https://unsplash.

com/photos/qcD2CW9Br04 ISSUE 50 / JUNE 2023

The quarterly journal of the Building Disputes Tribunal

High-rise blues
CLIENTS IN HIGH RISE LEAKY
BUILDING SETTLEMENT
SUCCESSFULLY SUE THEIR LAWYERS.

Bad faith and without

substantial merit
WHAT IT MEANS AND WHAT IT TAKES

HOME
OWNERS
LOSE
DEFECTIVE
CLADDING
DISPUTE
Build-to-Rent Take a rain cheque
Case in Brief Parliament enacted the Taxation Act A decision by the Full Federal Court of
POOL-OWNERS 2023, establishing build-to-rent as a Australia has provided clarification about
SNOOKER COUNCIL specific and recognised asset class in the the wording of an insurance policy for a
New Zealand real estate market. construction project.

1 BUILDLAW | The quarterly journal of the Building Disputes Tribunal www.buildingdisputestribunal.co.nz

 CONTENTS

EDITORIAL

From the Editor In this issue

Tēnā koutou katoa
Welcome to the 50th issue of BuildLaw.
The publication of issue number 50 is a
significant milestone for the publication
which started back in March 2009 as a
quarterly newsletter. The Building Disputes
Tribunal has always been committed to
education and the sharing of knowledge. We have continued
22
18
BuildLaw is the quarterly journal
of the Building Disputes Tribunal,
published online each March,
June, September, and December.
BuildLaw contains a wide variety High-rise blues
of articles on topics related to the
 lients in high rise leaky building
C
construction sector.
settlement sucessfully sue their
lawyers.
Copies of our previous editions can

26
to develop BuildLaw over the years to what it is today, a well- be found on our website:
respected journal with a subscriber base in the thousands, www.buildingdisputestribunal.
representing readers from throughout New Zealand and across co.nz/resources/buildlaw/
the globe. The success of the publication is a result of the quality
content, and my thanks go to all of our authors across the years
for their valued contributions.
Build-to-Rent
2023 continues to be a busy year for us here at the Building
Submissions
An emerging asset class in
Disputes Tribunal. We have been delighted to see that our report We welcome the submission
New Zealand
Tracking the Trends has been of significant interest to those of articles and case notes for

33
working in the construction industry (see page 32 to get your possible publication in BuildLaw.
copy), case numbers continue at full strength, and this month Please click here to make your
also sees the Society of Construction Law Conference taking
submission.
place in Ōtautahi Christchurch, with Building Disputes Tribunal
pleased to be a sponsor.
Advertising Disgruntled builders lose defective
As always, this issue of BuildLaw brings together a diverse and Take a rain cheque
informative collection of articles and information for our readers
For information on advertising with
cladding dispute Full Federal Court of Australia
to explore. Topics include the test for awarding costs, the final BuildLaw, please click here.
Two experienced builders brought a claim for damages for a perceived reads common sense into
resolution of a defective cladding dispute, limitation periods,
build-to-rent developments, and much more. Our thanks go to defective installation of cladding for a new build. insurance policy
the contributors to this issue who have tackled topics covering
the latest in cases and updates from across the globe.

Contributions of articles, papers, and commentary for future Regulars Articles

issues of BuildLaw are always welcome. I do hope you find this
issue interesting and useful. Please feel free to distribute BuildLaw
to your friends and colleagues – they are most welcome to
2 From the Editor 14 Bad faith and without substantial merit –
What it means and what it takes
contact us if they wish to receive our publications directly. 4 BuildLaw in Brief
30 Case in Brief
36 Two conditional certificates do not one final make
Ngā mihi nui, nā
40 LJR Interiors Ltd v Cooper Construction Ltd [2023] EWHC 3339
(TCC) Fenwick Elliot
42 Case Update: English Court of Appeal confirms ‘useless’ ADR
procedure too uncertain to enforce
Catherine Green
Editor and Director Building Disputes Tribunal 45 ICC arbitration seated in Abu Dhabi held to be subject to the
supervisory jurisdiction of the courts of the Abu Dhabi global
market

2 BUILDLAW | The quarterly journal of the Building Disputes Tribunal www.buildingdisputestribunal.co.nz www.buildingdisputestribunal.co.nz 3
 REGULAR

BuildLaw
in Brief:
Recent key developments in
the construction industry

Judicial submission on Natural mana of each iwi and hapū

and Built Environment Bill in accordance with the kawa
In a rare move, Chief Justice tikanga and mātauranga. This
Helen Winkelmann has made will have practical difficulties for
a submission on behalf of the hearings in the criminal jurisdiction
judiciary to a Parliamentary and for matters of proof. These
select committee, namely the
Environment Committee, on the
concerns could be addressed
by expressly providing that these
“In a rare move, Chief
Natural and Built Environment Bill.
The Chief Justice notes that the
clauses apply to decision-makers
other than courts. Justice Helen Winkelmann
has made a submission
Bill has implications for access to • Clause 660 provides for
the courts, the ability of the courts independent monitoring of

on behalf of the judiciary

to perform the functions conferred decisions taken under the Act
on them, and the maintenance of by the National Māori Entity:
public confidence in the courts. Providing for decisions of the
The coming into effect of extensive
legislative reform is often followed
Environment Court to be subject
to review by the Entity would be
to a Parliamentary select
by a period in which the meaning
and effect of the new legislation is
inconsistent with New Zealand’s
constitutional arrangements.
committee namely the
litigated through the courts.
Her Honour expressed specific
• Boards of Inquiry: appointments of
judges to boards of inquiry need
Environment Committee,
concerns:
• Clauses 4 and 6(3) require
to be done with the concurrence
of the Chief Environment Court on the Natural and Built
Environment Bill.”
respectively the observance Judge in writing and judges need
of the principles of Te Tiriti and the same judicial immunities they

4 BUILDLAW | The quarterly journal of the Building Disputes Tribunal www.buildingdisputestribunal.co.nz 5


would ordinarily enjoy.
• It is not appropriate for the Chief
Environment Court Judge to
be called upon to appoint the
chairperson and other members
of the independent hearing
panels.
• Clauses 315 – 327 effectively
carry forward the provisions
of the COVID-19 Recovery
(Fasttrack Consenting) Act 2020
as an “alternative consenting
process”. The limitation of
appeal rights to errors of law and
prevention of passage to the
Supreme Court is undesirable.
The right to judicially review
decisions should also be
preserved where appropriate.
• The Bill (Part 11) would
significantly expand the scope
of available enforcement
6 BUILDLAW | The quarterly journal of the Building Disputes Tribunal
options, including increased
civil enforcement provisions.
The scope of authority and
jurisdiction between the
Environment Court and the
District Court needs to be
clarified.
• Monetary Benefit Orders
need to be made clear as
to the standard of proof and
the overlap with the Criminal
Proceeds (Recovery) Act 2009.
• The Māori Land Court is called
upon to perform specific roles
of appointment to regional
planning authorities under
clauses 4 and 12 of Schedule
8 and clauses 684–687. But the
performance of this function will
have resource implications for
the Court.
• The judiciary is responsible for the
administration of justice before
the courts. Consistent with this
constitutional principle, the
judiciary considers that rules of
court concerning practice and
procedure should only be made
with the concurrence of the
judiciary, and in particular the
relevant Head of Bench (clause
858).
Standards NZ releases draft
revision of NZS 3910 construction
contract for public consultation
Standards New Zealand has
released its much-anticipated
draft revision of NZS 3910 and
opened a public consultation on
the proposed changes.
The NZS 3910 standard is
the most widely used model
contract for construction and
civil engineering projects in New
www.buildingdisputestribunal.co.nz
Zealand.
The draft revisions are the latest
stage in the review and update
project which began in July 2020.
The project aims to incorporate
legislative changes over the past
10 years and address widespread
industry dissatisfaction with the
current standard’s conditions on
risk allocation between principal
and contractor. The shortcomings
of the standard’s current terms
results in parties redrafting them
and including their own complex
special conditions, causing
confusion and increasing the risk
of litigation. It is hoped that the
proposed revisions will achieve
a fairer sharing of risk, provide
certainty and ultimately improve
client-contractor relationships in
the industry.
www.buildingdisputestribunal.co.nz
Date for the reasonable
discovery of defects
The date a body corporate ought to
have known about the defects in
their building determined from when the
limitations provisions ran.
The public consultation on the
proposed revisions will close for
submissions on 30 June 2023. The
final version of the new standard
is expected to be published in
October 2023.
Further information, including a
comparison document showing
the proposed changes, how
to submit feedback for the
consultation, and details of the
revision project, is available on
the Standards NZ website.
Leaky homes case survives
knockout attempt
In Body Corporate 449665 v
CMP Construction Limited [2023]
NZHC 449, both a strike-out
application and a defendant’s
summary judgment application
were attempted based on the
Limitation Act 2010. The key
REGULAR
issue hinged on the date for the
reasonable discovery of defects in
the plaintiff Body Corporate units.
The first defendant construction
company alleged the plaintiffs’
agent confirmed his awareness
of the defects, the subject of
the plaintiffs’ statement of claim,
by his email dated 20 August
2018. The building work, the
subject of the plaintiffs’ claim was
completed between January 2013
and 23 November 2013.
The focus was therefore on the
longstop period as defined by
section 11(3)(b) of the Limitation
Act 2010. This means the claim
filed 6 December 2021 had
to show the “knowledge” of
facts supporting the claim was
obtained after 6 December 2018,
being within three years of the
7
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lawsuit being filed. Body Corporate survived the the party withholding the the retention money intends to includes: Government responds to
Specifically, the plaintiffs had no interlocutory applications, to money becomes insolvent or use it to remedy defects, it must • $71b for new and existing Commerce Commission’s report
knowledge that by 6 December progress to a trial on the merits in co-mingles it with its other funds. give the subcontractor 10 days’ infrastructure projects. This will on competition
2018 or at any earlier date of the due course. The amendments address this advance notice. cover the next five years. In our 48th Issue of BuildLaw,
fact: and strengthen protections and • $100m for the new infrastructure we discussed the release of the
New Zealand’s Construction •A
 ccounting, record keeping
• the act or omission had transparency for parties awaiting agency, Rau Paenga, for a Commerce Commission’s final
Contracts (Retention of Money) and reporting
occurred (section 14(a) of the payment of retention money five-year period. Rau Paenga report on competition within New
Amendment Act receives Royal Retention money must be kept
Limitation Act 2010); (usually subcontractors). has been repurposed from the Zealand’s residential building
assent separate from the retention
• the act or omission on which the Some of the most notable Christchurch rebuild agency supplies industry. The Government
The Construction Contracts holder’s other funds, either in a
claim is based was attributable changes include: Ōtākaro. has now responded to the report,
(Retention Money) Amendment separate bank account or by
to the first defendant (section • $3.6b to minimise cost pressures establishing that it agrees with
Act 2023 (the Act) received Royal • Automatic
 creation of a trust way of a financial instrument
14(b)); and in the public housing build eight of the Commission’s nine
assent on 5 April 2023. Retention money will such as insurance or a
• the plaintiff Body Corporate unit programme. recommendations.
The Act amends the provisions automatically be held on trust guarantee/ bond.
owners had suffered loss (section • $3.1b to build 3,000 more public
in the Construction Contracts by the party withholding it.  lear accounting ledgers must
C The government agrees with the
14(c)), housing places by June 2025.
Act 2002 (Subpart 2A- Retention The creation of a trust will be be maintained and the party following:
such that the late knowledge • $6b for the National Resilience
Money) dealing with retention triggered at the time when withholding the money must
period did not commence until Plan. Part of this involves
the money becomes retention report to the subcontractor as • Introducing competition as an
well after 6 December 2018, money (money withheld under a allocating money for the
money under the terms of the soon as reasonably practicable objective – the Government
being less than three years before construction contract as security newly released Infrastructure
contract. after the money becomes agrees in principle that
proceedings were issued. for fixing defective work). The Action Plan. Released in May,
retention money, and at least competition should be a
The plaintiff succeeded in changes will come into force on It will only cease to be retention the Infrastructure Action Plan
every three months thereafter. consideration in the building
showing it had an arguable case 5 October 2023 and apply to any money when paid to the is an extensive strategy set to
regulatory system. Competition
that it ought to have known new or renewed construction subcontractor, the • Offences and penalties for non- deliver, maintain, and improve
is also important for well-
the facts underlying the claim contracts after this date. subcontractor gives up its claim, compliance new and existing infrastructure
functioning markets, which in
by October/ early November Under the old provisions, or the funds are used to remedy There are cumulative penalties such as hospitals, roads and
turn lead to safe, healthy and
2019, and therefore the plaintiff retention money is at risk where defects. If the party withholding for each breach of the rules, waste management facilities.
durable homes.
including fines for failure to keep The Government is also setting
retention money as required aside extra funds for weather • Better serving Māori through
(up to $200,000), failure to keep and climate related issues. The the building regulatory system
accounting records as required following will likely have a strong – Māori needs can be better
(up to $50,000), and failure to impact on the construction served by delivering on Treaty
provide regular reports (up to sector: of Waitangi obligations. The
$50,000). Company directors • $1b for the flood and cyclone Construction Sector Accord
can also be held personally recovery package. This had Transformation Plan 2022–2025
liable and fined up to $50,000 been partially created to was designed to provide
each. establish infrastructure like initiatives to strengthen the
Budget 2023 makes allocations stopbanks, to prevent the type Māori economy.
for housing and infrastructure of damage seen earlier in the
The Government has delivered year. • Creating additional clear
its “no-frills” Budget of 2023 • $370m to increase the resilience compliance pathways for a
with a focus on cost-of-living of railway infrastructure. broader range of key building
and cyclone recovery. The • $50m for renewable energy supplies – the Government will
construction sector is also set projects in remote communities. work to successfully implement
to benefit, with several billion • $10.7m to establish a renewable building product information
dollars being set aside for housing energy system on the Chatham regulations. The CodeMark
and infrastructure projects. This Islands. scheme will track their impact.

