Landmark leaky building case won

LEAKY: Spencer on Byron in Takapuna.
North Shore Times
LEAKY: Spencer on Byron in Takapuna.

In what is being hailed a landmark case, a leaky Takapuna hotel and residence has won its case against its local council.

The Supreme Court released a decision today saying the former North Shore City Council owed a "duty of care" to ensure the Spencer on Byron development complied with the building code.

The 249-residential unit complex, 200 of which are leased to a hotel, was certified by the council but later found to have defective cladding.

Lawyer Paul Grimshaw, who acted for the Spencer on Byron body corporate, said the decision was historic for non-residential building owners.

"To date, in a line of cases dating back to the 1970s, the courts have only imposed duties of care on councils in respect of residential premises."

Lower courts had rejected previous claims by non-residential property owners.

He now believed "tens of thousands" of leaky buildings had a case.

"Now the owners of offices, factories, churches, hospitals, motels, hotels, schools and all other buildings may sue councils in respect of their negligent inspection and certification of buildings in order to recover damages for necessary remedial work."

Grimshaw thought developers, architects, project managers, builders and contractors were now also potentially liable.

The building's body corporate chairman, Wayne Powell, said he was delighted by the rulings.

"It seemed illogical to us that the council could have a responsibility for residential buildings that leaked and not for something like the Spencer, which is a mixture of residential and commercial."

Although no costings had been done on the remedial work, Powell said it would be ready for the next court date in October next year.

Grimshaw said the Supreme Court had found the city council liable but negligence and any costs would be determined in the High Court.

The Auckland City Council, which assumed responsibility for the North Shore City Council liabilities after the super-city merger, said it was good to have some further clarification.

"Until this decision, there has been some doubt as to whether or not the owner of a commercial building was entitled to sue a council for damages reflecting the cost of bringing the building up to standard."

The council had made provisions for potential future liabilities for leaky residences, but not for commercial properties, council media manager Glyn Walters said.

Only one of the four judges involved with the Supreme Court ruling disagreed with the decision.

Justice Young said commercial buildings were owned by investors or owner/occupiers, and any losses associated with construction defects "are investment or business in nature and thus, are not of a kind that is obviously appropriate for spreading amongst the community, via territorial authorities".

But Justice Tipping took the view that councils could be expected to have insurance for cases of negligence.

"There is a risk that councils may be liable for past negligence on an unindemnified basis, but that does not persuade me that a duty that is otherwise appropriate should not be imposed."

Grimshaw recommended all owners of defective properties building in the last 10 years consider their position, as time was of the essence.