Editorial: No end to leaky home debacle

The Herald has been "banging on", as the Prime Minister once put it, about the leaky buildings scandal for longer than we would wish. This is not because we have yet to find who is at fault - that became very clear very quickly - but because the owners of leaky buildings are having a great deal of difficulty pinning the blame where it plainly lies, at the door of the Government's former advisory body, the Building Industry Authority.

Last week the owners suffered a severe setback when the body corporate of the Sacramento apartment complex in Auckland lost a claim again the Crown in the Court of Appeal. Many will wonder how the court could possibly come to that decision, for the facts are well known.

During the 1990s builders adopted a form of construction known as face-fixed monolithic cladding that they attached to the timber frame. It helped produce the neat, box-like buildings that are now commonplace. In 1995 the Standards Association of New Zealand approved the use of untreated timber for building frames. The combination of porous cladding against untreated framing has caused widespread rot.

The Building Industry Association was the statutory body charged with advising the Government on building controls, granting accreditation for building products and processes, and approving building certifiers who were supposed to carry insurance in case of claims against them. In 1998 that body endorsed the Standards Association's ruling on untreated timber, issuing a notice that it "met the durability requirements of timber building elements".

The Sacramento body corporate sued the Crown alleging the Building Industry Association had failed to take sufficient care over the use of monolithic cladding with untreated timber and had been negligent in its supervision of Sacramento's building certifier and the certifier's insurance cover. On the first claim, at least, it is hard to see how it could fail. Yet it has.

The Court of Appeal has ruled that the Government's advisory body did not have sufficient "proximity" to the problem to have a legal duty of care. It cites precedents for this conclusion, of course, but the justice of it will escape most people. How can a body charged with approving building products and processes escape liability for a common practice that has resulted in so many faulty buildings that the whole system of regulating the industry has since been changed?

The leaky buildings problem occurred under a system of "light-handed regulation" introduced to many industries in the 1990s. The idea was that competitive suppliers and consumers have sufficient incentive to check the safety and reliability of goods and services themselves, so that regulatory bodies need not be as prescriptive as they used to be. The Appeal Court has judged the Building Industry Association in the light of that time.

But even in a regime of minimal regulation, the association ought to have been more vigilant. Builders had a right to rely on the association's verdict on untreated timber even if they had doubts about the wisdom of attaching porous cladding to it. And few intending buyers of the buildings would have had the knowledge necessary to protect themselves.

The buyers of leaky buildings have been waiting a long time to discover where the buck stops. By the time the rot set in developers had ducked for cover, building certifiers were out of business and the insurance they were supposed to carry was not available. Now the Appeal Court has overturned a High Court ruling that the Building Industry Association was finally liable. The buyers may have to go to the Supreme Court for the compensation they deserve.