8 BUILDLAW | The quarterly journal of the Building Disputes Tribunal www.buildingdisputestribunal.co.nz www.buildingdisputestribunal.co.nz 9
 REGULAR

• Exploring ways to remove
impediments to product
substitution and variations –
MBIE will consider options to
remove impediments to making
minor changes after a building
consent. This may involve
amending the Building (Forms)
Regulations 2004, increasing
the flexibility of the MultiProof
scheme, and codifying elements
of MBIE’s product substitution
guidance. The Government
has said not only does it
agree with the Commission’s
recommendation but that it
should go further. The building
consent review will include
options to guide builders,
architects, and building consent
authorities to make decisions
about product substitution and
variation.
• Establishing a national system
for sharing information
about building products and
consenting – on 11 December
2023, new building product
information regulations will
come into force. These will
require designated building
products to have a consistent
minimum set of information
accessible online and available
with the product at the time of
purchase.
•P
 roviding education for building
consent authorities – MBIE is
progressing work to implement
this recommendation. Under
the Building Act 2004, it is able
to deliver intended outcomes
related to coordination
approaches for consenting and
product approval processes.
• Creating an all-of-government
strategy to facilitate offsite
manufacturing – the
Government wants to go further
with this by creating a vehicle to
bring together representatives
from industry to develop an
action plan to develop offsite
manufacturing. Kāinga Ora
has developed a goal to
increase the number of offsite
manufacturing solutions they use
by a minimum of 20% annually.
• Considering the economy-wide
use of various legal instruments
– the Ministry of Housing and
Urban Development is reviewing
the use of development-limiting
covenants which may be
responsible for restricting the size
of housing, thereby restricting
urban densification. The broader
Resource Management reforms
are also leading changes to
planning laws.
The Government notes the
following, but does not entirely
agree:
•P
 romoting compliance with
the Commerce Act 1986 – the
Government supports the
Commerce Commission’s
work to promote and enforce
compliance with the Act, and
even recently tightened the
penalties for non-compliance,
but believes the Commission
must act independently from
the Government.
‘The embodiment of chutzpah’:
Don’t apply for set aside with
unclean hands
In Oasis Newman Operations Pty
Ltd v Hockley [2023] WASC 79,
the Supreme Court of Western
Australia refused an application
to set aside an adjudication
determination, despite the
adjudicator having made multiple
wrong findings of jurisdictional fact
and law.
Oasis Newman Operations Pty
Ltd (Oasis) had contracted an
electrical contractor (contractor)
to carry out works on a motel,
but a dispute arose after
Oasis refused to pay several
invoices. The contractor applied
for adjudication under the
Construction Contracts (Former
Provisions) Act 2004 (WA) (the
Act). The adjudicator found in the
contractor’s favour and ordered
Oasis to pay nearly $70,000 plus
interest and costs.
Oasis applied to the Supreme
Court for set aside of the
adjudicator’s determination on
the basis that the adjudicator
lacked jurisdiction. Oasis argued
that several jurisdictional
preconditions had not been
satisfied – the adjudication
application had not been
brought within 90 business days
of the payment dispute arising,
and there was no construction
contract for the purposes of the
Act.
The Court acknowledged that
the adjudicator’s reasoning
was deficient in relation to the
jurisdiction preconditions and
that they had made multiple
incorrect findings of fact and law.
But despite these deficiencies,
and based on rather different
reasons and findings of fact, the
Court ultimately found that the
adjudicator did have jurisdiction
and refused to set aside the
determination.
Notably, the Court went on to
state that its power to set aside
an adjudication determination
is a discretionary one, and
applications can be refused
where the party seeking the set
aside has come to Court with
unclean hands. The Court held
that even if the adjudicator
had lacked jurisdiction, it would
still have refused to set aside
the determination on account
of Oasis’ bad faith behaviour
during the adjudication process
– deliberately and repeatedly
seeking to avoid and deny
service, and tactically electing
not to provide their version of
events or documents which
would have assisted the
adjudicator in establishing the
facts.
The Court found that Oasis
had shown contempt for the Act
during the adjudication; and
the fact that it was now trying to
rely on technicalities within that
same Act to try to defeat the
outcome was the embodiment
of chutzpah, which ought not to
be rewarded with the grant of
discretionary relief.
A whodunit mystery for the High
Court of England
In Allianz Insurance plc v The
University of Exeter [2023] EWHC
630 (TCC), the University of Exeter
suffered crucial damage after
an unexploded bomb dropped
during the Blitz was discovered.
Owing to the fragile state of the
bomb, experts determined the
safest option would be to explode
it on site. The explosion was
enormous and the damage to the
halls of residence caused students the policy was then, at the very
to be relocated. least, one of the causes of the
The University of Exeter notified damage.
a claim under their insurance Considering the factors above,
policy. Allianz declined the the Judge found in favour of
claim, pointing out that an Allianz.
exclusion clause existed for
Right there in the T’s and C’s
damage occasioned by war. The
In the High Court of England’s
question for the Court then was,
decision in BDW Trading Ltd v
did the damage result from the
Lantoom Ltd [2023] EWHC 183, a
dropping of the bomb or from its
housing development in Cornwall
subsequent detonation? If the
suffered from what appeared
former was the case, then the
to be substandard materials.
University of Exeter could not be
The developer, BDW Trading
covered under the policy.
Limited (BDW), had used a set
To find the proximate cause
of stones from a local supplier,
of the damage, the Judge
Lantoom Limited (Lantoom).
examined the common law
BDW had sought a particular
on the issue. The Court looked
type of stone, slate, and it was
at the classic case of Reischer
their belief that this is what the
v Borwick [1894] 2 QB 548. This
contract between the parties
decision discussed the principle
had guaranteed. Lantoom
of the reasonable and proper act
denied that this representation
in the circumstances, in relation
had been made. In coming to a
to an initial damaging act. The
decision, the judge looked at the
importance of this principle is that
test on incorporation of terms by
certain actions may be necessary
reference.
in the presence of an external
Central to Lantoom’s argument
danger. The Judge found this to
was that it had set the contract
be obviously the case when an
on its own terms in the form of
eroding bomb sat in the middle of
a counter-offer. This supposed
a city.
counter-offer had occurred when
The Court also used the rule
Lantoom imposed reference
in the recent FCA v Arch [2021]
to the conditions of sale on the
UKSC 1 to hold that where there
back of a delivery note that BDW
are concurrent proximate causes,
then signed. These terms and
and one of these is excluded,
conditions were found online and
then the exclusion clause holds.
did not purport to provide BDW
Even if it were true that the bomb
with slate.
was not the proximate cause,
Alternatively, Lantoom argued
the explosion resulted from that no misrepresentation had
the combination of the bomb been made as the type of stones
existing, and its detonation. The provided are often referred to
bomb, of course, only existed in Cornwall as slate. The Judge
because of the Second World found it to be irrelevant what
War. An action excluded by type of stone was intended. The

10 BUILDLAW | The quarterly journal of the Building Disputes Tribunal www.buildingdisputestribunal.co.nz www.buildingdisputestribunal.co.nz 11
 REGULAR
greater concern should have
been the performance of the
stone.
The Judge considered whether
reference to terms and conditions
on a website amounted to
incorporation into the contract.
The Judge cited at [16] a passage
in Impala Warehousing and
Logistics (Shanghai) Co. Ltd v
Wanxiang Resources (Singapore)
Pte Ltd [2015] EWHC 25 (Comm)
stating that in this modern era,
a reference to a website is a
sufficient incorporation within the
agreement.
Unfortunately for Lantoom, the
Judge held that its method of
making a counter-offer was not
sufficient to change the terms.
Among the Judge’s reasons was
that there was absolutely no
basis upon which Lantoom could
have expected somebody at the
delivery site to have authority to
accept a counter-offer. Another
submission by Lantoom as to
why the method was valid was
described by the Judge as being
barely articulated and makes no
sense.
The judge found in favour of
BDW, holding that it could make
a claim under the warranty within
the terms of its purchase order.
UK Building Safety Act: High rise
building register opens
The Building Safety Act 2022
(Act) came into force last year.
It is the most significant change
to England’s building regulation
regime in 40 years. The Act is the
UK Government’s key legislative
response to the London Grenfell
Tower tragedy, and focuses on
‘higher risk buildings’.
12 BUILDLAW | The quarterly journal of the Building Disputes Tribunal
One of the Act’s key features
is the introduction of a higher-
risk building register. Higher-risk
buildings cannot be occupied
until they have been certified and
registered with the Building Safety
Regulator. The implementing
secondary legislation for this
feature recently came into
force on 6 April 2023 (Building
Safety (Registration of Higher-Risk
Buildings and Review of Decisions)
(England) Regulations 2023). The
Building Safety Regulator opened
the registration process on 12 April
2023.
The ‘accountable person’ of
an ‘occupied higher risk building’
needs to complete registration
by 1 October 2023. Higher-risk
buildings are those 18 m or seven
storeys high and over, with two or
more residential units.
Within 28 days of registration,
the accountable person must
follow up by submitting the
information set out in the Higher-
Risk Buildings (Key Building
Information etc.) (England)
Regulations 2023, including
details of ancillary buildings,
the building’s use(s), staircase
access, evacuation plans, energy
supplies, and the materials used
in the structure, external walls,
insulation and roof.
BDO releases construction
sector reports
BDO has recently released
a pair of reports detailing
crucial information about the
construction sector.
Beyond Boom and Bust: A
Construction Sector Taking Control
of an Uncertain Future is BDO’s
fifth annual report and measures
the sector’s environment since
August 2021. Since then, the bulk
of Covid-19 restrictions have
ended, but New Zealand now
faces economic uncertainty. The
report addresses how this is being
felt by the construction sector.
Having surveyed construction
businesses, the report details what
challenges exist, and how these
are being met by the different
sub-sectors. While the report
notes real challenges, it also
points to signs of optimism, with
many businesses experiencing
sustainable cashflow and margins.
BDO’s Construction Sector
A HEAD FOR MORE
overview focuses on the human
side of the industry – exploring
the relationship between
THAN THE NUMBERS
mental wellbeing and business
performance among NZ’s
construction sector business
leaders and owners. The
overview shares construction
sector findings of the April 2023
measure of the biannual BDO
BDO CONSTRUCTION SECTOR SPECIALISTS. MORE THAN ACCOUNTANTS
Wellbeing & Performance Index -
Construction in New Zealand has seen huge growth in the past two decades. With the sector
Te Rangahau o Ngā Hauora Pai.
relying on alternative means of financing, it’s important to seek guidance from someone who
By surveying over 500 business understands these trends and knows where to safely move next. Our construction sector specialists
leaders, the overview is able to offer the full range of business advisory services, including accounting, tax, advisory, corporate
monitor wellbeing and business finance, insolvency services and succession planning.
performance, as well as showing
We build trusted client relationships founded on tailoring our services to meet the needs of the
the link between them. The results
varying cycles of industry activity and profitability. Considering exiting your construction business?
of the survey are measured
Sound succession planning and implementation is typically the best outcome. Our years of
against the WHO-5 Index, the experience and knowledge in construction mean we’ll guide you through these issues with the
World Health Organisation’s nuances and peculiarities of the sector in mind.
globally recognised measure of
mental wellbeing. The overview Get in touch to see how we can help build a strong future for your business.
shows that the score has declined
considerably from this point last IDEAS | PEOPLE | TRUST
year. The lower WHO-5 score
aligns with the businesses’
financial performance sentiments,
troubled by declining margins SCAN HERE FOR MORE
and an uncertain work pipeline. BDO.NZ/CONSTRUCTION
BDO New Zealand Limited, a New Zealand limited liability company, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the
international BDO network of independent member firms. BDO New Zealand is a national association of independent member firms which operate as separate legal entities.
www.buildingdisputestribunal.co.nz
 ARTICLE

