Auckland Council has paid out more than $300 million in confidential financial settlements in the last five years. Photo / Dean Purcell
Auckland Council has paid out more than $300 million in confidential financial settlements in the last five years. Photo / Dean Purcell
Auckland Council has forked out more than $300 million in confidential financial payouts to settle legal disputes, sparking concerns about transparency and claims of council liability potentially being “covered up”.
The payouts - spanning five years - are cloaked in secrecy, preventing the council or payment recipients fromdivulging details about the terms of each settlement or the amount paid.
However, figures released to the Herald under the Official Information Act show the negotiated settlements include dozens of defective and leaky building claims linked to the council’s liability as the city’s consenting body.
They also include employment settlement cases and severance payments, as well as cash payments to end civil damages claims against the council involving allegations of negligence, nuisance, defamation and privacy breaches.
The council is defending the payments and associated confidentiality clauses, saying it has no choice but to respond to legal claims, and endeavours to do so effectively and with minimal cost to ratepayers.
Revelations of the payouts come during a tough financial time for the council, which is wrestling with a post-Covid budget hole.
It has been forced to cut services, lay off staff and sell assets to help balance the books. Residents and businesses also face steep rates hikes as part of the council’s 10-year budget.
Auckland Mayor Wayne Brown has hit out at councils effectively being the “last-resort insurer” in many defective building disputes, with ratepayers facing uncapped financial liability.
He told the Herald he has raised the issue of joint and several liability with Building and Construction Minister Chris Penk.
Brown said Auckland ratepayers were losing millions of dollars due to current rules. He plans to meet with the minister this month to press the case for new legislation.
Auckland Mayor Wayne Brown says ratepayers are losing millions of dollars due to an uncapped liability for defective building work or leaky properties.
“This is a good example of when the law doesn’t make sense.
“Joint and several liability means Auckland Council, and in turn ratepayers, are footing the bill just because there’s no one else left to pay the bill - the last man standing.
“Councils end up financially liable for gaps in central government regulations.”
Councillor Mike Lee expressed concern at the figures and lack of transparency surrounding the payments.
Auckland councillor Mike Lee says nearly a third of a billion dollars in secret payouts is a significant amount of money. Photo / Jason Oxenham
“Nearly a third of a billion dollars paid out in secret over five years is a very significant sum of money, especially given the council’s financial challenges,” he said.
“I have problems with the ethics of this, given this is the public’s money, and as a councillor I believe the lack of transparency that seems to be inherent in such [a] practice means it is open to possible abuse.”
If the council was at fault regarding defective building claims, “rather than simply being out-gunned legally or out negotiated, how can there be [lessons] derived and improvements made if it is all covered up?”, Lee asked.
In November last year, the Herald revealed the council had made a secret seven-figure financial settlement to a North Shore homeowner after a house built to the roof line had be demolished due to structural concerns.
The Greenhithe home was demolished because of alleged structural concerns but is now being rebuilt. Photo / Sylvie Whinray
Critics described the payment as “shifty” and “inexcusable”, sparking calls for greater transparency around such payments and for the council’s finances to be opened for an independent inquiry.
The Herald then requested details of all financial settlements since 2018 that were subject to confidentiality agreements on behalf of Auckland ratepayers.
A response from Auckland Council general counsel Helen Wild showed up to $315m had been doled out in such payments in the five financial years to June 2023.
Defective building and weather tightness claims accounted for $305m. Most of the claims concerned multi-unit apartment buildings, Wild said.
“Auckland Council has no choice but to respond when a defective building claim is made. We are committed to managing claims against the council as effectively and efficiently as possible.
“The council has consistently voiced its concern that the cost of the claims falls disproportionately on building consent authorities and continues to call for the reform of joint and several liability, and advocates for a cap on the liability of councils in building defect claims.”
Auckland Council paid out $305 million in confidential financial settlements for defective or leaky building claims in the last five years. Photo / 123RF
Meanwhile, more than $5m was spent settling civil damages claims against the council, Wild said, mostly involving allegations of negligence.
The council would not provide a breakdown of the claims, saying doing so could breach confidentiality provisions, undermining the dispute resolution process.
“There is a public interest in agencies such as [the] council being able to enter into confidential settlement agreements to resolve disputes,” Wild said.
“This avoids litigation or other lengthy dispute resolution processes, which reduces pressure on the courts and the need for further resources to be expended from public money on the administration of justice.”
A further $5.5m was spent on severance payments to settle employment disputes, though only some of these were subject to confidentiality agreements.
Figures released in the council’s annual reports show there were at least 230 such payouts in the five years to 2023.
Severance payments were in addition to final salary payments, holiday pay and superannuation.
Lane Nichols is Deputy Head of News and a senior journalist for the New Zealand Herald with more than 20 years’ experience in the industry.
