulations will not necessarily put purchasers on notice of these matters. This emphasises the need for purchasers and their lawyers to make comprehensive enquiries about issues of this nature at the time of purchase”.

Grimshaw & Co regularly advises bodies corporate and unit owners. We are experts on the Unit Titles Act and are well placed to advise your body corporate on the validity of body corporate rules, repair and maintenance obligations, section 74 schemes and provide other specialist advice. For assistance, please call us on (09) 377 3300.

James Hardie cladding systems on trial

Since the early 2000s, some building experts have claimed that James Hardie cladding systems marketed and sold from the 1990s are defective. These experts say the systems allow water ingress and require installation methods that cannot practically be achieved in real world conditions.

James Hardie has always argued there is nothing inherently wrong with its cladding systems and that installation failures and poor workmanship are to blame for the weathertightness failures in houses clad with James Hardie products.

Wherever the truth lies, thousands of homeowners throughout New Zealand with homes clad in James Hardie products such as ‘Harditex’ fibre cement cladding sheets have discovered their homes are subject to weathertightness failures and decay damage. They are required to reclad their homes at significant cost, often several hundred thousands of dollars.

Many owners, whose homes were signed off by a council and were still within the 10 year limitation period, took Court action against the council and others involved in the construction to recover compensation. Other owners were left with the option of a claim against James Hardie as manufacturer of the cladding systems.

Two groups of claimants formed to bring claims against James Hardie, a group of 144 homeowners in Wellington and a larger group in Auckland comprising the owners of 1,236 residential homes, 5 commercial buildings and 5 retirement villages.

In August 2020 the stage 1 trial of the Wellington claim commenced in the High Court. The stage 1 trial will determine whether James Hardie owed a duty of care to the owners, if so whether that duty was breached and whether James Hardie made misleading statements in its technical literature.

Grimshaw & Co Partner Gareth Lewis advises: “In view of recent developments in tort law there are good arguments to say James Hardie owed a duty of care to the homeowners.” If James Hardie is found liable there will need to be a stage 2 trial in which the Court determines whether any shortcomings in the cladding systems contributed to the water ingress and damage on the facts of each case and, if so, to what extent. According to Mr Lewis “this second stage could be a drawn-out process as experts often find multiple causes of moisture entry and damage in leaky homes and these would need to be taken into account in determining whether James Hardie caused loss.”

The High Court decision on the Wellington claim is likely to be issued in early to mid-2021.

The larger Auckland based claim is brought against more companies in the James Hardie group and is due to proceed to a stage 1 trial in May 2021, on similar terms to the Wellington claim.

Grimshaw & Co are experts on building defect claims, construction disputes and Construction Contracts Act adjudications. Call us on 09 377 3300 for specialist assistance.

Calling all writers – applications are now open for the 2021 Grimshaw Sargeson Fellowship.

Media release: 14th September 2020

The Grimshaw Sargeson Fellowship is back looking for writers ready for their 2021 placements. The Fellowship, now in its 34th year, is a national literary award offering published New Zealand writers the chance to focus on their craft full-time, a historic environment to write in, along with financial support and networking opportunities. Applicants must be a New Zealand Citizen or have New Zealand permanent residency Frank Sargeson Trust Chair Elizabeth Aitken-Rose says now more than ever it is important to support New Zealand authors and creatives. “It’s great that we can provide these well deserving writers the opportunity to focus solely on their literary work for a few months. It gives them the opportunity to devote more time and explore ideas they might not otherwise be able to.”

“We want this Fellowship to enrich and nurture New Zealand’s literary landscape. It’s always exciting to see the work that our recipients create during their tenure, and we look forward to seeing what new concepts are put forward by this year’s talent.”

Writing about sex, human relationships and immigrant perspectives, poet Hera Lindsay Bird and fiction writer Michalia Arathimos were Grimshaw Sargeson’s 2020 fellows. Auckland-based Hera had to adapt, like most New Zealanders, and completed her fellowship at home due to COVID-19 lockdown. This didn’t dent her experience however, and she still continued to develop her project.

“It was such a pleasure to have a few uninterrupted months of time to focus on my work. Even though I didn't get the opportunity to use the building, it was still a great experience,” says Hera. “I really value the time and support this residency afforded, and don't think I would be where I am with my project without this concentrated period of time to think, reflect and work.

