Townhouse owners fight for justice

John Gray (centre) and other residents of Ponsonby Gardens who are part of the first group to be awarded for a leaky home claim. Picture / Richard Robinson

When the shower fell through the ceiling, it produced a domino effect for John Gray and fellow owners in the Ponsonby Gardens townhouses. It was February 2000. The 10 buyers had endured a stream of problems virtually since they moved into the Vermont St homes, built by Tim Manning's Taradale Properties in 1995 and 1996.

During a winter downpour in 1998, Gray arrived home to find water cascading into the internal garage and laundry. The problem was traced to poorly applied waterproofing on an overhead deck and repairs were carried out by the original installers, Architectural Waterproofing .

"We weren't to know they were just putting a bandaid on, not solving the underlying causes," says Gray.

The names Manning and Taradale were not then synonymous with leaky building disasters such as Sacramento in Howick, The Grange in Albany, Vista Rosa in Mt Albert and West End in Grey Lynn.

In the mid-1990s, Manning was riding the wave of an immigration-fuelled property boom, and had a reputation for stylish apartments and townhouses.

The Ponsonby Gardens townhouses designed by Peter Townsend were no exception: two storeys, three bedrooms, clad in weatherboard and stucco, with complex roof shapes and upstairs decks. They came with European fit-out, internal garaging and private gardens.

The buyers ranged from busy young professionals to those looking forward to retirement. They had in common a desire for low maintenance and proximity to Ponsonby cafes and restaurants.

"I EXPECTED TO ENJOY LIFE in the inner city in a new, upmarket, low-maintenance home after many years in a large villa," said unit 8 buyer Elizabeth Berry. She ended up spending her retirement savings on repairs.

Gray, whose job as an airline pilot would take him overseas for long periods, had also had his fill of do-ups.

Plans showed the cladding system would include a ventilated cavity, the kind councils now insist on to prevent framing timber from rotting should water get in. And the brand-new homes were signed off by Auckland City Council inspectors as complying with the building code.

But after paying nearly $500,000, the proud new owners soon had cause to wonder. Several units leaked in heavy rain, through the roof or around windows and ranchsliders, and cracks began to appear in the stucco.

"It looked like a $500,000 product but it was shoddy construction," says Gray.

At first, Taradale sent someone to do repairs. But as problems escalated in 2000 and 2001, the owners found Taradale more and more evasive.

"There were endless phone calls, faxes, assertions, promises and arrangements made but not kept," says an affidavit by unit 9 owners Lynne and Leon Roborgh.

As the incidents escalated, Manning wrote to all owners that the problems were "bigger than Taradale", that the firm was "only the co-ordinator of services" and that architects, builders, roofers and other contractors would need to be consulted. They heard nothing more.

After the shower incident, Gray knocked on his neighbours' doors and heard similar depressing stories.

Faulty plumbing and a lack of waterproofing allowed water to seep through tiles and rot the particle board flooring in the upstairs bathrooms of several units.

Invited to view repair work on the deck on unit 10, he saw floor joists rotten to the bottom plate. Then a penny dropped. With the wall cladding removed, he could see no sign of the ventilated cavity between the stucco and the framing, as specified in the council-approved plans.

Instead, sandwiched between the framing timber and the plaster exterior was a woodfibre lining called Triple S which, if its edges are left unsealed, soaks up water like a sponge.

Frustrated owners called in building assessors and were shattered to discover their homes riddled with rot. On one unit, the assessors itemised building defects which ran to three pages. Getting nowhere with Taradale, the owners undertook repairs at their own expense.

Each would spend about $80,000 stripping back the cladding and rebuilding. The repairs would take months - the owners living with dust, noise and strangers in their homes. Windows and doors were removed so proper flashings could be installed, roofs repaired and stucco reapplied - this time with ground clearance.

The tiled bathrooms were ripped apart and the particle board replaced, this time with a waterproof membrane before retiling. While the decks were repaired and waterproofed, several owners took the architect's advice to enclose them.

"For several winter weeks only building paper separated me from the outside world," said Elizabeth Berry, a retired doctor. "It was cold and uncomfortable and a serious security concern."

ON A BLUSTERY DAY LAST October, seven owners filed into the eighth floor of an Albert St office building - the newly opened Auckland office of the Weathertight Homes Resolution Service. They entered a room laid out not unlike a courtroom - three rows of desks facing adjudicator Tony Dean; a table and chair for witnesses to be cross-examined; grey flecked carpet, grey walls, grey vertical blinds.

The claimants were seeking a combined $1.36 million, including compensation for the repair costs and damages for stress, stigma and inconvenience and, for two owners, loss of rental income.

They had claims against Manning, the city council, architect Peter Townsend, site manager Steve Lay, project manager Bruce Christian, and contractors Architectural Waterproofing.

It was six years after the problems began to show, three years since repairs started and 20 months since Gray's claim was filed.

Set up at the height of the leaky-buildings scandal in 2002, the Weathertight Homes Resolution Service was intended to give leaky-home owners a cheaper and quicker alternative to the courts. But in its first 18 months, the service had resolved only about 150 of more than 2000 claims received.

The Ponsonby Gardens hearing was hailed by the service as something of a landmark. It had just opened the Auckland office in a move to ease the claims backlog. And this was the first hearing of a group claim - until then, the service would deal only with individual claimants.

