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Court opens door for non-residential leaky building claims

In a landmark decision, the Supreme Court has paved the way for owners of non-residential buildings to sue councils for leaky building syndrome.

The court decided the owners and body corporate of an Auckland apartment block can continue their multi-million dollar battle against the now defunct North Shore City council for negligence.

The owners of the building and the body corporate claim the council breached its duty of care when it passed the building as compliant with the building code.

The building, Spencer on Byron, is a 23-storey mix of hotel rooms and six penthouse apartments.

In a judgment released today, the court decided 4-1 that non-residential properties should also be owed a duty of care by the council.

This leaves the door open to businesses, schools and other mixed-used buildings to claim against the territorial authorities for negligence.

Chief Justice Dame Sian Elias, Justices Andrew Tipping, John McGrath and Robert Chambers found in favour of the body corporate.

Justice William Young dissented.

The majority says a duty of care is owed regardless of the nature of the premises.

In his judgment, Justice Chambers pointed out the decision would be restricted to work done by councils while the Building Act 1991 was in force.

Justice Young says given commercial buildings are owned by investors or owner/occupiers, any losses are business in nature.

He says it is inappropriate to spread business losses across the community as ratepayers would foot the bill.

The Supreme Court, in an earlier decision known as Sunset Terraces, had decided residential owners could sue territorial authorities. It left open the question of whether businesses could also.

Access the full judgment here:

More by Victoria Young

Comments and questions

Golly!.... this will be as welcome as a plague rat at a barmitzvah-
And here is the best bit ...guess who will then get to pick up the TAB - just us little old ratepayers of course ....Time to head for greener [or maybe that should be browner..] pastures methinks!

I've heard that just like the insurance industry & eqc in Chch are ducking for cover any opportunity, so too the local authority insurer who has also told the councils to s*d off when any claim settlement might be considered. As rightly mentioned the poor suffering ratepayer will be hit as usual.

Where the residual bill sits is a secondary issue. If the city council was negligent in signing off shoddy (soggy) buildings without a proper inspection process then they should rightly shoulder some of the blame.

Can you please post a link to this judgement.


Hi Damien,

I've popped a link into the story just now.


The Council gets sued, but it's the ratepayers who pay.

The biggest blame is to be with the designers who want to do less then minimum all the time and would cry to Polticians when Councils do want these people to follow rules. Guess who chooses these cheap designers ??? Cheap gets you cheap so stop blaming councils for a change and take some personal responsibility

A parallel can be drawn from the recent US Supreme Court decision that gave equal rights to corporations for election campaign contributions. That has completely skewed the democratic process and driven the up coming presidential race into a two horse event funded by the same backers.

By increasingly equating corporate entities with individual citizens, the NZ Supreme Court has added to the scourge of corporate power. With the rise of corporatism we have entered a new and dangerous phase of inverted totalitarianism, but where the phrase still holds true, "All animals are equal, but some animals are more equal then others."

In the case decided by the Supreme Court the people most affected were individuals who bought units in the defective building. They were not "corporates". Also behind every "corporate" are individual shareholders and investors. Why should they be denied the rights of any other individual? The same logic applies to your politcal argument.

Because corporations get tax privileges for taking the risks, whereas housing is a basic 'human' right for the ordinary citizen. The owners took the gamble of incorporation or owning their homes in a semi business arrangement. They chose to blur the distinction of the home ownership or the human right to shelter and the advantages of making a calculated business decision. Like as I was saying, the Supreme Court has helped codify that blurring between the corporate and the individual.

I suspect that a reason for Council charges spiralling out of control is the need to prop up leaky building payouts

It is surprising in some respects that this 'duty of care' judgement has taken so long in coming. Those in the know in development, design, council approvals and construction circles have long recognised that the lack of investment in trade apprenticeships, the 'dumbing down' of design scope to enable designers (architects and engineers) to survive when fees are competitively tendered, the fast pace of development and building approvals would lead to a 'train crash'. The residential sector is but one of those which has suffered by the same cause and effect problems the industry has suffered. Sadly for ratepayers the council may be the "last man standing!'

What I find of more interest is ratepayers who complain that they are having to cover Council pay outs for leaky home damage. How many ratepayers have bothered to use their vote against the political parties or council members who oversaw the council during those sign offs of badly built homes? Has anyone asked the real question: why have NO politicians (local or national) asked for the names of the council workers who signed these leaky home off? And has any journalist or researcher gone behind the names of the companies that built those homes and buildings to locate the recurring architects, draughtsmen and women, and/or business owners during this time?

The law states council workers are protected as individuals, and its the council that bears the consequences. The law also states the last man standing pays 100% of the cost. With architects, builders etc able to hide behind limited liability companies... which have all gone bust, the council is the last man standing. It's not the local politicians, but parliament that makes these laws.

Time that Town Clerks and Building Inspectors plus Councillors who were in the seat at the time were called to account and at least named and shamed and made to cough up some of the costs. The innocent tax payer/rate payer shouldnt have to bear the cost certainly not the whole cost. These people were negligent didnt do their jobs and must be held to account. Citizens are sick and tired of having to pay for the gross incompetence of over paid under performers.

The solutions to this are not in the hands of ratepayers, but Riskpool, the TA's so-called insurer; cutting the tens of millions being wasted on the Heaneys law firm to spend five times on what they claw back from the victims; making government pay for their dodgy (Clark and Cullen, who else) BIA scam; and taking James Hardie and CCH + Fletchers through to the Supreme Court for a billion-five each.
Stop the pointless litigation and fix.....without paying any council a fee or taking GST on the rebuilds. Can the wasted fee that goes to one of our great scams, Branz....which has nothing to do with either Aussie or Kiwi standards
Then start an ACC-type fund which all developers, builders and owners pay into....and let the lawyers and expert witnesses go an pack shelves in New World.

As long as the affected buildings are in Wellington/Auckland?Ch.Ch, the cost was always going to fall on the ratepayer and taxpayer.
The court case was only held to legitimise the theft.

We need to take a closer look at the role of judges and their decisions. How can one judge get it wrong? - thank goodness there was more than one judge.

Since when do judges rule on what should be appropriate ! - they should only rule on facts and precedents - not what they feel should be right.

I find it astonishing that this case had to go through the courts. Councils were and still are responsible for inspecting all properties subject to the Building Act and code - it should not matter whatever the building type.

Yes we will all end up paying for this mess - in more ways than one. Whilst the government was responsible for changing the Building Act has not been held to blame (so far at least) - I suspect given time it will also have to bail out councils who run into financial strife. There is only so much a ratepayer will tolerate their rate rising.