WHRS Act
Before looking at the specifics of the case, it is worth first examining the WHRS Act.
The WHRS Act was established in New Zealand to help address issues related to the well-known leaky homes crisis which affected many timber-framed homes built from 1988 to 2004.
The WHRS Act offers a mechanism for homeowners to obtain financial assistance to repair weathertightness defects. This includes determining eligibility for funding and the extent of financial support available. It provides a structured process for resolving disputes between homeowners and builders or other responsible parties regarding weathertightness defects, and establishes a key role for MBIE in overseeing and managing the resolution process.
The WHRS Act generally only covers residential buildings. Specifically, it applies to:
- Dwellings: These include single houses and multi-unit complexes, such as townhouses or apartment buildings, with weathertightness issues.
- Multi-Unit Complexes: The Act also applies to unit title complexes (eg, apartment buildings or condominium-style developments), provided they meet certain criteria under the Act.
The Oak Shores development
The Oak Shores development contains seven principal units and common areas.
On 20 May 2013, the Body Corporate for Oak Shores requested an assessor’s report from MBIE due to weathertightness issues. The completed report, finalised on 20 January 2015, indicated eligibility for the claim for the whole development. However, on 18 February 2015, MBIE raised concerns about whether block 4’s units qualified as dwellinghouses due to the original building consent being for a commercial building. Ultimately MBIE wrote a letter determining eligibility, which excluded block 4.
The Body Corporate argued that the February 2016 determination should have included all four blocks of Oak Shores in the eligible claim. The estimated repair cost for block 4 was $12 million, with potential financial assistance covering 25% of this amount.
The High Court was asked to resolve whether the eligibility decision encompassed the entire complex or just blocks 1, 2, and 3, and if the exclusion of block 4 was legally justified.
The High Court’s decision
Many different grounds to challenge the decision were raised at the High Court. However, the primary argument advanced led the High Court to examine the powers of MBIE in assessing the eligibility criteria and how these were reconciled with the assessor’s report.
The Body Corporate argued that the only relevant aspect of the eligibility form was the final conclusion stating that the claim was eligible and related to the complex as a whole.
However, the High Court dismissed this argument. It determined that statutory requirements constrained the decision-maker’s role and could not override the dwellinghouse criteria. The High Court held:[1]
I do not accept that as a fair reading of the document, particularly taking into account the statutory context. As a matter of law, it is not within the discretion of the decision maker to override the “dwellinghouse” requirements, and this is not what she purported to do. There is no overarching ability to treat non-residential principal units as dwellinghouses. For example, level 3 consists of a restaurant, a reception, staff quarters, and other conference facilities. The layout of that level is simply inconsistent with that principal unit being used for the principal use of a private residence
The Court stated that the concept of the complex as a whole pertains to class action policies where a representative claims on behalf of all owners in a complex. To pursue a claim, a representative must obtain authorisation from at least 75% of residential unit owners. This provision aims to prevent individual owners from taking conflicting positions or “holdouts”.
In this case, the claim was deemed eligible for the complex as a whole but was strictly confined to units that qualify as dwellinghouses. The determination that the claim is “eligible” pertains to the extent clarified in the documents and does not extend to all units within the complex.
Conclusion
In summary, the eligibility of claims related to leaky buildings is strictly governed by the requirement that the units in question must be dwellinghouses. Despite any overarching claims about the eligibility of a complex as a whole, the statutory definition of a dwellinghouse is clear and cannot be overridden. The technical services manager’s assessment and the final eligibility determination must align with these requirements, ensuring that claims are appropriately categorised and that non-residential units are excluded from eligibility.
References
[1] At [77].