“Over the pandemic, most of the writers and artists I know have been reconsidering the function, intent and audience for their work, and while re-evaluating everything can be daunting, it can also be exciting and re-invigorating. I'm going to keep working on my book with renewed clarity and energy.”

Michalia is due to come up from Wellington at the end of the year to undertake her tenure at the Sargeson Centre in Auckland.
Aitken-Rose also says that it is wonderful to see a diverse range of authors apply for the Fellowship across all genres and encourages all established writers to consider applying, whether they are poets, biographers, playwrights or novelists.

“The contribution that they make to New Zealand’s culture is invaluable,” says Paul Grimshaw, Partner of Grimshaw & Co, “that’s why we continue to support New Zealand’s literary talent.”

Applications close on Friday 16 October 2020, with the tenure due to begin in April 2021.

Further information on the Fellowship is available here. Any queries can be directed to Elizabeth Bennie at elizabeth.bennie@grimshaw.co.nz or on +64 9 375 2393.

- ENDS -

About Grimshaw & Co

Grimshaw & Co are leaders in dispute resolution, with experience across all areas of civil and commercial litigation. Established in 2005, Grimshaw & Co are based in Auckland, representing clients across the country.

About the Frank Sargeson Trust

The Frank Sargeson Trust was formed in 1983 by Christine Cole Catley, Frank Sargeson’s heir and executor. The Trust aims to continue Sargeson’s lifelong generosity to writers through providing residential fellowships while preserving his house in Takapuna, Auckland, as New Zealand’s first literary museum. The first fellowship was awarded to Janet Frame in 1987. Learn more about Frank Sargeson and the Fellowship here.

For media enquiries contact:

Nick Davies
P: +64 4 494 6144
M: +64 27 5484442
E: ndavies@acumenrepublic.com

Hot tips for body corporate remediation projects

A major repair or renovation to an apartment building is a significant undertaking which requires careful planning, clear lines of communication and specialist expert advice.

There is a lot at stake for the owners. A well-managed remediation project will take less time, enhance the reputation of the building and add value to the apartments. A poorly managed project can lead to incomplete repairs and years of delay and frustration.

Here are 10 hot tips for bodies corporate undergoing remediation or renovation projects:

• Take independent building advice. The body corporate should take advice on building defects and remediation options from independent building professionals. Avoid taking informal advice from others such as the developer or members of the body corporate.

• Beware of targeted repairs. There can be a temptation to undertake ‘targeted’ or ‘patch’ repairs which are cheaper but essentially cover over problems and do not address the underlying issues. These repairs often fail and result in the need for further repairs in the future. Seek confirmation the proposed repairs will be durable in the long term.

• Obtain advice on claim options. Consult legal advisors who specialise in building defect claims to identify whether you have a claim against those involved in the construction or certification of the complex for the cost of repair works. All claims are subject to strict limitation periods, so legal advice should be sought as soon as possible.

• Get the owners on board. Any remediation project needs the support of the owners. This means satisfying the owners the work is necessary and there is a commercial benefit in undertaking the work. Provide a valuation report which sets out the potential capital gain and a business plan with details of the estimated cost and timing of the repair project.

• Apply for a section 74 scheme. Engage lawyers to apply to the High Court for a repair scheme under section 74 of the Unit Titles Act. This will clarify the basis upon which owners are to be levied for the work and authorise the body corporate to undertake work to both unit and common property, amongst other things. The scheme provides an assurance the project will proceed in an organised and professional manner.

• Engage a body corporate manager with experience in remediation projects. Body corporate managers who have managed other remedial projects are familiar with the issues that are likely to arise, know the best experts, will have systems that can be used to manage the project and can provide useful advice to owners throughout the project.

• Put in place clear lines of responsibility. The contractual arrangements between the body corporate, the building professionals and the head contractor are important. Seek legal advice in relation to the contracts. Ensure there is a clear understanding as to the responsibilities of each building professional and who ultimately oversees the work.

• Appoint an owners representative. An owners representative fulfils an important role in liaising between the building professionals and the owners. He or she provides important information to the owners, such as when they need to vacate their apartments, and can assist with other matters such as finance and alternative accommodation options.

• Provide regular updates. The body corporate should provide regular updates to the owners so they have a clear understanding of how the project is progressing and have up to date estimates of the costs and timing of the work. Reports from the building experts should be provided to explain any significant changes in the scope of the work.

