Weathertight Homes Resolution Services Amendment Bill

One of the first cases of leaky homes that I had contact with after becoming an MP was a very, very unfortunate development called Pepperwood Mews. The building is still standing, actually. It is on Great North Road in Kelston, now in Carmel Sepuloni’s electorate. It had been a development that Housing New Zealand undertook in the mid-2000s, and Waitakere City Council was the local authority that signed off the work. Basically, what Housing New Zealand did was it did a deal with a developer and said: “We’ll sell you this land, and if you develop it, we guarantee that we will lease all of the dwellings from you.” It is, basically, a block of apartments. The developer built the building and sold off the individual units to a whole lot of mum and dad investors, who ploughed their retirement savings into this development. It was the most shonky, most dodgy, rotten development that you could imagine, and within about 3 or 4 years of being completed and signed off by the local council, Waitakere City Council at the time, the place was, basically, condemned. It was uninhabitable; it was leaky in the extreme, and since about 2010 that building has stood as sort of a rotting hulk on Great North Road.

The CHAIRPERSON (Hon Trevor Mallard): Order! I regret interrupting the member. I am sure there is a way of tying his story into this part of the bill, but since it has been going for nearly 2 minutes, I would appreciate him doing that, just to show that he is being relevant.

It is very important to provide some colour for the discussion of Part 2 because—

The CHAIRPERSON (Hon Trevor Mallard): That would be nice, too.

Part 2 is the other part of the Weathertight Homes Resolution Services Amendment Bill that deserves some specific comment in this debate, and what it does is—again, it is a pretty technical, minor tweak—it, basically, responds to a decision by the Supreme Court that is all around the definition of the word “built”. So let me explain that, if I may. To have a claim declared eligible under the Act, claimants must meet a series of statutory criteria, and we have discussed that in relation to Part 1. Those criteria include that the claim must be made within 10 years of the date on which the affected structure was built. What is the meaning of “built”? It is very vague, if you think about it. Until the case in question at the Supreme Court, Osborne v Auckland Council 2014, was decided, the interpretation of the word “built” was, essentially, the finalising of the building. What the Supreme Court held was that the meaning of the word “built”, in this case, would be the issuing of the code compliance certificate. The Osbornes of Auckland—not the Osbournes from television fame—took this case through to the Supreme Court. John and Helen Osborne had been arguing that the 10-year limitation on leaky buildings, basically, should start when the code compliance was issued; not when the physical building had been completed. They took it all the way through to the Supreme Court. The commentary at the time said that the effect of the ruling could mean that another 300 leaky homeowners could benefit from the funding assistance package.

I do not know what has happened. This was a year ago now, when the Supreme Court handed down that judgment. I do not know what has happened since. I do not know what has happened to the Osbornes. It would be interesting to know whether John and Helen Osborne have, in fact, sought to be registered under the funding assistance package and to get the benefit of this scheme. So that is, basically, what the bill does and the effect of Part 2 will be to slightly increase the pool of eligible homeowners.

I just have a couple of things that I would like some clarity on but, first, I do want to reiterate, as I said in my earlier contribution on Part 1, that this bill will seek to define what the built date is, which is not actually defined in the primary legislation. As I understand it, the built date is 10 years after the code compliance certificate is issued. But what I do want to ask—and it is unfortunate that we do not have the responsible Minister, Nick Smith, here, because there is an issue around the weathertightness of homes that has a direct relationship to what is happening within the Canterbury rebuild. That, for many of the constituents who come through the doors of my office and the Hon Clayton Cosgrove’s office and the other Christchurch MPs’ offices, is around the repair strategy that is stymied because of the implication that there might be weathertightness issues with the home. So a lot of Earthquake Commission issues are held up because of this type of issue.

What I would like to ask the Minister is: if that becomes part of the Earthquake Commission’s scope of works, the weathertightness issue, where do those residents in Canterbury fit into the Weathertight Homes Resolution Services Amendment Bill? Is there going to be an opportunity for their concerns to be addressed within this bill? I know it is potentially slightly out of the scope, but it has a big impact on the people who are part of the Canterbury rebuild, and I would ask the Minister whether he has got an answer to that question. Thank you.