Bad faith and without

substantial merit
What it means and what it takes

One of the most frequently asked questions by parties to a dispute

resolution process is what will it cost and who pays? Parties are often
required to bear their own costs and expenses. However, the Court (or a
Tribunal/ Adjudicator) may order that costs and expenses must be met by threshold for a costs award under
one of the parties if it considers that the party has caused those costs and the Canterbury Earthquakes
expenses to be incurred unnecessarily by acting in bad faith or making Insurance Tribunal Act 2019 (Act)
allegations or objections that are without substantial merit. was met. In particular, IAG argued
that the Tribunal erred in finding
that IAG had acted in bad faith
and without substantial merit.
The High Court recently
The property of the plaintiffs
provided some helpful guidance
to the original litigation (Family
on the meaning of ‘bad
Trust) suffered significant damage
faith’ and ‘without substantial
in the Christchurch earthquake
merit’ in the context of a costs
on 4 September 2010, with
determination by the Canterbury
further earthquake damage
Earthquake Insurance Tribunal
in February 2011. Once the
(Tribunal). As these terms appear
Earthquake Commission (EQC)
in the costs provisions of the
Construction Contracts Act 2002 acknowledged that the cost of
(CCA), parties and their counsel repairing the damage would
to adjudications under the CCA exceed its statutory cap, IAG
will find this judgment of interest. and the trustees of the Family
Trust agreed that it would be
Background
repaired under IAG’s Managed
IAG New Zealand Ltd (IAG)
Repair Programme. Following
appealed a costs determination
completion of the work, the
by the Tribunal1, on the grounds
trustees found issues with the
the Tribunal was wrong, in fact
standard of repairs undertaken
and in law, in finding that the
and claimed that the original
scope of works had been
1  Dewes, Green and Shand (as trustees of the Dewes Green Family Trust) v IAG New Zealand Ltd [2019] CEIT- inadequate to properly repair the
2019-0037, May 2021 [Costs decision]. earthquake damage.
The Family Trust took the matter
to the High Court, which was
then transferred to the Tribunal.
Over 100 alleged defects were
considered.
The Tribunal issued three
decisions:
• A decision declining an
application by IAG to rule
aspects of the Family Trust’s
evidence inadmissible.
• A decision determining the
defects and their causes.
• The costs decision, which IAG
appealed.
The Tribunal’s cost decision
The Tribunal’s power to award
costs is derived from s 47 of the
Act. This allows the Tribunal to
award costs against a party if the
Tribunal considers that:
• The party caused costs and
expenses to be incurred
unnecessarily by acting in bad
faith or making allegations or
objections that are without
substantial merit; or
• The party caused unreasonable
delay.
The first ground bears a striking
similarity to section 56(1) of the
CCA.
The Tribunal found that IAG
acted in bad faith in:
a. Formally challenging the
admissibility of the Family Trust’s
evidence;
b. Its uncompromising approach
including overriding attempts
by its experts to establish
common ground;
c. There being alleged errors of its
expert witness(es); and
d. Failing to narrow the real issues
in relation to the bathroom.
The Tribunal also found that the
following allegations made by IAG
were without substantial merit:
a. That the dislevelment still
evident was due to either
pre-earthquake settlement or
ineffectual relevelling.
b. That seven of the 15 steel
windows conceded as
damaged by IAG’s expert in
his second brief had not in
fact been damaged in the
earthquakes.
c. That using black adhesive to

14 BUILDLAW | The quarterly journal of the Building Disputes Tribunal www.buildingdisputestribunal.co.nz www.buildingdisputestribunal.co.nz 15
 ARTICLE

repair damaged slate tiles was that did not amount to bad faith. merit or otherwise attempting to the Tribunal did not depart from The Court therefore upheld the order – it proposed to pay the full
an acceptable repair method. The Court also considered mislead”. the appropriate test. Tribunal’s findings that IAG acted sum of the award regardless of
IAG challenged the Tribunal’s whether IAG acted in bad faith The High Court therefore The Court then considered without substantial merit. the outcome of the appeal.
definition of “bad faith” and due to alleged errors of its expert quashed the Tribunal’s findings whether IAG advanced For parties to an adjudication
Outcome
“substantial merit” in the High witness(es). The Court held that IAG acted in bad faith. submissions contrary to the under the CCA, this decision
The Court quashed the Tribunal’s
Court. that, in circumstances where evidence of its experts, reinforces, rather than changes,
What is “without substantial findings that IAG had acted
the expert has represented thereby amounting to “without the well understood tests in such
What is “bad faith”? merit”? in bad faith, but upheld the
themselves as suitably qualified, substantial merit”. The Court findings that IAG acted without cases as Clearwater, Trustees
The Court adopted the test in The Court discussed the meaning
has indicated their understanding of “without substantial merit” in held that IAG, represented by substantial merit. The appeal Executors, Ace Structural Ltd,
Clearwater Cove Apartments,2 in
of the relevant code of conduct, light of case law, observing that: experienced counsel, knew was therefore allowed in part. and Brescoe Electrical Services
which Katz J accepted that the
and there is no evidence of • The expression “substantial that the position taken in its The Court would have reduced Ltd v Michael J Lonsdale
meaning of bad faith will depend
on the circumstances in which it is counsel interfering with the merit” denotes claims which submissions lacked substantial the costs award accordingly, (Electrical) Ltd [2019] EWCA Civ
alleged: witnesses’ independence, it may properly be characterised merit. but IAG had not sought such an 27.
As the Tribunal observed, was not appropriate to attribute as of substance, and require
any deficiencies in the expert
the meaning of “bad
evidence to the party itself.
serious consideration by the About the authors
faith” depends on the Tribunal.3
circumstances in which it is Finally, the Court looked into • The fact that a claim is
alleged to have occurred. whether IAG overrode attempts unsuccessful does not Stuart Robertson
The range of conduct of its experts to reach common necessarily mean that it lacked Stuart is co-leader of Dentons Kensington Swan’s Major Projects and
constituting bad faith can ground or failed to narrow its substantial merit from the Construction team. He advises national and international clients on how
range from dishonesty to submissions to the relevant issues. outset.4 to ensure a successful project and specialises in resolving disputes. Stuart is
a disregard of legislative Having considered the specific • The bar for establishing Immediate Past President of the Society of Construction Law New Zealand, a
intent. It is well established factual matters to which such “substantial merit” should not be current Council member, member of Engineering New Zealand, Fellow (Arb) of
that a party alleging bad allegations related, the Court set too high.5 AMINZ, appointed to the adjudication panels of BDT and AMINZ, and regularly
faith must discharge a found that these allegations • The Tribunal should have the appointed adjudicator under the CCA.
heavy evidential burden, had also not been made out. ability to award costs against
commensurate with the Much of the subject matter in those making allegations which
gravity of the allegations fact related to actions by IAG’s a party ought reasonably to
expert, in respect of which the Stephanie Panzic
made. have known could not be
Court held that the Tribunal had Stephanie is a Senior Associate within Dentons Kensington Swan’s Major Projects
In applying the above test, the established.6
erred in equating what it saw and Construction team. She provides both contentious and non-contentious
Court did not agree with the IAG contended that the
as failures by IAG’s expert with advice to contractors, developers, consultants and government agencies
Tribunal that IAG had acted Tribunal’s shorthand reference
bad faith by IAG. The Court throughout the life cycles of their construction projects. Stephanie has worked in
in bad faith in challenging the in its determination of “no
New Zealand and abroad and has acted for clients throughout New Zealand,
admissibility of the Family Trust’s noted that a finding of bad faith reasonable prospect of success”
the UK, Europe, the Middle East and China using a wide range of standard form
evidence. It noted that bringing a in such circumstances requires was inappropriate as it failed to
and bespoke contracts. 
formal challenge to admissibility evidence that “counsel or the accurately assess “substantial
might be inconsistent with the party themselves was complicit in merit”. The Court did not accept
objectives of a speedy and the experts conduct in advancing IAG’s argument. It found that,
efficient resolution of disputes, but a theory they knew was without despite the shorthand description, Anna Cho
Anna is an Associate within the Dentons Kensington Swan’s Major Projects
2  Clearwater Cove Apartments Body Corporate No 1700989 v Auckland Council [2013] NZHC 2824. and Construction team. She has acted for contractors, developers,
3 Trustees Executors Ltd v Wellington City Council HC Wellington CIV-2008-485-739, 16 December 2008; as consultants, suppliers and insurers in all forums of dispute resolution, in particular
endorsed in Riveroaks Farm Ltd v W B Holland HC Tauranga CIV-2010-470-584, 16 February 2011. adjudications and arbitrations. Anna is a Fellow of the Chartered Institute of
4  Ace Structural Ltd v Green and Firma Construction Ltd [2019] NZHC 1558. Arbitration (CIArb, UK) and AMINZ(Arb), and a co-chair of Young AMINZ.  
5  Clearwater Cove Apartments, above n 2.
6  Clearwater Cove Apartments, above n 2.

16 BUILDLAW | The quarterly journal of the Building Disputes Tribunal www.buildingdisputestribunal.co.nz www.buildingdisputestribunal.co.nz 17
 FEATURE ARTICLE

DISGRUNTLED
BUILDERS
LOSE DEFECTIVE
CLADDING
DISPUTE
In Goodman-Jones v Hughey & ors [2023] NZHC 604, two experienced
builders brought a claim for damages for a perceived defective
installation of cladding for a new build. Despite the action being
brought against multiple defendants the Court found that no damages
could be substantiative, and with it the costly six year ordeal was
brought to an end.