• Resolve disputes quickly. If disputes between the body corporate, building professionals and/or the head contractor develop it can result in significant delays to the project or at the conclusion of the project the body corporate may have difficulties obtaining the producer statements it needs from contractors. Address any disputes which arise as soon as possible, and where necessary invoke the dispute resolution process in the contract.

Grimshaw & Co regularly acts for bodies corporate undergoing remedial work projects. We are experts in building defect claims, construction contract disputes, section 74 schemes and the Unit Titles Act 2010. Call us on 09 377 3300 for practical expert advice.

Covid-19 lockdown and lease disputes

On 25 March 2020 the Government declared a civil emergency and enforced a Level 4 lockdown. Aside from the unprecedented social impact, shockwaves reverberated throughout businesses operating in New Zealand.

If you owned/operated a business at a leased premise before the lockdown, then almost certainly you have acquired rights when it comes to the payment of rent during the lockdown period.

The standard form Auckland District Law Society lease document (6th edition, 2012) has special provisions relating to “No Access in Emergency”. These were incorporated as a response to the Christchurch Earthquakes and fall out from the Red Zones created following those catastrophes. Put simply, a qualifying lessee will be entitled to withhold a “fair proportion of the rent and outgoings”. Other standard form leases have similar provisions which may be engaged by the circumstances of the lockdown.

On the flipside, if you were the landlord of commercial premises during the lockdown then you will need to carefully consider your approach to the enforcement of rent payments.

Grimshaw & Co is able to provide tailored advice to your situation, after considering the applicable lease documents, and your particular lessor-lessee relationship. We are able to think outside the box to offer a strategy suited to your individual circumstances. This may simply involve an exchange of correspondence, or more formal measures such as mediation, expert determination or quick form arbitration.

Get in touch if you would like to speak to one of our experienced lawyers today.

Covid-19: Suspension of Construction Contracts

The Covid 19 lockdown resulted in many contractors and property owners examining the provisions of their construction contracts in order to check the circumstances in which the contract may be suspended and the implications of a suspension for both parties.

The most common form of contract used for large construction projects in New Zealand is NZS 3910:2013. Clause 6.7.1 of the General Conditions states:

“If the suspension of the whole or a part of the Contract Works becomes necessary, the Engineer shall instruct the Contractor in writing to suspend the progress of the whole or any part of the Contract Works for such time as the Engineer may think fit, and the Contractor shall comply with the instruction”.

When the Alert Level 4 took effect many contractors asked the Engineer to the contract to suspend the contract works under clause 6.7.1 on the basis laws passed by the Government prevented the contractor from continuing work. These laws included amendments to the Health Act to give the Government powers to stop the spread of infectious diseases, an Epidemic Notice under the Epidemic Preparedness Act 2006 and a Health Order issued under the Health Act. These measures required that all premises close (excluding houses and essential businesses amongst other things) and prevented people from congregating in outdoor places.

The list of “essential businesses” included “Tradespeople” but only in respect of “maintenance if it is to maintain the necessities of life or critical to safety. This includes electricians, plumbers and builders.” Most building projects contracts did not fall into that category and could not continue.

Clause 6.7.3 of NZS 3910:2013 states unless the suspension is due to default on the part of the Contractor, the suspension is to be treated as a Variation. Clause 5.11.10 also states that a Variation arises when the Government passes laws that increases the cost of performing the contract to the contractor. The Variation is to be valued in accordance with clause 9.3 and the Engineer is to grant an extension of time to the contractor for the net effect of the Variation under Clause 10.3.1.

Under clause 9.3 the contractor is to notify the Engineer of any Variation claim within 1 month of the Engineer issuing the suspension notice (9.3.2). A Variation claim arising from the lockdown would likely include time related costs including off-site and on-site overheads and profit for the period of the suspension. Where the contract includes a schedule of prices with applicable rates, including working day rates, these would apply. Otherwise, the formulas set out in clause 9.3 for determining time-related costs are used.

The assessment of the contractor’s time related costs during the Alert Level 4 period is likely to be an area of dispute between contractors and owners. The extent to which problems may arise will depend on whether the relevant rates are clearly stated in the Special Conditions of Contract and the ability of the parties to work together to resolve any differences. Covid 19 is an extraordinary event and it will require collaborative approach from contractors and owners in order to resolve the issues arising from the lockdown. If this is not possible, the adjudication process in the Construction Contracts Act is available for the parties to resolve their differences.