It is a pleasure to take a short call on Part 2 in this Committee stage of the Weathertight Homes Resolution Services Amendment Bill. This bill is yet another remedial action that has occurred because of the very serious situation around lack of weathertightness and the difficulty that claimants have had. As has been said by several colleagues, the purpose of this bill is to remove doubt around the eligibility of certain claims in the period in which they are claimed. The bill has traversed clauses 1B and 1C of the 2011 Gazette notice and has inserted them into the bill. As my colleague Phil Twyford has said, the bill aims to deem eligible certain claims that were not eligible as a result of the term “built” in sections 14 to 18 of the Act, arising from the Supreme Court case of Osborne v Auckland Council. That ruling has potentially allowed a number of additional claims to be eligible under the Act.

There are a number of Supplementary Order Papers on the bill, but before we get to that, I would like to turn the attention of the Committee again to some of the clauses in Part 2 and particularly the drafting amendments to section 164, in clause 7, which are the provisions that amend the 2011 Gazette notice, and to ask the Minister whether he would clarify why, in subsection (2), it says: “In clause 1, delete ‘To qualify for a contribution from the Crown, all of the criteria in this clause 1 must be met:’.” I assume, although it is not entirely clear from the revision-tracked version of the bill, that that clause 1 is subsection (1) of section 164, which is the section in which it appears. I may have misinterpreted that. It may be the original clause 1, but I would like the Minister, if he could, to clarify that, because it does have an important implication. If it is section 164(1), then we are dealing with quite a wide set of qualifications of Crown contributions, and that, presumably, has fiscal implications, and I would be very interested to know how they have been quantified.

The original estimates of leaky building syndrome were a Crown cost, if I recall, of about a billion and a half dollars. Recently, I have seen estimates as high as $25 billion. In the context of this clause, which raises the question of Crown indemnity, I think it is worth our while reflecting on the genesis of the issue, both design problems and, importantly, the use of untreated kiln-dried timber at the request of the industry and in the absence of effective regulation from the Building Industry Authority. That is vested here, in the increased exposure of the Crown to claims, and the need to make remedial amendments that clarify the importance of removing the ambiguity that has crept up. I guess that is typical—when you rely upon the common law processes, even when set up under an Act like this, and you have thousands of cases going through, there is going to be a whole lot of variation, a whole lot of special cases that the law did not foresee. There is an old saying in jurisprudence, which is that hard cases make bad law. As it evolves, the law stretches to accommodate them, and every now and again, Parliament has to re-intervene and tidy up the mess, as it is doing today.

The Labour Opposition supports this bill. We support Part 2. We think the amendments are necessary, and that is regrettable. But as with other pieces of legislation where we think it makes a positive difference for our community, we are not a party that would hesitate to say we support the Government—that is, we are not standing on ceremony, we are not standing on party tribalism; we are trying to do what is best for the country. We have no hesitation in saying that it is sad it has got to this point, that yet another set of remedial amendments such as section 164(1) are required. But it has got to that point.

The Minister may also wish to take a call and clarify section 165 in Subpart 9, “Meaning of affected claimant”. Here we are at the heart of the matter, because so many thousands of New Zealanders have been affected by it and there has been so much ambiguity about who can claim and who cannot. Just imagine that we did not have the residual liability of the consenting authorities—[Bell rung]

The CHAIRPERSON (Hon Trevor Mallard): The Hon David Cunliffe, but with a bit of a caveat. He has mentioned, I think for the second time now, a clause in the bill. It would be really good if he could focus on the bill now.

Thank you, Mr Chairperson. That is very generous of you. Section 165(a) brings in a person who has “brought a claim under section 9 in respect of the construction or alteration of a dwellinghouse for which—(i) 1 or more code compliance certificates were issued for the relevant building work;”—and for whom—“(ii) the certificate or certificates were issued before 1 January 2012;”. There are then a number of subsections that follow, that impose quite stringent conditions: “(b) the chief executive or the chair decided, within the period starting on 1 April 2007 and ending on 10 June 2014, that the claim was not an eligible claim;”, and that the sole reason for that decision was that the claim failed to satisfy the criteria in the various sections that are noted—sections 14(a) through to 18(c)—and “(d) in reaching that decision, the chief executive or the chair treated the date on which the dwellinghouse was constructed or altered as a date earlier than the date on which the code compliance certificate … was issued”.