WRITTEN BY SAM DORNE

“It is not enough to

argue that there was a
The setting of Quantity Surveyors, and
variation in the building
Between 2014–2016
Phillippa and Gareth
one of the services she
provided was to project
specifications… variation
Goodman-Jones
(the plaintiffs) built an
manage construction costs.
The Court noted that the
in the timber frame was
architecturally designed home on
the Lyttelton Harbour.
architectural build of the plaintiffs’
home was typical of this. all largely immaterial
At the time that building consent
was obtained in March 2014,
Mr Goodman-Jones worked for
a company that sold the Western and any remedial
work needed would be
Mrs Goodman-Jones had been Red Cedar vertical cladding. The
a quantity surveyor for 32 years. same material was to be used on the

minimal.”
She was also the former national house. He was also a carpenter for
president of the New Zealand Institute almost his entire working life and was

18 BUILDLAW | The quarterly journal of the Building Disputes Tribunal www.buildingdisputestribunal.co.nz www.buildingdisputestribunal.co.nz 19
 FEATURE ARTICLE

No damages could be asked for urgency in getting the Decision of the High Court the framework in accordance with

substantiative. windows, doors and cladding The Court dismissed the claim the quote they received, so there
affixed. Arguments continued and found in favour of all the was no breach of contract; and
around delays and, finally, defendants. to the extent there was a 20 mm
The High Court held that
around Christmas Eve of 2015 In doing so, the Court held difference from that spacing in
although the defendants had
Mrs Goodman-Jones was said that cedar cladding, with in-built certain instances, there was still
used the wrong materials and
to be on the verge of a mental dwang spacings generally at reasonable compliance with what
installation methods to build parts of
breakdown. 480 mm centres, does comply they had to build. The framework
a house, this was not enough to
show damages. After further disagreements, on with the Building Code. The Court they provided was fit for purpose.
10 June 2016 both parties agreed found that there was no reason The Court ultimately held that
to terminate the contract with Mr based on the evidence why the because the framework complied
Hughey, who stated it was the first building would not get Council with the Building Code and a
time he never completed a build approval for a minor variation to code compliance certificate can
that he had started, which was all the consented plans as installed; be issued with the framework
down to the souring relationship. and that ultimately the plaintiffs as constructed, the plaintiffs
At the time of termination the would be able to obtain a code have suffered no loss through
cladding was almost complete compliance certificate for the PlaceMakers constructing and
and only one section remained. building of their home as built, supplying the framing as used.
The plaintiffs were not happy once certain completion work is Conclusion
with the cladding. The cedar carried out. Ultimately this is a cautionary
cladding needed to be fixed to The Court ruled that ultimately tale about the trappings in any
used to difficult builds. needed to be replaced at a cost consent that they had obtained.
the framework that was ordered, there was no reason to claim for damages. You must be
The Goodman-Jones’ became of $465,427. Further damages of The two defendants joined in
directly by the plaintiffs, from suspect there will be a failure able to show actual damages.
responsible for engaging $162,043 for failing to complete Christchurch City Council to the
PlaceMakers. However, there was of the cladding system or It is not enough to argue that
contractors, acquiring timber, the works within a reasonable proceedings on the basis that,
a difference in spacing between weathertightness issues that could there was a variation in the
joinery and windows, and time and overcharging were should they be found liable,
the framework provided by affect the value of the home. building specifications. The Court
arranging for materials to be also made, but subsequently the Council should share in
PlaceMakers and the consented Therefore, subject to some ultimately ruled that this variation
delivered. dropped. that liability as the Council was
plans. The dwangs (horizontal liability for certain minor in the timber frame was all
The plaintiffs contracted David The external wall framing was negligent in carrying out the
bracing pieces used between rectification work, which Mr largely immaterial and that any
Hughey (the first defendant) to made by PlaceMakers (the inspections. wall studs in the frame) were Hughey agreed to, he was not remedial work needed would
be their builder, but the contract second defendant). The plaintiffs The plaintiffs argued that Mr supposed to be spaced at liable for any further damages. be minimal. It did not require a
was terminated in June 2016 by argued that PlaceMakers were Hughey was the project manager 400 mm. However, the framework In dismissing the claim against complete gutting of the house
mutual consent. also liable for failing to supply for the build. However, the Court supplied was actually spaced PlaceMakers the Court ruled that as alleged by the plaintiffs, and
The dispute the framing in accordance with disagreed; finding that a labour- at 480 mm, with some closer to whilst it had been provided with that they had to take on some
The plaintiffs subsequently initiated consented specifications. only contract had been signed 500 mm. Hence, why proceedings the original consents plans from responsibility for the fact that the
court proceedings against Mr Effectively the plaintiffs’ and Mr Hughey did not assume were commenced against both the plaintiffs when PlaceMakers build was not completed to plan
Hughey for both breach of arguments were that any responsibility for the overall PlaceMakers (for supplying provided a quote for the because they had agreed with
contract and negligence in PlaceMakers made the frames project management of the build. the defective materials) and materials, the estimate provided the supplier by accepting the
carrying out the commissioned to the wrong measurements The relationship soured over Mr Hughey for installing said was based on the dwangs being quote for the wrong size materials
works. and that Mr Hughey installed the coming months, and on 9 materials. at 480 mm (not the 400 mm as to begin with. Now the plaintiffs
The substantive issue revolved these frames and used them to October 2015 Mrs Goodman- Mr Hughey argued that it was specified in the plans). However, will have their own legal costs to
around the alleged defective affix the cedar cladding onto. Jones emailed Mr Hughey to not necessary to redo the whole the 480 mm was in accordance bear and likely a significant sum,
ordering, acceptance and They argued this resulted in the complain about the lack of house and that if there were with Timspec specifications as yet undetermined, towards the
installation of external framing building not being weathertight progress, the amount it was issues with any isolated boards and the normal Building Code defendants’ costs – which meant
and cedar cladding. The plaintiffs and therefore not being costing and that he was seriously they could be remedied and requirements. The plaintiffs this was a very costly exercise
argued that the cladding compliant with the building letting the side down. She replaced. instructed PlaceMakers to build indeed.

20 BUILDLAW | The quarterly journal of the Building Disputes Tribunal www.buildingdisputestribunal.co.nz www.buildingdisputestribunal.co.nz 21
 ARTICLE

Background been signed on behalf of

The Spencer on Byron is a the Body Corporate.4
23-storey building in Byron [5] The CDA provided that
Avenue, Takapuna, built in any settlement proceeds
2000–2001. It is a leaky building. It were to be used to repair
comprises units used commercially the Building and then credit
as a managed hotel and some would be allocated, on a
units for residential use. unit entitlement basis, to the

High-rise
The Body Corporate 207624 second plaintiff unit owners.
(Body Corporate) sued its Some unit owners did not
former solicitors for breach of join the claim so would not
its contract of retainer and be allocated any credit to

blues
negligence in relation to the
distribution of settlement funds to
repair damage to the building.
The former firm, Grimshaw and
Co (Grimshaws), acted for the
Body Corporate in extracting
a $20,050,000 settlement from
The lawyers who acted for the body corporate and most Multiplex and the Auckland
unit owners in settling the Spencer on Byron’s leaky Council1 (original claim) in
proceedings which lasted from
building claim have been successfully sued by the body
2007 to 2013 and went to the
corporate in Body Corporate 207624 v Grimshaw & Co
Supreme Court2 and back.
[2023] NZHC 979. The body corporate successfully argued
The settlement was governed
that the time taken to resolve the division of settlement
by:3
proceeds delayed the start of remedial works. Damages
… a conduct and
of $3,268,201.14 (with interest) have been awarded
distribution agreement
against the law firm. between the Body
Corporate and second
plaintiff unit owners (the
CDA). The CDA was
drafted by Grimshaws
WRITTEN BY in 2010 and Grimshaws
RICHARD PIDGEON subsequently advised the
Body Corporate to approve
the CDA in 2013. It had not
apply against repair costs.
There was no distribution to
the Body Corporate.
When the claim began in 2007
(Grimshaws took over in February
2008),5 the Unit Titles Act 1972
was still in force. By the time the
original claim settled in 2013,
the Unit Titles Act 2010 (UTA
2010) had been in force for two
years. Grimshaws’ advice did
not change with regard to the
CDA. A key difference between
the statutes is the handling of the
ownership of common property,
which accounted for 80% of
Spencer on Byron. After the UTA
2010 came into force, the Body
Corporate owned the common
property6 and had a duty to
maintain and repair the premises.7
Previously the unit owners owned
the common property as tenants
in common.
When Grimshaws took over
acting for the Body Corporate,
it added the second plaintiffs
(more than 200 unit owners) to
ensure the costs of repairing units
could be claimed. As noted, in
2010 Grimshaws prepared a CDA
for the distribution of settlement
proceeds.8
The Body Corporate claims
Grimshaws breached its
duty of care to the Body
Corporate in failing to
advise it after the UTA10
came into force that the
CDA was invalid and/or
ineffective because:
a. the CDA deprived all
current unit owners who
were not second plaintiffs
(non-plaintiff owners) of the
benefit of a share in the
settlement; and
b. second plaintiffs who
had sold their units had
changed the damages
claimed from estimated
repair costs to loss of
value on sale of their units
and the CDA provided
for distribution on a unit
entitlement basis.
Differences arose between the
owners who had signed up as
parties to the CDA and to the
litigation and those who had not,
or had sold their units. The non-
plaintiff owners (who had not
signed up) still claimed a share
in the remediation settlement
proceeds by virtue of their share
in the Body Corporate. Given
the dispute, Grimshaws did not
distribute the funds; it filed an
interpleader.9 An interpleader
proceeding (application to
determine the right to the funds

1  B ody Corporate 207624 v 4  It later was accepted by resolution: Above at [79].

Grimshaw & Co [2023] NZHC
979 at [85].
2  Body Corporate No 207624
v North Shore City Council
[Spencer on Byron] [2012] NZSC
83, [2013] 2 NZLR 297.
3  Above, n 1, at [4]–[5].
5  Above, at [18].
6  Unit Titles Act 2010, section 54.
7  Unit Titles Act 2010, section 138.
8  Above, at [8].
9  Above, at [110]–[122]

22 BUILDLAW | The quarterly journal of the Building Disputes Tribunal www.buildingdisputestribunal.co.nz www.buildingdisputestribunal.co.nz 23
 ARTICLE

held in Grimshaws’ trust account) had instead positively advised c. Did Grimshaws breach the risks could be eliminated or Justice Tahana ruled that:20 quantum of damages. The next
was argued in court through the Body Corporate that the CDA duty?13 mitigated so that the Body The costs of the interpleader biggest heads of damages were
independent lawyers, and was a proper basis for distribution. d. Were the damages claimed Corporate could achieve proceedings21 and the the costs of the interpleader
incurred substantial cost, further Grimshaws’ negligence delayed consequences of the breach?14 its commercial objective increased repair costs due ($306,985.58) and the
delaying use of the funds for the Body Corporate’s ability to e. Is there a sufficient connection of having settlement funds to the 18 month delay increased costs of the cladding
remediation. The interpleader was apply the settlement proceeds to between each head of available so that remedial are the consequence of ($380,903.00). Other amounts
resolved in April 2016. the remediation of the building. damage claimed and works could commence Grimshaws’ breach of its related to increased consultancy,
Grimshaws’ duty?15 without delay. duty of care to the Body consent and insurance costs.
Conduct and distribution Delays
f. Is there any reason at law or in Grimshaws failed to advise Corporate. Interest on the damages was
agreement and developments The High Court found that the
fact that the damages cannot the Body Corporate as to the Later the Judge said:22 directed from specific dates set
The CDA established a settlement remediation should have started
be claimed?16 legal risks of approving and Increased repair costs are out in the decision.25
committee to deal with the in July 2014, when in actual
g. Were any of Grimshaws’ implementing the CDA and how a consequence of the Grimshaws’ Limitation Act,
lawyers and settle the original fact the remedial work started
defences valid? to eliminate or mitigate those risks unavailability of settlement estoppel, betterment, and various
claim. The net settlement in May 2018. The Court found
by amending or replacing the funds due to the interpleader other defences were rejected in
proceeds were to be held by that Grimshaws was responsible Existence, scope and breach of
CDA, and how to do so.18 proceedings. a comprehensive judgment.
the Body Corporate for the unit for an 18 month delay from a duty of care
Grimshaws was under an The Court found Grimshaws
owners, to be allocated amongst June 2016 until December 2017. As to the first question, the Court Conclusion
ongoing duty to advise the Body responsible for the costs
them according to their unit The total amount claimed was found that Grimshaws owed the As litigation slows with body
Corporate about the CDA and applicable during the delay
entitlements. approximately $10.4 million.10 Body Corporate a duty of care corporates and moisture ingress
about confirming it, and was period of June 2016 to December
If Grimshaws had advised In 2013 the Body Corporate had to review the terms of the CDA issues,26 this case was very fact
liable for the consequences of its 2017. Notably, only cost escalation
the Body Corporate properly, obtained a building consent, but when the UTA 2010 came into specific. It shows the need
negligence in not giving advice was recoverable during that
a new CDA would have been due to the delay had to contend force. The Court then turned its for care in dealing with body
that it should have. period.23
prepared and entered into by with later, stricter requirements by analysis to the scope of this duty coporates in terms of instructing
Grimshaws was found liable A further contentious issue was
the Body Corporate and the the Auckland Council (which took before answering the damages lawyers, lawyers giving advice
to pay damages to the Body the inflation factor methodology
owner plaintiffs in the proceeding, over from the North Shore City questions. (or failing to), and crafting and
Corporate for its breaches of to use for the cost escalation. The
and the settlement proceeds Council after super-city council Justice Tahana found:17 implementing settlement deeds
the duty of care in contract and
would have been distributed amalgamation). This added to The scope of Grimshaws’ Rider Levett Bucknall tender price or CDAs. This includes taking
negligence.
in accordance with that new the delays caused by the inability duty of care was to index was used:24 account of changes in the
agreement in February or March to access settlement funds. review the CDA after the Damages This index more closely reflects law and adjusting the advice
2014. That would have avoided The Court posed several UTA10 came into force The Court answered the damages actual construction cost accordingly.
the delays caused by the flaws in questions, which were (broadly and to advise the Body questions (d)-(g) above in favour increases in Auckland and is Arbitration or mediation might
the original CDA. speaking): Corporate of any legal of the Body Corporate and likely to be closer to actual have been viable alternatives
The law firm had negligently a. Did Grimshaws owe the duty of risks to it if it approved and accepted most of their heads of increases in construction costs, to litigation due to the long
failed to advise the Body care as alleged?11 then implemented the damages. The key issue was the thereby reflecting the likely drawn-out nature of the dispute
Corporate to amend the CDA to b. What was the scope of the CDA. The duty included escalation of costs19 and how to June 2016 contract price. and the ability to keep matters
reflect the UTA 2010. Grimshaws duty?12 advising as to how those quantify it. This resulted in the $2,803,110.90 confidential.