Grimshaw & Co regularly acts for contractors, property owners and bodies corporate in construction contract disputes and adjudication claims under the Construction Contracts Act. Call us on 09 377 3300 for practical expert advice on how to manage your dispute.

Warning signs emerge regarding viability of building guarantee schemes

MBIE’s Building System Legislative Reform Package includes a proposal to require compulsory guarantee and insurance products (GIPs) for residential new builds and significant alterations. In August 2019 MBIE published a summary of the public submissions on its Reform Package. 76% of submitters supported the proposal to require GIPs, although some submitters expressed doubts that the insurance market would be prepared to support the proposal and others suggested Government involvement by way of a backstop cover.

The reservations expressed by some of the submitters has been borne out in recent news reports in New Zealand and Australia which cast doubt as to whether building guarantee schemes of this type are financially viable.

The Sydney Morning Herald recently reported that the New South Wales Government paid out more than $200 million in one year to prop up a home warranty scheme with further increases expected. The scheme enables owners of homes and apartment buildings of 3 levels or less to make an insurance claim in respect of defects if the builder becomes insolvent, dies, disappears to has their license suspended. The premiums are paid by builders but over time these have been insufficient to meet claims. In 2010 the NSW stepped in to cover unfunded claims and it has since amassed more than $639 million liabilities. There is no warranty scheme for apartment buildings above 3 levels as both private insurers and the government pulled out due to the risk in 2003.

More recently the Stuff website reported two private guarantees offered by New Zealand building companies, the Stamford Insurance 10-year new build guarantee and the New Zealand Certified Builders’ Halo 10-year guarantee, have lost their underwriter and cover will end when the policies expire in December 2019 and January 2020. This has led to some calls for a mandatory nationwide warranty of the type being investigated by MBIE.

In view of New Zealand’s record of poor building work over the last 30 years the prospects of private insurers providing long term cover, whether for private guarantee schemes or industry wide compulsory guarantees, appears to be slim. That leaves the Government as the only funding option, but there is unlikely to be much appetite for taxpayers to foot the bill for the indeterminate liability it would face. If and when the reputation of the New Zealand’s building industry improves insurance cover may become available but that is unlikely to be for some time.

In the meantime, a more productive focus for regulatory reform is likely to be the strengthening of the processes within building consent authorities to ensure everything possible is being done to avoid defective building work in the first place.

Grimshaw & Co are experts in all aspects of building defect law. Email Gareth Lewis on gareth.lewis@grimshaw.co.nz for assistance.

Why your body corporate home is not necessarily your castle

For many New Zealanders who grew up in a home on a quarter acre section it takes time to adapt to the complex issues that can arise from owning and living in an apartment building. One of these issues is the extent to which owners have control over their own apartments and, in particular, who is responsible for repairs and maintenance to the apartments. In this article we discuss the way in which the law relating to work of this nature has developed from a position of some autonomy for unit owners to one of collective responsibility.

The Unit Titles Act 1972 introduced laws to govern bodies corporate. To a large extent the Act gave unit owners control over their own unit space. It allocated responsibility for the repair and maintenance of a unit to the owner and responsibility for common property to the body corporate. The Act granted the High Court the power to sanction schemes for the repair of buildings, including cost apportionment, but in the leading Court decision, Tisch, the Court of Appeal ruled scheme cost allocations should only depart from the Act where this was necessary to achieve fairness between the parties. As a result, most Court decisions on schemes under the 1972 Act allocated the cost of unit repairs to the owners of the unit and the cost of common property repairs to the body corporate.

In this way, although the owners collectively managed the common property, they exercised a degree of autonomy over their own apartments.

The Unit Titles Act 2010 was passed in response to the leaky building crisis and the difficulties that bodies corporate often faced in undertaking remedial work to the exterior of buildings, in particular to unit property. The 2010 Act gives bodies corporate the power and the obligation to repair and maintain all building elements which relate to or serve more than one unit, irrespective of whether these building elements are within unit or common property. The costs of these works are payable by all unit owners and may only be reapportioned to individual owners in certain circumstances. This change in the law has been reflected in a number of recent Court decisions:

• In The Links the Court approved a body corporate scheme to apportion all weathertightness repair costs according to utility interest in circumstances where the balconies and at least part of the exterior were within unit property but the work benefitted the building as a whole.

• In Sebel Suites the Court held that weathertightness repairs to a deck over a restaurant in Auckland’s Viaduct Harbour, which was within unit property, was payable by all owners in accordance with utility interest.