Anybody listening to that rather long and tangled exposition will note that there were about five “ands”. So although this section broadens the eligibility of claimants by allowing some earlier claims between the period 2007 and 2014, I would say that the number of specific hurdles that such a claim would have to pass amounts to quite an onerous process. Certainly, in my own electorate of New Lynn, in those bushy but rather damp hills around Titirangi, we have had a number of very, very sad cases where apparently very good homes have had to be all but completely rebuilt because of the terrible effects of leaky building syndrome or a lack of weathertightness, and many of them would fit into the time period that we are talking about here.

In section 166 of the Act, “Affected claimants deemed to have eligible claims”, in respect of a dwellinghouse, if the Gazette notice as amended applies, the claim must be treated as eligible from the date on which it would have been eligible if the chief executive or the chair had originally decided in the claimant’s favour. So the subsection here retrofits the decision. If it passes those five conditions, the five gates that we talked about in the previous section, then, effectively, it reconstructs the decision and allows it through as if it had been approved originally. It is messy. It reminds me of the Inland Revue Department, of income tax or other tax law, because there are always amendments upon amendments upon amendments. We as a Parliament find ourselves once again taking up the time of the House with remedial legislation that is doing its best to put a patch over what is, in fact, a very serious and difficult situation. Those are the matters that I wish to turn the attention of the Committee to in respect of Part 2, and I thank the Committee for its time.

In dealing with Part 2, I want to also return to the regulatory impact statement in respect of a number of matters. I just note—and the Committee and those listening at home should note—that the Opposition has raised a series of pretty serious questions in Part 1. There has not been one call from a Government speaker, and there has not been one call from the Minister in the chair, Michael Woodhouse, who is not the portfolio holder but none the less has a plethora of venerable officials behind him. There has been not one call, not one question answered, and that speaks volumes.

Either the Government or the Minister—and he could be, because he is not the portfolio Minister—is not confident in answering those questions but, you know, you do have pieces of paper, you do have eminent officials who could provide that. I am sure they are very willing to. In fact, I suspect they have written down on pieces of paper what the answers are. But there has been not one response to any of the issues raised, so one could be forgiven for thinking, as we go through Part 2 and raise further questions, that they will not be given houseroom by the Minister or the Government. That is how seriously they take this issue. Maybe they cannot answer the questions. But we will give it a go anyway.

In referring to the executive summary in the regulatory impact statement, one of the items that is cited is “Government provides assistance to owners to access bank finance for remaining agreed repair costs by way of loan guarantees to banks for loans made to owners eligible for the assistance and who can meet the bank’s lending criteria.” On the face of that—and my question flows from this—that is a good thing to do. I would argue that most of these homeowners could not of their own volition gain assistance from a bank, given the equity in their home or the value of their home has been destroyed. The question is, they are provided with some sort of loan assistance from the Government if they can meet the bank’s lending criteria.

My question to the Minister is that you cannot have one without the other—it is a bit chicken-and-egg—so what sort of lending criteria are there? It says in the regulatory impact statement that the Government has liaised with the banks and has spoken with the financial institutions, so what sort of special lending criteria might be put in place? Again, banks will be interested in having and securing some sort of value over the asset or the residual asset, so what, in essence, does that mean in practical terms? I commend the Government for promoting the notion that it is somehow going to stand—if we read this—as some guarantor or whatever, but I would like some explanation as to how that should work.

I also note in the regulatory impact statement that “Councils have identified the risk of being joined into litigation between the homeowner and other parties (e.g: developer, builder, architect) as a significant barrier to them agreeing to sign up to the scheme.” Have all local authorities signed up, is the question. If they have not, how many are exposed to litigation and therefore have been reluctant to sign up? This goes to the heart of Part 2 as we look at the criteria, as certain applications continue on the basis of amended law, as to whether affected claimants are deemed to be eligible in terms of claims. It goes right to the heart of it because if they cannot get their part of the assistance package up, then this is meaningless to them. It does not work.