10  Above, at [12]. 18  Above, at [570].

11  Above, at [181]. 19  $2,803,110.90 as per above, at [3](c).
12  Above, at [211]–[214]. 20  Above, at [574].
13  Above, at [286]–[289]. 21  $306,985.58 as per above, at [404] and [591](a).
14  “Factual causation question” – Above, at [290]. The two categories are costs arising from the interpleader 22  Above, at [576].
proceedings and delays in commencing remedial works. 23  Above, at [444].
15  “Duty nexus question” – Above, at [389]–[392]. 24  Above, at [460], [461].
16  This includes remoteness of damage and a failure to mitigate or a different cause of the delay or failure to 25  Above, at [586]–[590] and [591](d).
avoid loss it could reasonably have been expected to avoid – Above, at [162](f). 26  But still see SRG Global Remediation Services (NZ) Ltd v Body Corporate 197281 [2022] NZCA 518 for
17  Above, at [569]. example.

24 BUILDLAW | The quarterly journal of the Building Disputes Tribunal www.buildingdisputestribunal.co.nz www.buildingdisputestribunal.co.nz 25
 ARTICLE

number of domestic policy
settings, particularly from a tax
perspective, which affect the
feasibility of BTR developments.
The Tax Amendment Act
addresses one of these key policy
issues but, as outlined below, a
number of further important issues
remain in the BTR context.
Having regard to the current
housing crisis across the country,
completed before 1 July 2023,
the landlord must offer any
current tenants before 1 July
2023 a fixed-term tenancy
of not less than 10 years,
and must always offer future
tenants such a tenancy;
- in the case of dwellings
completed after 1 July 2023,
the landlord must always offer
prospective tenants a fixed-
above requirements, fails to
meet the above requirements.
Te Tūāpapa Kura Kāinga -
Ministry of Housing and Urban
Development (MHUD) will be
responsible for maintaining a
register of “build-to-rent-land”.
Only land that is recorded on
this register will be entitled to
the exemption from the interest
limitation rules. Taxpayers must

Build-to-Rent: an
both with respect to supply and term tenancy of not less than apply to MHUD to have their land
affordability, research undertaken 10 years;  registered. The owners of existing
by Property Council New Zealand BTR assets have until 1 July 2023 to

emerging asset class

- the tenancy agreement
indicates that New Zealand could must expressly refer to the apply to MHUD to qualify for the
deliver over 25,000 BTR homes in ability of the tenant to exemption.

in New Zealand
the next decade if the right policy
settings are adopted.
Interest deductibility
The Tax Amendment Act
provides that “build-to-rent land”
is exempted from the interest
limitation rules for residential
properties under the Income
Parliament enacted the Taxation (Annual Rates for 2022- Tax Act 2007 (ITA) in perpetuity.
23, Platform Economy, and Remedial Matters) Act 2023 (Tax BTR has been added to the
Amendment Act) on 31 March 2023, establishing build-to-rent list of “exempted residential
(BTR) as a specific and recognised asset class in the New Zealand land” in Schedule 15 of the ITA.
real estate market. This exemption allows investors
to deduct (from their taxable
CONTRIBUTED BY: NATALIE STEUR, GREG NEILL AND ANDREW DAVIE income) interest on loans relating
personalise the dwelling with
the consent of the landlord
in accordance with the RTA,
and include examples of
possible personalisations and
the landlord’s position on the
keeping of pets;
- the tenancy agreement must
provide that the tenant may
terminate on 56 days’ notice;
and
• not include land that at any
time after first meeting the
Remaining issues
While the position regarding
interest deductibility is a positive
step for BTR developments, the Tax
Amendment Act does not address
all of the current legal and
economic barriers to BTR in New
Zealand. The following legislative
issues remain unresolved:
• Overseas persons will require
the consent of the Overseas
Investment Office (OIO) if they:
- acquire interests in sensitive

What is BTR?
BTR assets are typically large
residential developments that
comprise a number of dwellings
to be held long-term for rental
investment rather than for sale on
completion. The developments
are professionally managed
and usually owned by a single
institutional investor. BTR assets
offer tenants the security of
long-term leases (generally with
tenant favourable break rights)
and often include additional
shared amenities (eg, co-working
facilities, gymnasiums, event
venues).
The BTR sector is significant
in many overseas jurisdictions
and a number of developers
and investors have increasingly
been looking to invest in
this space in New Zealand.
There have however been a
Contractual
to BTR assets for as long as that
interest has a sufficient nexus
with the income derived from
those assets. The exemption is Adjudication
retrospective from the date the
The new resolution process developed
interest limitation rules took effect by NZDRC and NZIAC with cost and time
on 1 October 2021. efficency in mind
To qualify as a BTR development
under the ITA the development
If you’re interest in hearing more about Contractual Adjudication, please
must: email registrar@nzdrc.co.nz or registrar@nziac.co.nz
• comprise 20 or more dwellings to
be used for residential tenancies
under the Residential Tenancies
Act 1986 (RTA) and:
- in the case of dwellings

26 BUILDLAW | The quarterly journal of the Building Disputes Tribunal www.buildingdisputestribunal.co.nz www.buildingdisputestribunal.co.nz 27
 ARTICLE

where an otherwise identical (streamlining the consent of BTR developments, there

asset is developed for the
purposes of selling the individual
dwellings.
National’s proposal
Chris Bishop (the National Party’s
spokesperson for Housing)
introduced the “Boost Build
to Rent Housing Bill” in March
2023. National’s proposal seeks
to address the OIO and the
depreciation issues by amending:
• the OIA to align the treatment
of “build-to-rent developments”
with student accommodation
and retirement villages by
including “build-to-rent
developments” within the
definition of “long-term
accommodation facility”
process under the OIA if certain
other criteria are satisfied); and
• the ITA to permit “build-to-
rent developments” to claim
depreciation deductions for
income tax purposes like non-
residential buildings.
Neither the Tax Amendment Act
nor National’s proposal seek
to address GST recoverability
(although it is expected that the
GST issue will be considered from
a tax policy perspective in the
near future, following the general
election in October 2023).
Next steps
As noted above, while the Tax
Amendment Act brings welcome
change for the economic viability
remain certain unresolved issues
that may well be discussed at
length during the lead up to the
general election.
If you would like to discuss any
BTR related matters, please get
in touch with one of the experts
below or your usual Russell
McVeagh contact.
This article is intended only to provide
a summary of the subject covered. It
does not purport to be comprehensive
or to provide legal advice. No person
should act in reliance on any statement
contained in this publication without first
obtaining specific professional advice.
If you require any advice or further
information on the subject matter of this
newsletter, please contact the partner/
solicitor in the firm who normally advises
you, or alternatively contact one of the
partners listed below.

About the authors

land; or be more difficult. This creates deductions that the owner of
- e
 nter into transactions, or liquidity concerns for BTR a “non-residential building”
establish businesses, where developers and investors as is entitled to. Student
the expenditure exceeds the potential buyer pool of BTR accommodation and retirement
NZ$100m (although higher assets in the secondary market villages are generally treated
monetary thresholds may is restricted and the transaction as non-residential buildings for
apply for certain investors). costs of transacting BTR assets depreciation purposes.
• All residential land (regardless of are higher than they otherwise • Residential accommodation is
size) is deemed to be sensitive would be. an exempt supply of services
land pursuant to the Overseas • Residential building owners for the purposes of the Goods
Natalie Steur Greg Neill
Investment Act 2005 (OIA). are effectively not entitled to and Services Tax Act 1985.
Russell McVeagh partner Natalie Steur Russell McVeagh partner Greg Neill is a highly
As BTR developments involve claim depreciation deductions Consequently, residential
advises clients on all aspects of property experienced tax lawyer and provides advice
residential land and may from their taxable income landlords are generally unable law, particularly in relation to complex and on a broad range of New Zealand tax matters
involve investment exceeding (as opposed to the owners of to recover GST input credits for structured real estate transactions. Areas of for large corporates, financial institutions and
NZ$100m, BTR operators who are non-residential buildings who expenses incurred in respect specialisation include commercial acquisitions private businesses based in New Zealand
overseas persons will require the are able to claim depreciation of residential developments. and divestments, development agreements and offshore. His primary expertise includes
OIO’s consent. While the initial deductions of either 1.5% or The inability to recover GST and pre-lets and real estate focused mergers M&A, private equity, banking and corporate
investment and development 2% per annum depending on during the development and acquisitions. finance, as well as land transactions, emissions
may benefit from being the tax depreciation method stage materially reduces the trading, private wealth investment and general
processed under the increased adopted). Consequently, the economic feasibility of a BTR corporate tax.
housing test, the disposal of owner of a BTR development development and creates a
completed developments will will not enjoy the depreciation disadvantage to a situation

