Critics of a secret seven-figure financial settlement paid by Auckland Council to a North Shore homeowner after a house built to the roof-line had to be torn down have labelled the payout “shifty”, “inexcusable” and a “disgrace”.
Auckland mayor Wayne Brown was blindsided by the revelations when informed by the Weekend Herald last week.
He has fired a shot at council officials for not alerting him to the huge payout and called for “clearer protocols”.
The mayor has also hit out at councils effectively being the “last resort insurer” in many defective building disputes and ratepayers, facing uncapped financial liability.
Brown is vowing action and plans to raise the problem with the incoming Government.
Meanwhile, there are calls for greater council transparency when agreeing secret payments, especially when Auckland families face steep rates hikes, asset sales and service cuts as the cash-strapped organisation struggles to balance its books.
“Wayne Brown was elected on a mandate of stamping out these sort of shifty dealings,” Auckland Ratepayers’ Alliance spokesman Jordan Williams said.
“If heads aren’t rolling, the mayor ought to explain why.”
The confidential settlement, revealed by the Weekend Herald, was agreed in November last year just days after Brown was elected to office promising to “fix Auckland” and address the council’s perilous finances.
It has also emerged the council spent $530,000 on legal fees defending the case before agreeing to settle the matter out of court mid-way through a High Court trial.
The deal is shrouded in confidentiality, gagging the parties from divulging details of its terms.
Councillor Mike Lee was disgusted to learn of the secret payout this week.
“To be frank the whole affair is a disgrace. Apart from the waste of public money, the secrecy is inexcusable. I am finding all too frequently council uses confidentiality to conceal embarrassing information.”
Lee said the scandal was “another good reason” for the council’s finances to be opened for an independent inquiry.
Brown said he should have been alerted to the payout and had now “raised those expectations” with officials.
He confirmed the settlement was covered by the council’s insurer but subject to an excess and the policy terms and conditions.
“However, this is an example of the problem that councils face because the government expects us to be the last-resort insurer of building defects.”
Brown said the Building Act sets out acceptable building standards and councils sign off consents based on that code.
“As a consent authority, Auckland Council is often the last party standing in litigation because of joint and several liability, even when the council has made little to no contribution to the loss.
“Central Government has created this uncapped liability for local government, without any funding for it, which ultimately falls to ratepayers.
“This is not fair to ratepayers ... and is something I’m working to correct. I will be raising this with the incoming Minister of Building and Construction.”
Williams said shrouding the payout in secrecy made it sound like the council had something to hide.
Confidentiality clauses should not be used to shield the council from embarrassment, he claimed. Ratepayers were owed transparency.
“The costs [of the payout] are the equivalent of the annual rates bill of at least 541 ratepayers. It could be many times larger, but with the council refusing to front up we just don’t know.
“Hardworking Auckland families are already facing punishing rates hikes at the same time as service cuts, and yet even during a cost-of-living crisis Auckland Council continues to spray money around with no sense of accountability.”
But the council has defended the payout and legal expenses.
General counsel Helen Wild said the council had no choice but to respond when legal action was brought against it.
It continually assessed the risk of exposure to a claim, aided by legal and expert advice.
“Weighing up the potential costs of proceedings is an important factor we consider carefully when making a recommendation on settlement. In some cases, that assessment can change as the proceedings evolve.”
The council was committed to managing legal claims as “effectively and efficiently as possible”.
“Our preferred outcome is always to resolve claims at an early stage without incurring significant costs of a lengthy court battle. Unfortunately, that is not always possible and despite our best efforts sometimes it is necessary to defend a claim to a hearing.”
Wild said confidentiality was standard for settlements of legal claims and there was nothing unusual about this case.
Greenhithe homeowners Christopher and Kathryn Dron filed civil proceedings in 2020 against building company Home Design Company Ltd, concrete specialists Concrete Engineering Ltd and Auckland Council as the consenting body. The case involved allegations of defective building work.
As a result of the settlement, the trial was discontinued and no determination of fault handed down.
It is the second time the Eastvale Close property had to be demolished. The original 150-year-old villa was first bulldozed after being damaged by fire in 2018.
The property had nearly been rebuilt when alleged structural concerns emerged in 2019. Work was eventually stopped on the site, legal proceedings launched and the home eventually pulled down again.
A new home is now under construction.
The Drons, Home Design Company Ltd and Concrete Engineering Ltd, all declined to comment, citing confidentiality.
Auckland Council building consents general manager Ian McCormick said the case was subject to a “wide-ranging” confidentiality clause and the council was unable to disclose details of the settlement or underlying facts and allegations.
McCormick stressed the allegations were never determined in court and urged caution around reporting on “any unsubstantiated claims related to defects in the building work and the consenting and inspection process”.
Building work on the Greenhithe property was not “signed off” by the council, only the consents, he said.
“Once issues with the building work became apparent, council inspectors stopped work on the site. The building was never completed and no code compliance certificate was sought or obtained.”
Powerball has now rolled over to $10 million for Wednesday night's draw.