High Court tells Downer to fix leaky units

The High Court has upheld an arbitrator's decision that a builder must put right defects in a leaky multi-million-dollar Auckland townhouse development.

Downer Construction (NZ) designed and built Silverfield Terraces, a 65-townhouse complex at 3 Wagener Place in St Lukes. Silverfield Developments (formerly Redwood Group No 8) sold all the units but most are suffering from water damage to varying degrees.

Silverfield wanted Downer to spend more than $4.2 million fixing the units, but Downer refused.

The two parties approached a building disputes arbitrator, Tomas Kennedy-Grant, who is also a mediator and legal adviser.

He ruled that Downer breached its contractual obligations by building units that were not watertight.

Downer went to the High Court, appealing against parts of the arbitrator's decision.

Justice Rhys Harrison has now issued a decision upholding the arbitrator's ruling, dismissing Downer's appeal and ordering the builder to pay Silverfield's costs.

In his decision, Justice Harrison outlined the project's history.

Downer built the townhouses between August 2000 and July 2001 and Silverfield sold most of them from the plans. But soon after unit owners moved in, they reported leaks, prompting Silverfield to commission a report from weathertightness experts Alexander & Co that found widespread problems.

There was a dispute about remedial works and the Auckland City Council said it would not issue a building consent for such work unless a cavity system and treated timber framing were incorporated in the repairs.

So the parties went to arbitration.

At the heart of the case was Downer's challenge to the arbitrator's ruling on specific performance - that it should have performed its contract on the townhouses.

The arbitrator found that Silverfield had proved 115 defects in workmanship on the townhouse project and ruled that Downer had breached its obligations.

Justice Harrison said it was the builder's responsibility to fix the townhouses.

"The principal term of the order requires Downer to remedy all examples of the following defects in the following units, together with all damage to the structure and building components of such units resulting from such defects and the remediation of those defects so as to render the units in question watertight," he wrote.

The arbitrator had not erred in law in making an order for specific performance, the judge said, dismissing Downer's appeal.

Downer is understood to be considering an appeal against the ruling.