28 BUILDLAW | The quarterly journal of the Building Disputes Tribunal www.buildingdisputestribunal.co.nz www.buildingdisputestribunal.co.nz 29
 REGULAR
The facts
Case
A Nelson home which
won numerous design
awards, was based around
a pool in its courtyard
in Brief:
area. It obtained a
building consent in 2004
and a code compliance
certificate in October 2006.
The plaintiffs purchased
Pool-owners snooker Council the property for $780,000 in
2008, relying on the code
compliance certificate.1
The owners of a property based around a
The Council inspected the
majestic swimming pool successfully sue pool and signed off on it
again as compliant in 2009
the Tasman District Council in Buchanan v and 2012.
Tasman District Council [2023] NZHC 53 for When the plaintiff
family trust went to sell
acting negligently in their inspections of the the property in 2019,
pool. the Council determined
1  B
 uchanan v Tasman
WRITTEN BY RICHARD PIDGEON District Council [2023]
NZHC 53 at [110].
30 BUILDLAW | The quarterly journal of the Building Disputes Tribunal www.buildingdisputestribunal.co.nz
Snookering the Council
 ool owners sue local
P
council for loss of amenity in
their award-winning home
the pool was non-compliant.
The owners had not made any
changes to the pool.
On 23 December 2020 the
owners issued proceedings
against the Council, unable to
sue on the original 2006 CCC due
to being time-barred under the
10-year longstop provisions of
the Building Act 2004. The Judge
noted:2
…the 2009 and 2012 pool
inspections failed to identify
that the pool barrier, which
had been thought originally
to be compliant, was
not and never had been
compliant with the Building
Code and the FOSPA
[Fencing of Swimming Pools
Act 1987].
2  Above at [49].
3  Above at [19].
4  Above at [82].
5  Above at [89].
www.buildingdisputestribunal.co.nz
The plaintiffs sought special litigated in New Zealand.
damages for the loss of the
The decision
opportunity to sue for the
The issuing of the building consent
negligently issued CCC, general
in 2004 and the CCC in 2006 were
damages, interest, costs, and a
not especially relevant in the end:4
declaration.3
They sue for the loss of that
Justice Palmer for the High
chance to sue that was
Court, following a three day trial,
caused by the negligent
noted in his judgment:
pool inspections by the
A key issue in considering
Council, in August 2009 and
whether the Council was
January 2012, and their
negligent is whether the
subsequent statements
Council owed a duty of
care to Ms Buchanan
to Ms Buchanan and Mr
Marshall that their pool and
and Mr Marshall to use
pool barriers complied with
reasonable skill and care in
inspecting their pool under
regulatory requirements.
The claim based on the 2009
the FOSPA in 2009 and 2012.
inspection was barred by the
This is apparently the first
occasion on which such
statutory longstop.5 In terms of the
Limitations Act 1950 and 2010:
a duty of care has been
31
 REGULAR
v Attorney-General [The Grange]
in particular,7 and noted that the
Tracking
pool owners rely on the authorities
to inspect with reasonable skill
and care.8
the trends
The cause of action for breach
of statutory duty (the Council
failing to fulfil their duty to inspect
properly under section 10 of
FOSPA) was dismissed, but all
A REPO RT ON
other elements of the plaintiffs
sought-for relief were granted
STAT U TO RY
save for the costs of applying
ADJ U DIC AT I ON IN for an MBIE determination of
AOT EAROA NEW compliance. The main element
ZEAL AND 2003-2023 of damages was for the loss of
amenity value caused by the
remediation, that is, architectural
excellence butchered,9 and
F IN D OUT M O R E
amounted to $195,000 (plus
interest from the date of
purchase). The total damages
were approximately $270,000 with
legal costs additional.
Conclusion
The issuing of inspection
certificates for swimming pools is
undertaken in the performance of
a valuable public safety regime.
However, it is not for the pool
Ms Buchanan and Mr period under the 2010 Act. owners to have to go behind the
Marshall reasonably gained The Council’s negligence was certification as the Council owes
knowledge of the fact not an omission but a positive act a duty of care to perform the task
they had suffered damage of inspecting the pool followed with all reasonable skill and care.
or loss, due to the lost by a misstatement.6 The claim in This case appears to be the first
opportunity caused by that negligent misstatement as well of its kind and sets a precedent
inspection, only when the as in pure negligence was made in the field – inspections need to
2019 inspection incurred. out. be undertaken once every three
Therefore they were within the In formulating the novel duty of years for each pool. Councils
six-year limitation period and care, Justice Palmer relied on the need to think twice before diving
three-year further late-knowledge decision North Shore City Council headlong into the task!
6  Above at [111].
7  North Shore City Council v Attorney-General [The Grange] [2012] NZSC 49, [2012] 3 NZLR 341.
8  Above at [52] and [63].
9  Above at [114](a) and (b), and [117].
32 BUILDLAW | The quarterly journal of the Building Disputes Tribunal www.buildingdisputestribunal.co.nz
ARTICLE
Background
In 2014 the claimant, Acciona,
Take a rain
became a party to a construction
contract. Acciona’s job was
to construct works on a 19.5
cheque
kilometre stretch of road in
northern New South Wales
between Nambucca Heads and
Warrell Creek.
Acciona took out a policy with
Full Federal Court of Australia reads Zurich. The policy contained
an exclusion clause for loss
common sense into insurance policy or damage due to rain. This
exclusion clause contained an
exemption for situations
A decision by the Full Federal Court of Australia has provided
where such loss or damage
clarification about the wording of an insurance policy for a
is due to an event with a
construction project. In Acciona Infrastructure Australia Pty
minimum return period of
Ltd v Zurich Australian Insurance Limited [2023] FCAFC 47,1 the
20 years for the location
Court held that the insurer, Zurich, could rely on its exclusion insured on the basis of
clause to limit cover on the basis that to do otherwise would be the 24 hour statistics
illogical and without business efficacy. prepared by the Bureau of
WRITTEN BY ALEXANDER LYALL
Meteorology for the nearest
station to the location
insured, or such other
independently operated
1  A
 cciona Infrastructure Australia Pty Ltd v Zurich Australian weather station situation
Insurance Limited [2023] FCAFC 47.
Take a rain cheque.
T he Full Federal Court of
Australia made sense of an
insurance policy by simply
reading it in a logical way.
www.buildingdisputestribunal.co.nz 33
 ARTICLE
near or adjacent to the
location insured.
What did the insured
construction site look like?
The policy contained definitions
for “Project Site”. One of these
definitions covered areas where
the Insured is performing the
works or has property stored or
being processed together with all
surrounding areas in connection
with the Project. Another definition
was contained in the Schedule
of the policy and was to include
work comprising Design and
Construction of the upgrade of
the existing highway to a four
lane divided carriageway. The
34 BUILDLAW | The quarterly journal of the Building Disputes Tribunal
Schedule also included new
bridges over certain parts of the
belt as well as floodplain bridges
and culverts. Definitions of further
terms, such as “Project”, were left
by the policy to be defined in the
various contracts between the
parties.
Cover for damaged works come
rain or shine?
In June 2016 heavy rainfall lashed
northern New South Wales causing
a series of floods. The damage
to the works was significant and
Acciona made a claim under the
policy.
The ability to receive cover
was clearly going to be made
difficult by the fact rain had
caused the damage. However,
the intensity of the rain was such
that it may have been able to fit
under the exemption for unusually
heavy rainfall. A weather station
along the stretch of the works
had recorded the level as
being a 1-in-20-year event, the
very condition which would be
exempt under the policy.
The difficulty for Acciona was
that the long stretch of road
contained another two weather
stations, with each of the three
recording a different volume
of rain fall. In that event, the
question was asked whether
each cluster of damage had
been caused by rainfall dumped
at a regular amount, or that
which was abnormally substantial.
To establish the applicability of
the exclusion clause, the Court
had to establish which part of
the project site was covered by
the extreme weather exemption.
Central to this determination was
how the term location insured
could be read. Did the entire
belt constitute one location?
Or was the location the specific
section which had suffered the
damage? Acciona believed that
if the exemption applied in one
section of the project site then
all damage would be covered,
regardless of its proximity to the
covered rainfall. Zurich argued
that it simply referred to the
location where the extreme rain
had fallen.
Full Federal Court Decision: the
Court knows it rained, but did it
pour?
Neither party contested what
www.buildingdisputestribunal.co.nz
Conflict
Management
IM PROVE C OM M U NICATION AND
E NHANC E PE R FOR MANC E
G ET IN TO U CH
the Court understood to be
the principles regarding the
construction of insurance policies.
These were nevertheless cited to
be summarised correctly in Liberty
Mutual Insurance Company
Australian Branch t/as Liberty
Specialty Markets v Icon Co (NSW)
Pty Ltd.1 In short:
The working out in a
coherent and congruent
fashion of the operation of
a market specific insurance
policy requires a businesslike
interpretation to bring about
a commercial result based
on what a reasonable
business person would have
1  L iberty Mutual Insurance Company Australian Branch trading as Liberty Specialty Markets v Icon Co (NSW)
Pty Ltd [2021] FCAFC 126 at [152].
2  Star Entertainment Group Limited v Chubb Insurance Australia Ltd [2021] FCA 907; Outback Music Festival
Group Pty Ltd (formerly known as Big Run Events Pty Ltd) v Everest Syndicate 2786 at Lloyd’s [2022] FCA 13.
www.buildingdisputestribunal.co.nz
www.icra.co.nz
understood the policy to
mean.
In assessing what the term
location insured referred to, the
Court followed the approach
centring on logic and business
efficacy.
The Court looked at what
made sense in the context of the
policy, and believed it difficult
to see the logic in assessing
the intensity of an event in one
area by reference to the same
event at another. Instead, logic
would dictate that the level of
rainfall should be assessed by the
weather stations proximate to the
damage, not elsewhere.
An approach which tried
to understand the term using
business efficacy found a
similar outcome. It could not
produce businesslike practicality
if the policy was read in a way
which obfuscated the nature
of the event which caused the
damage. In this case, it could be
readily seen that only a portion
of the damage along the project
site had been caused by an
event covered in the exemption
to the exclusion clause. How
could it make sense then to say
that this event could apply to all
the damaged locations?
Finding that Acciona’s reading
of the exclusion clause was
illogical, the Court found in favour
of Zurich.
Conclusion
In centring on business efficacy
and logic, the Court has helped
implement a commonsense
understanding of the policy’s
wording. Doing so provides
another recent example of
the federal courts in Australia
applying a practical approach
to interpretation of insurance
matters.2 Agreements now
seem to be interpreted in ways
that stress the business context
under which they operate.
The effect may soon be that
exclusion clauses cannot be
read in deliberately obtuse ways.
Because, where language can
cause confusion, common sense
cuts right through.
35
 ARTICLE
Two conditional
certificates do not
one final make
The New South Wales Supreme Court Background
Parkview Constructions Pty
in Parkview Constructions Pty Limited Limited (Parkview) as contractor
was engaged by the principal,
v Futuroscop Enterprises Pty Limited Futuroscop Enterprises Pty Limited
(Futuroscop) to build a Travelodge
[2023] NSWSC 178 provides insight into hotel and a Wilson’s carpark in
Mascot, Sydney. The AS 4902-
the date of practical completion under 2000 form contract was entered
an AS 4902-2000 contract. into in September 2015 and work
began on 1 March 2016. The date
for practical completion was
4 September 2017. The ‘works’
did not distinguish between the
completion of the two buildings.
The superintendent of works
provided a retrospective
certificate of practical
completion for Building A (the
WRITTEN BY
RICHARD PIDGEON
Travelodge) on 12 September
2017, subject to Parkview
rectifying certain items, and a
separate certificate for Building
B (the carpark) on 25 September
2017, on the same basis. The first
certificate expressly stated that it
excluded Building B. The ‘works’
under the contract were not
36 BUILDLAW | The quarterly journal of the Building Disputes Tribunal www.buildingdisputestribunal.co.nz
defined in a separable way and
the superintendent could not
as it turned out, of practical
completion, given the definition of
enable the Principal to
obtain a certificate of
issue a certificate for practical
completion for only one building.1
practical completion:2
Practical completion is
occupation from the
applicable Authority;
The Superintendent was that stage in the carrying A dispute arose as to the release
conferred with an extensive out and completion of security provided by Parkview
role and powers under of WUC [works under and liquidated damages
the Contract, including construction] when: claimed by Futuroscop. Parkview
approving variations and (a)  the Works are commenced proceedings on
extensions of time, giving complete except for
directions to the Contractor, minor defects:
11 December 2018,3 seeking to
restrain Futuroscop from having
approving progress claims (i)   which do not recourse to the security. A
and – critically in this prevent the Works from crossclaim was issued in March
case – certifying practical being reasonably 2019 by Futuroscop for liquidated
completion and liquidated capable of being damages and the costs of
damages. used for their stated rectification of alleged defects.
In September 2017 the Council purpose; During the proceeding Futuroscop
approved interim occupation presented a lengthy defects list
…
of both buildings (which later to Parkview, some 382 items,4
became final) and Futuroscop (d)   the Contractor has which it said prevented practical
took possession of the site and done all things that completion from occurring.
began taking rental from that it is required to do Parkview claimed the
time. This was strong evidence, under the Contract to ‘works’ had reached practical
1  Parkview Constructions Pty Limited v Futuroscop Enterprises Pty Limited [2023] NSWSC 178 at [23].
2  Above, at [186].
3  Above, at [173].
4  Above, at [269].
www.buildingdisputestribunal.co.nz 37
 ARTICLE
completion as per the conditional
certificates. Futuroscop denied
Parkview could have recourse
to either its first or second
bank guarantees due to the
delayed and defective building
works, and also withheld a GST
payment.5 During the proceeding
the first bank guarantee was
released “without prejudice” by
Futuroscop.
Judge’s findings
Justice Rees held that the
“conditional” certificates had
no contractual effect and could
not be read in the composite.
She was called upon to
determine the date of practical
completion herself and thus the
defects liability period which
ran for 12 months after practical
completion. Further, her Honour
was called to determine whether
the contract was effectively a
code and prevented common
law damages for patent
defects from being claimed by
Futuroscop.
The terms of the contract were
pivotal. Further, Justice Rees
ruled that the superintendent
had breached his duties to act
reasonably and in good faith.
The Court interprets commercial
contracts objectively by what
a reasonable businessperson
would have understood [the]
5  Above, at [42].
6  Above, at [190]; Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at 656; [2014]
HCA 7 at [35].
7  Parkview Constructions Pty Limited v Futuroscop Enterprises Pty Limited [2023] NSWSC 178 at [190]; Mount
Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at 116; [2015] HCA 37 at [50].
8  Above, n 1, at [205]; Official Assignee of Hutson v The New Zealand Antimony Company (Ltd) (1890) 10 NZLR
143.
9  Above, at [208]; Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, 771.
38 BUILDLAW | The quarterly journal of the Building Disputes Tribunal
terms to mean:6 The actual
subjective intentions of the
parties are irrelevant.7 The
superintendent had not issued
a certificate for practical
completion in September 2017
or the ensuing five plus years.
Parkview complained that the
superintendent should administer
the contract and not just pass
on Futuroscop’s complaints. This
resonated with the judge, who
was sympathetic to Parkview’s
evidence.
The Court found that unless a
contract specifically provides for
a certifier to issue a “conditional”
certificate, the issue of such a
certificate may be ineffective.8
In this case the certificates had
no contractual effect. This finding
went Futuroscop’s way but the
Court then moved to determine
the practical completion date
of its own accord. This favoured
Parkview.
The Court ruled that the
contract provided a code which
established the rights, obligations
and liabilities of the parties, and
mechanisms by which completion
of the ‘works’ was to be achieved
to practical completion and
during the defects liability period.
Justice Rees said that technical
language is to be avoided in
construing the contract:9
In determining the
meaning of the language
of commercial contract,
and unilateral contractual
notices, the law therefore
generally favours a
commercially sensible
construction. The reason
for this approach is that a
commercial construction
is more likely to give
effect to the intention of
the parties. Words are
therefore interpreted
in the way in which a
reasonable commercial
person would construe
them. …
Where the superintendent had
failed to determine the practical
completion date, there was
nothing in the contract to prevent
the Court from stepping in (or
an arbitrator) and determining
that date. Indeed, the contract
itself permitted this. The Court
held that the date of practical
completion was important (finding
it was 25 September 2017) as the
contractual terms provided:
• The superintendent could direct
Parkview to remedy defects for
the defects liability period of
12 months at Parkview’s cost;
failing which Futuroscop would
undertake the rectification at
Parkview’s cost
• A further 12 months defects
www.buildingdisputestribunal.co.nz
liability period for rectified work
• Within 42 days of the expiry
of the last defects liability
period a final certificate was
to be issued as to the amounts
owed between Parkview and
Futuroscop, and this would
equate to conclusive evidence
of an accord and satisfaction
• Patent defects, such as most
of those focused on in the
proceedings were exceptions to
those discovered in the defects
liability period and could not
be claimed under common
law damages; rather, they
were covered solely under the
Building Disputes
Tribunal Adjudication
Low Value Claim
Scheme
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value fixed scheme for arbitration under its
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LE AR N MO R E
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contract and the contractual party following a six-day hearing.
time limits applied.
Conclusion
The superintendent had not
The contractual documentation
specified a separate defects
and certification needs to
liability period.
Court orders were made for be effectively drafted and
payment under the contract to implemented to avoid the
Parkview and a modest amount Australian courts from having
for rectification of certain proved to step in to stipulate the date
defects. Parkview was liable to for practical completion. If a
pay some liquidated damages, dispute of this nature were to
but in an amount Justice Rees happen in New Zealand, the
calculated, putting aside the Building Disputes Tribunal is well
superintendent’s calculations. placed to provide a cost-effective
Costs were payable on an
remedy to avoid protracted and
overwhelming basis to Parkview
expensive court proceedings.
as the substantively successful
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39
 ARTICLE

