Leaky home owners 'out on limb'

The $20 million claim made by 153 owners of the Sacramento complex in Manukau City is acting as a test case for the leaky homes problem. Picture / Dean Purcell

Pressure is growing on the Government to help leaky home owners as a result of the Court of Appeal striking out a claim by an Auckland apartment complex against the former Building Industry Authority.

The $20 million claim was made by 153 owners of the Sacramento complex in Manukau City and was a test case to determine whether the former Crown agency had a legal duty to leaky home owners.

Sacramento lawyer Paul Grimshaw, of Grimshaw & Co which acts for 5000 leaky home owners in Auckland, said long waits for compensation meant the Government had to step in.

"The Government doesn't need to admit liability, but it does need to provide some sort of interest-free loans to allow home owners to fix the problem so that it doesn't worsen."

Leaky Homes Action group leader John Gray said he was disappointed by the judgment because it left so many people "out on a limb". They had their buildings approved by independent certifiers who were now out of business.

"The Government has side-stepped liability and is prepared to take it to the highest court in the land, though it says 15,000 homes are affected nationally and their estimates of repair costs [$1 billion] are woefully beyond the true costs.

"Meanwhile people are sitting in the leaking, rotten, poisonous homes. The Government should step up, acknowledge it's a national disaster and provide compensation or assistance to enable safe and sanitary repairs."

Mr Gray said he had hopes of progress. The action group was consulted in a review of the effectiveness of the Weather Tight Homes Resolution Service and hoped to meet Building Issues Minister Clayton Cosgrove this week.

Auckland deputy mayor Bruce Hucker said councils were working for Government relief through Local Government New Zealand.

In addition to concerns that councils might have to bear some repair costs if other parties were unable to, there was concern that processing costs were taking 65 per cent of settlements.

Mr Grimshaw said the owners were thinking about whether to seek leave to appeal to the Supreme Court.

He said Sacramento owners were also suing defendants such as the building certifiers, builders, architect, suppliers of the cladding systems, project manager, BRANZ Ltd, the developers, suppliers of concrete tiles and lead flashings, and defendants' insurance companies.

Many of the defendants are insolvent and their insurance companies have declined cover.

Auckland barrister Derek Firth, a building law specialist, said the Court of Appeal decision would draw much debate and he believed it should proceed to the Supreme Court - even if the Government has to fund it.

"It is insane that a matter of this importance should depend on the action and be at the cost of one block of apartment owners," said Mr Firth. "It would be even worse if it is now left to someone else to take another case knowing they will have no chance of success in the High Court and Court of Appeal."

In 1998 the BIA declared that use of untreated timber for house framing was an acceptable solution for meeting building durability requirements.

Sacramento was built in 1999-2000 from fixed face monolithic cladding over untreated pinus radiata framing.

Leaky building syndrome afflicted the Sacramento to the extent that some units have been demolished and total losses in the complex are about $20 million.

Sacramento owners sued the BIA saying it owed a duty of care to them over the cladding system and for being negligent in supervising the firm of building certifiers and allowing the firm to have inadequate insurance cover.

The Crown, as successor to the liabilities of the BIA, appealed to the Court of Appeal after it failed to have the claim dismissed by the High Court.

It said the BIA 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.

Delivering the judgment of the court of appeal last week, Justice William Young said the relationship between the BIA and building owners was extremely limited.

The court had 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.