• In Otway the Court of Appeal held that repairs to decks within unit property over shops in a Mt Maunganui tower block were payable by all owners in accordance with utility interest, as the repairs were important for the storm water system for the entire building and were of benefit to all owners.

• In Pavilions the Court approved a body corporate scheme for repairs (including a reclad) to a 4 level tiered apartment building in Mt Maunganui in accordance with utility interest, on the basis the works addressed the weathertightness and compliance of the building as a whole.

This case law reflects the reality that building elements in an apartment building will often be interlinked and that significant remedial works will often benefit all of the owners. In these situations the interests of the owners are interdependent so that the maintenance of the building is necessarily a collective responsibility. In many ways, a body corporate of this type is more accurately described as a group ownership arrangement rather than a collection of individual properties. This may mean that your body corporate home is not necessarily your castle, in the sense that there is not the same level of control as a stand alone home. But that is not necessarily a bad thing. It is a different form of property ownership which needs to be managed in its own way.

Grimshaw & Co regularly acts for bodies corporate. We are experts on the Unit Titles Act and are well placed to advise your body corporate on the validity of body corporate rules, repair and maintenance obligations, section 74 schemes and provide other specialist advice. For assistance please contact Gareth Lewis on (09) 375 2376 or Gareth.Lewis@grimshaw.co.nz.

A Body Corporate Guide For First-Home Buyers

One of the by-products of high house prices in Auckland and our expanding population is that more and more first-home buyers are choosing apartment living as their primary step on the property ladder.

For Grimshaw & Co partner Gareth Lewis the trend comes with an added incentive for home-owners to be more aware of their responsibilities and rights when living in a shared structure.

“Compared to say 10 years ago, more and more people around town have either lived in apartments or have owned them and are a lot more people are aware of what’s involved in owning an apartment, how they’re levied and what their obligations are,” Gareth says.

“But its still quite common for first-home buyers to have their first home-buying experience in an apartment building.”

Gareth says the three main issues to consider when buying a unit in an apartment block are:

1. Body corporate levies: People are used to paying rates and then separate amounts for power, maintenance etc but in an apartment building all of that is administered by the body corporate which bills you a significant amount per annum. Gareth says that getting used to the levies and understanding how these are calculated needs to be considered right from the outset.

2. Building defects: Gareth warns against buying into an apartment building with weathertightness, fire rating or structural problems. “Unfortunately a lot of buildings in Auckland do have these issues and it can lead to very expensive repairs.” The best way to be pre-warned about any potential problems is to get body corporate minutes from meetings going back as far as possible. “It’s hard when buying into a unit title complex to identify all problems but you should look at the minutes. You have to accept the fact that you’re going to contribute to repairs in other parts of the building and for common property, but you tend to find that defects are common throughout a building and some issues will relate to more than one unit. So, yes, if someone on level five is having major deck problem or a ranch slider leaking, it could well be your apartment next.”

3. Understanding that the majority rules: Although there are a lot of benefits in body corporate living – someone else taking care of maintenance and living close to the middle of town and all those services – Gareth says it’s important to realise that you are “sacrificing control” over many aspects of your property. “Generally the courts have said that you have to go along with the wishes of the majority – whether that’s over repairs or even painting it a different colour.”

So if you are buying into a body corporate should you seek to be involved in the body corporate committee? Gareth says there are two key requirements:

• You must have plenty of time as understanding the obligations of a body corporate committee and handling body corporate affairs can be a very time-consuming process.

• You must be the sort of person who is willing to seek advice from qualified professionals and not try to run the show yourself. Gareth says problems arise usually when body corporate committees makes decisions or carry out actions when they don’t have the expertise or are not independent. “It’s when someone has a brother who’s a builder who can carry out any work, or who takes on the cleaning contract, or who has a small amount of accounting experience or who thinks they know the law, that it becomes a problem. You must be willing to take advice where appropriate.”

Gareth Lewis is a Partner at Grimshaw & Co with expertise in construction claims, body corporate disputes and employment law. He is a Fellow of the Arbitrators and Mediators Institute of New Zealand and uses various forms of dispute resolution, including mediations and arbitrations. He has appeared in the Employment Relations Authority, WHT, District Court, High Court, Court of Appeal and Supreme Court, including interlocutory applications, trials, appeals, interim injunction applications and insolvency matters.