payment. Although Cooper to any action to enforce the judgment application it

had described it as being the
basis for a “smash and grab”
adjudication, the Judge said that
it was: “perhaps better viewed
as a return to an otherwise cold
contractual scene long after
the time when any appropriate
investigations into it might be
decision, benefit from a much
longer limitation period than the
1980 Act contemplated for the
bringing of legal proceedings.
The Judge also referred to,
and agreed with, a statement
in Keating on Construction
Contracts (11th ed), at para.16-
would be unconscionable
to ignore.”
The adjudicator’s approach in
deciding that LJR’s cause of
action, accrued on 28 August
2022, paid no regard to the terms
of the Contract, as to when the
right to payment of the balance

LJR Interiors Ltd v Cooper expected to have concluded.”

The Judge referred to the
047, which supported this
approach:
sought by Application No. 4
accrued. It further appeared to

Construction Ltd [2023] EWHC

Supreme Court decision in “The Limitation Act 1980 have assumed that the absence
Aspect v Higgins, noting that and other enactments of a pay less notice (taking the
the recognition of a limitation apply equally to limitation defence or any other

3339 (TCC)
LJR sought summary enforcement
of an adjudicator’s decision
whilst Cooper sought a Part 8
declaration that the adjudicator’s
decision was void on the ground
that the sum awarded was barred
by limitation. Back in August
2014, the parties entered into
a written contract under which
LJR agreed to carry out dry lining
and other works for Cooper. The
Contract contained no provision
for the reference of disputes to
adjudication, so the adjudication
provisions of the Scheme applied.
Cooper said that the works
under the Contract were
completed on 19 October
2014. On 31 July 2022, almost
8 years after they had finished
works under the Contract, LJR
submitted Application No. 4 in the
sum of £3,256.58. While the sum
claimed was small, LJR submitted
similar applications in July 2022
to Cooper across a number of
other contracts. Cooper did not
respond and LJR gave notice
of adjudication saying that the
dispute arose “on or about 28
August 2022 when the notified
sum due was not paid by the
final date for payment.” Amongst
other adjudication defences,
Cooper said that the claim was
issued outside the Limitation
Period of six years, in accordance
with section 5 of the Limitation Act
1980:
“For the avoidance
of doubt, the ‘cause of
action’ was either 28
November 2014 when
the Respondent failed to
pay the sum invoiced for
by the Referring Party, or,
although denied by the
Respondent, on 12 March
2015 when the Respondent
issued the email refusing
to pay the sum invoiced
by the Referring Party and
provided its reasons for
refusal …”
The adjudicator addressed the
issue of limitation by saying that
the general rule in contract was
that a cause of action accrued
when the breach takes place.
The breach alleged here was the
failure to make payment of a sum
said to be due by the final date for
payment, namely 28 August 2022.
On that basis, the limitation period
had not expired. Section 5 of the
Limitation Act 1980 provides that:
“An action founded on simple
contract shall not be brought after
the expiration of 6 years from the
date on which the cause of action
accrued.”
In defence to the enforcement
proceedings, Cooper simply relied
upon the date of the completion
of the works as providing the
accrual date for a claim for
payment under a contract for
those works.
HHJ Russen KC noted that
Application No. 4 was not the
typical type of application for
period of six years for the adjudication in the sense objection to payment of that sum)
commencement of legal that an adjudicator must meant that it was unnecessary to
proceedings to enforce an treat the law of limitation as consider whether the application
adjudicator’s decision provided a substantive defence just itself was timely. LJR’s right to
reason why the decision itself as any other defence.” payment of all sums identified in
should recognise any limitation Further, the Judge said that: Application No. 4 was one which
defence that operates to defeat “The key hallmark of a point accrued on 28 November 2014.
the claim advanced under the which may operate to The unpaid balance did not
referred dispute. Otherwise, a defeat such enforcement somehow become “due again”
contracting party would, through on a responsive Part 8 for limitation purposes simply by
the grafting on of the discrete Claim … is that it should be virtue of being demanded again
limitation period which applies one which on a summary over seven and a half years later.
About the author
Jeremy Glover
Jeremy Glover is a partner at Fenwick Elliott LLP , the UK’s largest
construction law firm and President-elect of the Dispute Resolution Board
Foundation (DRBF). He is listed as a leader in his field in Who’s Who Legal:
Construction 2020. An accredited FIDIC DAB adjudicator and member
of the CIArb Adjudication Sub-Committee. Jeremy is the co-author
of Understanding the FIDIC Red and Yellow Book: A Clause by Clause
Commentary, the third edition of which was published in 2018, and lead
editor of Building Contract Disputes: Practice and Precedents. Jeremy
is a member of the Board of Examiners on the Construction Law MSc
programme at King’s College and teaches on the MSc Building Information
Modelling Management Programme at Middlesex University. He is also a
member of the FIDIC Net Zero Task Group TG23 and of The Chancery Lane
Project Built Environment Advisory Committee. 

40 BUILDLAW | The quarterly journal of the Building Disputes Tribunal www.buildingdisputestribunal.co.nz www.buildingdisputestribunal.co.nz 41
 CASE UPDATE
Case update:
English Court
of Appeal
confirms
‘useless’ ADR
procedure too
In our December 2022 issue of
uncertain to
BuildLaw, we reported on a
case in the English High Court 1
about an unusual alternative
enforce
dispute resolution (ADR)
procedure in a construction
contract that was held
to be too uncertain to be
an enforceable condition
WRITTEN BY KATE HOLLAND precedent to litigation. The
case was appealed, but the
Court of Appeal has recently
issued its judgment dismissing
the appeal on all grounds:
Kajima Construction Europe
(UK) Limited and Kajima
Europe Limited v Children’s
Ark Partnership Limited [2023]
EWCA Civ 292.
1  C
 hildren’s Ark Partnerships Ltd
v Kajima Construction Europe
(UK) Limited and Kajima Europe
Limited [2022] EWHC 1595
(TCC).
42 BUILDLAW | The quarterly journal of the Building Disputes Tribunal www.buildingdisputestribunal.co.nz
Recap: Background to the
dispute
In June 2004, Children’s Ark
Partnerships Ltd (Ark) entered
into a development agreement
with Brighton and Sussex University
Hospital Trust to redevelop a
children’s hospital. Ark engaged
Kajima Construction Europe UK
Limited (Kajima) to design and
build it.
After the Grenfell Tower tragedy,
Ark and Kajima agreed to carry
out remediation works on the
hospital. This was many years after
the project had been completed,
and shortly before the expiry of
the contractual limitation period
for bringing a legal action.
The contract required any
disputes to be submitted to ADR
by a ‘Liaison Committee’ (which
included Ark and the Hospital
Trust, but not Kajima) before
initiating court proceedings. This
ADR procedure was described
by both the High Court and
the parties’ representatives as
surprising and unusual.
However, with issues around
liability and damages unresolved
and the litigation time bar fast
approaching, Ark commenced
an action in the High Court and
asked for a stay of proceedings
to allow it to engage in the ADR
procedure.
Kajima argued in the High Court
that Ark’s legal claim should
be struck out on the basis that
1  Children’s Ark, above n 1, at [61].
2  Children’s Ark, above n 1, at [82].
www.buildingdisputestribunal.co.nz
the contract’s ADR procedure
was a condition precedent to
commencing litigation and Ark
had failed to comply with it.
High Court’s decision
The High Court found that the ADR
clause was indeed a condition
precedent to commencing
litigation. However, it found that
the ADR procedure itself was
not sufficiently clear or certain to
make it an enforceable condition
precedent. Some of these
shortcomings included:1
• There was no meaningful
description of the process to be
followed. The Liaison Committee
could make its own rules and
procedures, but there was
no evidence of what those
rules and procedures needed
to encompass. Therefore,
there was no unequivocal
commitment to engage in any
particular ADR procedure.
• It was unclear how a dispute
should be referred to the
Liaison Committee or when the
process of referral to the Liaison
Committee came to an end,
making it unclear when the
condition precedent is satisfied.
• It was unclear how the Liaison
Committee could identify or
resolve a dispute because
Kajima was not a member of
the Committee and had no
obligation or right to take part in
the process. It was also unclear
what impact any decision of the
Liaison Committee would have
on Kajima.
The High Court refused Kajima’s
application for strike out and
granted Ark’s request to stay the
proceedings. The High Court went
on to say that even if the ADR
condition precedent had been
enforceable, it would not have
struck out the claim, stating that
a stay of proceedings was the
default remedy.2
Court of Appeal’s decision
Kajima appealed the High
Court’s decision in the Court of
Appeal on several grounds, but
was unsuccessful on all of them.
The first part of the judgment
deals with the application and
enforceability of the parties’
bespoke ADR procedure in this
case.
The second part addresses and
clarifies the Court’s discretion to
stay or strike out proceedings
where the contractual ADR
procedures have not been
followed, and the balancing
exercise required, particularly
where (as in this case) a stay will
deprive one party of a time bar
defence.
Appeal as to enforceability of
ADR condition precedent
Kajima unsuccessfully argued
that the High Court had wrongly
concentrated on the utility of
the ADR process, rather than
determining if it was sufficiently
certain to be an enforceable
43
 CASE UPDATE ARTICLE

