$20m leaky home case struck out

Who has to repair homes in the Sacramento complex will depend on the outcome of other cases. Picture /Kenny Rodger

A multimillion-dollar claim against the former Building Industry Authority (BIA) over an Auckland apartment complex with leaky building syndrome has been struck out by the Court of Appeal.

Today, 153 owners of apartments and the corporate body in the Sacramento complex in Botany Downs, Manukau, lost their claim against the Attorney-General. They have other claims against more than a dozen other parties.

The Crown, which was being sued on behalf of the BIA - now merged into the Building and Housing Department - asked the Court of Appeal to strike out the biggest claim against it for more than $20 million.

It was a test case to determine if the BIA had a legal duty to the $9 billion building industry, plagued by leaky building syndrome.

The BIA had claimed its role included registering private building certifiers to check building code compliance, give high-level policy advice and recommend code changes.

It did not check workmanship or design of individual buildings.

The Sacramento complex, built in 1999-2000, had a monolithic cladding, aiming to give a seamless outside appearance fixed directly on to untreated pine timber framing.

Some of the units appear to be unsalvageable and some have had to be demolished.

Justice William Young, delivering the judgment of the court, said leaky building syndrome, which emerged in the later 1990s, was associated with water getting through the external membrane of a building and inadequate water management, resulting in the timber framing retaining enough moisture to cause fungal activity causing decay and posing health risks.

The type of cladding over untreated timber of the Sacramento building was primarily implicated in the syndrome.

The court had to decide if there was duty of care by the BIA to the building owners.

The owners had claimed the building certifier, the builders, the architect and the suppliers of the cladding system were negligent along with the project manager.

They said the BIA was negligent in supervising the building certifier and in its approval of the insurance the certifier carried and owed a duty of care over the cladding system.

Justice Young said in determining whether a duty of care exists the ultimate question for the court was whether it was just and reasonable that such a duty be imposed. The Court looked to the proximity or relationship between the parties.

The further removed the public body was from day-to-day physical control over the activity which directly caused the loss, the less likely the courts were to impose a duty of care, he said.

The court was satisfied there was no duty of care in any of the instances claimed by the owners.

He said "responsibility for the durability of the Sacramento complex might be thought to rest far more directly on the developers, designers, builders and code compliance certifiers than on the BIA".

The judgment could have consequences for other claims against the BIA.

The lawyer for the Sacramento owners, Paul Grimshaw, of Grimshaw & Co, said owners were disappointed at the decision because in February the High Court ruled that leaky building home owners had the right to sue the authority.

"Owners are now considering whether to seek leave to appeal to the Supreme Court," said Mr Grimshaw.

Greg O'Sullivan, of building surveying company Prendos, said the decision gave clarity but was a "day of shame" because the whole leaky home problem rested with Parliament in general.

"The decision says that the Government through its Crown agency [the former Building Industry Authority] can make decisions and not be held responsible by society."

Mr O'Sullivan said the BIA had allowed private building certifiers to have less than adequate insurance to meet home owners' claims.

The authority had also approved the use of untreated timber and had ignored adequate warning from Prendos during 1999-2000 about durability concerns with untreated timber.

"Unfortunately, the ratepayer is going to cop a large amount of the cost because of the councils being reliant on the decisions given to them by the BIA."

The case

* Leaky building owners sued the Building Industry Authority (BIA), claiming it effectively allowed poor construction methods through a badly written Building Code.
* The Court of Appeal has thrown out the claim, saying the BIA was too far removed from the day-to-day decisions which caused the leaks.
* The decision could affect several other cases which aim to pin responsibility on the Government-appointed body.

- NZPA (Additional reporting by Wayne Thompson)