Council's leaky home appeal fails

Pauline Hough outside her leaky home in Byron Ave,Takapuna. Photo / Glenn Jeffrey.

A Supreme Court ruling has left New Zealand's 1.4 million ratepayers more exposed in the multibillion-dollar leaky-building fiasco.

The court has refused to allow the North Shore City Council's appeal that it was not liable to pay for the leaking building disasters at the 14-unit Byron Ave townhouses in Takapuna and the 21-unit Sunset Terraces in Mairangi Bay.

The High Court and Court of Appeal had both previously ruled that the council was liable.

The marathon case centred on who should pay for fixing the rotting homes, which PricewaterhouseCoopers estimates would cost New Zealand between $11 billion and $22 billion.

The Government has a scheme to share the load. If victims don't sue, they can apply for a 25-25-50 payment scheme to spread liability between the state, councils and homeowners.

Councils hard hit by the problem readily signed up to the scheme, hoping to move the bill out of the ratepayer's lap and on to taxpayers.

Paul Grimshaw, a partner at law firm Grimshaw & Co, which defended the Byron and Sunset homeowners, said the decision was a victory for all leaky-building victims.

He did not want to comment on its effects on ratepayers or taxpayers because his focus was on the victims.

"The council can no longer hide behind the notion that they are not responsible for the mess that leaky-home owners find themselves in. The court has said that the council must face up to its responsibilities. It must inspect residential buildings to ensure compliance with the Building Code. It doesn't matter whether or not it is a single house or a multi-unit development, whether the owners are the first or subsequent owner. Homeowners are entitled to rely on the council to do their job and get it right. We have some very happy owners," Mr Grimshaw said.

The Supreme Court ruling from Justices Elias, Blanchard, Tipping, McGrath and Anderson said the council had failed in its case.

"Councils owe a duty of care in their inspection role to owners, both original and subsequent, of premises designed to be used as homes.

"Subsequent purchasers of such premises are not barred from suing for breach of the duty owed to them," the court ruled.

The North Shore City Council has now been amalgamated into the Auckland Council.

Spokesman Glyn Walters said the Auckland Council would take the weekend to consider its response to the decision because it had "serious implications for ratepayers".

John Gray, president of the Home Owners and Buyers' Association, predicted huge annual rate rises in areas hardest hit by the disaster.

Billions of dollars were at stake, he said, after councils let their ratepayers down in many parts of the country by failing to properly inspect buildings when they were under construction.

The latest court decision was inevitable and simply North Shore City Council trying to defend the indefensible, persecuting leaky building victims, he said.

"This ruling is a great Christmas present for the Sunset and Byron townhouse owners ... The council was seeking to eliminate claims against it and it failed.

"It's hard to determine the liability of the new Super City in Auckland on this but it's going to be very significant - billions of dollars," Mr Gray predicted.

Inadequate funds had been set aside and shock rate increases were inevitable, he said. "Councils have been unrealistic, trying to ringfence themselves against claims.

"This is a serious problem for the ratepayers of Auckland and also for all New Zealanders."

Mr Gray said the Supreme Court action by North Shore was further persecution of victims but it came at a greater cost, because it set a precedent that councils were totally liable for the leaky-building disaster.

He said leaky homes were still being built and Government attempts to hatch the new 25-25-50 scheme were no solution.

People still contracted unlicensed and incompetent builders, said Mr Gray.

Even worse, councils proposed they would not in future inspect houses but still continue to issue consents, putting all the onus back on the building industry for inspections.

Big bill looming

* The Supreme Court has refused a council appeal that it is not liable to pay for leaky building disasters.

* 1.4 million ratepayers are now exposed to the possibility of having to foot the bill.

* It is estimated problems will cost between $11 billion and $22 billion to fix.

* Under the Government scheme, if victims don't sue, they can apply for a 25-25-50 payment scheme to spread liability.