condition precedent. (as opposed to inevitable) order tragedy. Furthermore, Ark had
The Court of Appeal agreed that the court will make when not simply ignored the contract’s
with the High Court’s authorities proceedings are started in breach ADR procedure, or the limitation
and reasoning on the ‘muddled’ of mandatory contractual dispute period – it had been well aware of
ADR procedure’s shortcomings resolution mechanism.4 The Court both and had acted reasonably
and uncertainties as outlined of Appeal clarified that a stay is in bringing the proceedings
above, and agreed that not a default remedy, and each and requesting the stay, rather
this rendered the procedure case will turn on its facts. On the than activating the useless ADR
unenforceable as a condition facts of this case, the Court of procedure and missing the time
precedent to litigation. The Court Appeal agreed that a stay was limit to bring a claim:5
of Appeal also rejected Kajima’s the appropriate remedy. It would not be
criticism that the High Court had Appeal as to judicial exercise of proportionate to exercise

ICC arbitration seated

wrongly concentrated on the discretion in granting the stay the court’s discretion to
‘utility’ of the procedure, stating Kajima unsuccessfully argued strike out a claim because

in Abu Dhabi held

it was unable to accept that the that in granting the stay of of a failure by a party
court cannot have at least a proceedings, the High Court (who has otherwise acted
reasonably) to activate a

to be subject to the
weather eye on the issue of utility.3 judge had incorrectly exercised
Appeal as to stays being her discretion because she had useless procedure.
the “default remedy” for non- not paid sufficient regard to the

supervisory jurisdiction
Conclusion
compliance with ADR resulting deprivation of Kajima’s The Court of Appeal’s decision
Kajima argued that the High limitation defence. confirms that a contractual

of the courts of the Abu

Court had been wrong to find The Court of Appeal noted ADR clause can only be relied
that a stay of proceedings would that while Kajima may well have upon as a condition precedent

Dhabi global market

in any event have been the been deprived of a limitation to litigation if the ADR process
“default remedy” (rather than a defence, the High Court judge and procedures as drafted are
strike out). had not incorrectly exercised sufficiently clear and certain.
The Court of Appeal her discretion in doing so, and Where a bespoke ADR process
acknowledged that the High had taken it into account as part is opted for, parties should take
Court judge may have overstated of the balancing exercise. The care to ensure it is a robust and
the applicability of stays, but that Court of Appeal notes that the recognised procedure, and
the expression “default remedy” remediations issues had arisen ensure the contract is clear and
had been used simply as a at a late stage and indirectly, in unambiguous about how it will
WRITTEN BY The Abu Dhabi Court of Background
shorthand to describe the usual response to the Grenfell Tower operate and the rules that will be
JONATHAN H. SUTCLIFFE Cassation has ruled that an Abu Dhabi’s financial free zone,
followed. If the ADR procedure is MOHAMMAD RWASHDEH
a condition precedent to bringing arbitration seated in Abu the ADGM, was established in
THOMAS PARKIN
legal proceedings, the drafting Dhabi and conducted under 2013 as an international financial
should make it clear when the the International Chamber of centre and a common law
condition is fulfilled. Commerce (ICC) arbitration jurisdiction with its own courts and
rules (ICC Rules) was seated in legal system. The ADGM Courts
the Abu Dhabi Global Market operate in the English language,
3  K
 ajima Construction Europe
(ADGM), and therefore subject and are equipped to handle
(UK) Limited and Kajima
to the supervisory jurisdiction of international cases as well as
Europe Limited v Children’s
the ADGM Courts, based on the having a supervisory jurisdiction
Ark Partnership Limited [2023]
presence of an ICC representative over arbitrations seated in
EWCA Civ 292 at [74].
office in the ADGM. the ADGM, which has its own
4  Kajima, above n 4, at [92].
arbitration law (the Arbitration
5  Kajima, above n 4, at [107].

44 BUILDLAW | The quarterly journal of the Building Disputes Tribunal www.buildingdisputestribunal.co.nz www.buildingdisputestribunal.co.nz 45
 ARTICLE
Regulations 2015).
The case (Abu Dhabi Court of
Cassation, Case No. 1045 of 2022)
concerned a dispute under a
construction contract (Contract).
The dispute resolution clause in
the contract provided for disputes
to be resolved by arbitration,
seated in Abu Dhabi, under the
ICC Rules .
The appellant commenced
proceedings in the onshore Abu
Dhabi Courts, seeking annulment
of an arbitral award issued in
relation to the Contract. The
appellant sought annulment of
the award on various grounds,
including alleged discrepancies
between the signatures of
members of the tribunal, counsel
1  Referring to Abu Dhabi Law No. 4/2013 Concerning the Abu Dhabi Global Market.
46 BUILDLAW | The quarterly journal of the Building Disputes Tribunal
exceeding the scope of a
power of attorney, the tribunal
violating the rule of objectivity in
its reliance on evidence, double-
counting of damages awarded,
and violation of the parties’
agreement concerning the seat
of arbitration.
The Abu Dhabi Court of
Appeal ruled that it did not
have territorial jurisdiction to
consider the claim, holding that
the ICC representative office
located within the Abu Dhabi
financial free zone, the ADGM,
“is considered a representative
office of the ICC and is the
place of arbitration governed
by the aforesaid ADGM Law,”1
and dismissed the challenge.
The appellant appealed to the
Court of Cassation. The appellant
argued that the arbitration
clause provided for Abu Dhabi
to be the seat of arbitration
without specifying any particular
geographical location in Abu
Dhabi, and that the selection
of the ICC rules in itself did not
amount to an agreement that
the ICC, or any of its branches
or offices, should be the seat.
Therefore, the onshore Abu
Dhabi Courts, and not the ADGM
Courts, should have jurisdiction to
hear the case.
Judgment
The Court of Cassation rejected
the appeal. Its reasoning was as
www.buildingdisputestribunal.co.nz
follows:
• First, under Article 1 of Federal
Law No. 6/2018 (UAE Federal The premier forum for
Arbitration Law), competence
to hear cases relating to an
international dispute
arbitration resides with the resolution in the
trans-pacific region
federal or local court of appeal
agreed by the parties, or within
whose jurisdiction the arbitration
is held.
• Under Article 1 of the ADGM
Law (Abu Dhabi Law No.4/2013),
“ADGM Establishments”
include any company, branch,
representative office, institutional
entity, or project registered or
licensed to operate or conduct
any activity within the ADGM.
• The ADGM Courts are
considered courts of the Emirate
of Abu Dhabi.
• The ICC representative office in
the ADGM was opened during
the course of the arbitration
proceedings.
• Therefore, the ICC office in the
ADGM was considered to be the
place of arbitration, and so the
ADGM Courts were the Courts
with supervisory jurisdiction over
the arbitration.
In essence, therefore, the Court of
Cassation reasoned that, because
the parties chose the ICC Rules
onshore courts and the ADGM that, at the outset, the arbitration
to govern the arbitration, and
Courts are courts of the Emirate of was seated in onshore Abu Dhabi,
that because the ICC maintains a
Abu Dhabi. and that its seat ‘moved’ to the
representative office in the ADGM,
the ADGM should be taken to ADGM with the opening of the
Analysis
be the seat of arbitration, giving The outcome of the case may be ICC office there.
the ADGM Courts jurisdiction considered surprising. The Court It remains to be seen whether
over any claims or applications appeared to elide the arbitration the Court’s decision will be
arising out of the arbitration. The rules and seat of the arbitration. followed in future cases. For
Court noted that the arbitration The judgment also states that the the time being, though, there
clause providing for the arbitration ICC office in the ADGM opened appears to be a risk that an
to be seated in Abu Dhabi was during the course of the arbitral arbitration seated in Abu Dhabi
not specific, and that both the proceedings, which would imply and conducted under the ICC
www.buildingdisputestribunal.co.nz 47
 ARTICLE

Rules may be deemed to be Emirate of Abu Dhabi,” or similar, Parties should take care to be
seated in the ADGM, whether or notwithstanding that the Emirate specific in specifying the seat
not this was the intention of the of Abu Dhabi contains two of arbitration in their arbitration
parties. separate supervisory regimes agreement and consider,
The decision also shines for arbitration: the onshore when seating an arbitration in
a spotlight on the inherent Courts applying the UAE Federal the United Arab Emirates, also

NEW ZEALAND’S
ambiguity of an arbitration Arbitration Law, and the ADGM specifying the courts that have
clause providing that “the seat Courts applying the ADGM supervisory jurisdiction over the
of the arbitration shall be the Arbitration Regulations 2015. arbitration.

PURPOSE-
BUILT DISPUTE
About the authors

RESOLUTION HUB
Jonathan H. Sutcliffe
Jonathan Sutcliffe is a partner in K&L Gates’ Dubai office where he is a
member of the international arbitration practice group. Jonathan has
significant experience in international arbitration and dispute resolution
and has acted for numerous clients on a diverse range of international
commercial arbitration, ADR, and litigation matters in the energy,
construction, hospitality, real estate, defence, insurance, international joint
venture, and film sectors, and on investor-state disputes. Jonathan also sits
regularly as an arbitrator.
Read Jonathan H. Sutcliffe’s full biography to learn more.
Based in Auckland and with expansive views of Takapuna Beach
and Rangitoto Island, the ADR Centre is New Zealand’s only
purpose-built dispute resolution facility. It can accommodate in-
Mohammad Rwashdeh person, virtual and hybrid meetings, arbitrations, mediations, court
Mohammad Rwashdeh is special counsel in the dispute resolution team of hearings, and general business meetings, and has state-of-the-art
K&L Gates’ Dubai office, based in the Dubai International Financial Centre AV technology to support these.
(DIFC). Mohammad regularly advises and represents both UAE-based and
Contact us to discuss your needs:
international clients in a wide range of commercial, intellectual property,
info@adrcentre.co.nz +64 9 871 0333
civil and criminal disputes. 
Read Mohammad Rwashdeh’s full biography to learn more.

The ADR Centre is home to these specialist registries:

Thomas Parkin
Thomas Parkin is an associate in the international arbitration and dispute
resolution team of K&L Gates’ Dubai office. Thomas is experienced in
representing high profile corporate clients in complex, high value, and
often multi-jurisdictional disputes in the Middle East and internationally, with
a particular focus on international arbitration and commercial litigation.
Read Thomas Parkin’s full biography to learn more.

48 BUILDLAW | The quarterly journal of the Building Disputes Tribunal www.buildingdisputestribunal.co.nz www.buildingdisputestribunal.co.nz 49

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