I would be grateful for some sort of explanation as to what paragraph 10, third bullet point of the regulatory impact statement means in practical terms. What actually is the Government going to do? Is it going to stand guarantor for everyone? If it is, I would have thought that with the Government being the biggest entity in New Zealand, the banks’ lending criteria would be met absolutely. You cannot get any better security than a Government-backed guarantee. If the Government is going to do that, then what is the projected cost? Again, the regulatory impact statement does not make any reference to that. Is it an open-ended envelope for between 42,000 and 89,000—as per the advice we have—estimated claimants? What is the quantum? What is the exposure to the Crown? What is the fiscal risk? I think all these are particular issues that have not been addressed in any of the documents that lie on the Table or in the legislation I have seen.

Again, just to roll the dice and have another go, having faith in the Government, as sometimes we do, I would be grateful for an explanation that pertains to all parts—the whole legislation—as to what paragraph 4 in the regulatory impact statement means: “Therefore there is uncertainty about the costs and benefits of the option(s).” That pertains right across the legislation, to every clause, and I think that is a key issue. There are specialist lawyers who will be looking at this very carefully and they will want to know what that means.

The most cynical amongst us could simply say that the Government members, given that they are not interested in taking any calls—no one on the Government side has responded to any of the issues that have been raised—are not confident. Maybe the new backbenchers are not—you cannot blame them too much—but surely the Minister, backed by a department, is confident. He is duty-bound to put on the record of the House, in the Committee stage, answers to some of these questions. The portfolio Minister, I would have thought, would want to take a high degree of interest in this and answer some of those questions. After all, we know that Nick Smith is very good at bandying around slogans and slinging the proverbial when it comes to these issues in question time, and at other times in this Chamber, but when it actually comes to a surgical, precise examination of his legislation, the silence is deafening from the Government—completely deafening. Nick Smith may pay a price for that as he pushes this legislation through the House.

So out of goodwill, maybe the Minister might have another crack. I am looking at the officials, and they look like they are itching to provide some answers. That would be great. They cannot do that.

The CHAIRPERSON (Hon Trevor Mallard): Order! The member cannot refer to them.

Indeed. These answers can come only from the vacuum that is the Government, and at the moment the silence is deafening. Every leaky home owner would appreciate some clarity tonight. Every leaky home owner, I think, would look with goodwill at this legislation—Part 1, Part 2, and the whole shebang—hoping that it will assist them.

I just find it astounding that, after all Nick Smith’s rhetoric over years, when the rubber hits the road in the Committee stage, there are no answers. Either that says this is just a lot of political horse puckey, or a bit of propaganda, and there is not really a commitment to solving it—this is just a bit of a patch-up job—or maybe we have raised some pretty genuine issues that cannot be answered. If officials are saying they are uncertain about the costs and benefits of a proposal, that is a pretty heavy-duty statement for officials to make about legislation. Normally a Minister would leap to their feet and deal with that issue and extinguish it. Tonight we have had absolutely none of that—no explanation. Maybe we will get one; there are still 7 or 8 minutes to go before the final bell, and I think it would actually pay the Government to stand by its own legislation and, if Government members believe in it and believe it would work, provide that certainty.

I move, That the question be now put.

So, as we have been saying, there are three main provisions in the bill. The first deals with, basically, trying to deliver more clarity by inserting the qualifying criteria out of the Gazette notice and into the legislation itself. The second, as we have been saying, is a response to Osborne v Auckland Council and the question of definition of “built”. The third, which I do not think we have discussed sufficiently yet, is really about the issue of the qualifying claimant.

The point here is that for a claimant to apply for the funding assistance package under the Act, a notice to proceed must be issued. In order to get that notice to proceed, the claimant has to be considered a qualifying claimant, and there are a number of steps involved—

The CHAIRPERSON (Hon Trevor Mallard): I regret that I have to interrupt the member. [Interruption] I am sure he does not regret it. The time has come for me to report progress.

Progress to be reported presently.

House resumed.

The Chairperson reported the Organised Crime and Anti-corruption Legislation Bill with amendment and divided into 15 bills, the Waitangi National Trust Board Amendment Bill with amendment, progress on the Weathertight Homes Resolution Services Amendment Bill, and no progress on the Radio New Zealand Amendment Bill.

Report adopted.

The House adjourned at 9.57 p.m.