But the case would only underscore dramatically the limitations of the leaky-homes legislation and the uphill struggle facing claimants. To get this far had already taken 18 months of assessments, evidence gathering, pre-hearing conferences and legal manoeuvring.

Piecing together who did what on site eight years after construction was like navigating a maze. Gray struggled to gather evidence on the building rules and practices in use at the time. Architects and engineers ducked for cover rather than supply expert opinions.

Gray found the council's records woefully lacking. The council would not even supply the names of officers who inspected the property.

But help came from unlikely sources - sympathisers in regulatory bodies and manufacturing firms anonymously passed on documents - a 1993 Branz publication on flashings, a 1996 stucco good-practice guide indicating that the industry was already well aware of the leaky-building problem.

"It's the human element," says Gray, "people realising this is a huge problem which has a huge impact on people."

The claimants would submit more than 1500 documents and Gray found himself swamped by a mountain of case law, building regulations and respondents' submissions. He spent 800 hours on the case.

The Weathertight Act prevented them from claiming legal costs, had they gone in with a lawyer. Gray says the owners were encouraged into thinking they could represent them-selves. But in practice the service is not the level playing field Parliament envisaged. What builder, faced with the prospect of a $100,000 bill, is going to turn up without a lawyer? And with councils increasingly a target - for having approved leaky buildings - they, and their insurers, are employing the best in the business.

ON THAT FIRST DAY, THE claimants, dressed in bomber jackets and cardigans, were confronted by five lawyers in suits. Among them, for the council, Rodney Harrison QC, well known for civil liberties cases.

He would spend the next few months going between efforts to get Ahmed Zaoui out of jail and debating the significance of rebated window flashings, nail lengths and horizontal control joints.

The council also had insurance law experts Heaney and Co on board. Its legal fees and expert witnesses would cost ratepayers $320,000 - to oppose other ratepayers who thought the council building inspectorate was there to protect them from shonky buildings.

The hearing was expected to take two weeks. But it would drag on, with adjournments, for 2 1/2 months.

The claimants' case, Dean noted on that first morning, was not excessively complex. The homes had been stripped back and repaired and the causes of the leaks and rot pretty well established: poorly installed waterproofing membrane; lack of mechanical flashings inside windows and doors; cladding buried into concrete or decking; the sponge-like qualities of exposed Triple S.

"Time limits in this case support the belief we should get on with this case rather than continue to shadow-box and delay," said Dean, a building surveyor and arbitrator with years of industry experience.

BUT THE LONG-ANTICIPATED first day lasted barely two hours. Architectural Waterproofing (AWL), blamed for faulty waterproofing on the decks and roofs, had put itself into liquidation three days before the hearing and was struck out.

This upset not just claimants but respondents, who expected AWL to be liable for a share of any costs awarded. The council, alleging an abuse of the Companies Act, was granted an adjournment to head to the High Court, where it succeeded in having AWL rejoined.

When the hearing finally started, it was largely devoted to cross-examination. Claimants and respondents were required to put their case in writing beforehand so there were "no surprises". But as leaky-home owners have found, sheeting home responsibility and getting adequate compensation can be like trying to catch an eel barehanded.

Tim Manning had several projects on the go in the mid-1990s as Auckland underwent an apartment building boom. He had placed Taradale Ponsonby Gardens, renamed Sigatoka Investments No 5, in liquidation in September 2003 and could produce few financial records.

Manning would maintain he was not the builder - a surprise to owners who dealt with him directly when early defects emerged. Project management staff, quantity surveyors and outside builders were employed to do the work.

The management team - Bruce Christian as project manager, Steve Lay as site manager and foreman Dave Gibbs - had come from Manson Group, another prominent builder. All three denied being the builder. Lay said he was not a builder and had delegated responsibility to site foreman Gibbs. At a pre-hearing conference, Lay unsuccessfully sought to have Gibbs joined as a party. Manning, Lay and Christian were left to lay blame at each other's door.

The city council wanted the Building Industry Authority, which administered the building code, included as a party, but it, too, was exempted.

Called as a witness by the claimants, authority chief policy adviser Bruce Porteous would lay responsibility for enforcing the building code firmly with councils. The council tried but failed to have itself removed as a party.

The council maintained its inspectors would not have turned their minds to leaky-home defects in 1996 and that architect Peter Townsend should have detected the construction flaws. Townsend claimed he was virtually shut out from oversight of the project and that Lay was responsible for quality and for obtaining building code compliance at the end.

Manning said he relied on Lay, Gibbs and the council for quality control on site.

TWO BUILDING INSPECTORS called as witnesses (a third mysteriously could not be located) had little recall. For Barry Holsted, Ponsonby Gardens was one of his first jobs and his inexperience and lack of training would be criticised. "Two things I remember about the site were a plug going down a drain and for some reason cobblestones," he said. There were no cobblestones.

The council argued that its inspectors could not have foreseen the problems; that practices that would ring loud warning bells now, such as the absence of flashings on parapets, were acceptable at the time.

It argued that aspects of the claims fell outside the narrow confines of the Weathertight Act, which limits claims to damage from water penetrating from outside. The claims for the rotten bathrooms would be dismissed.

The council accused some owners of contributory negligence and generally sought to minimise any costs awarded. It argued that claims for stress and stigma were ineligible.

Dean would dismiss the stigma claims, saying the claimants could not prove their homes - now repaired and rebuilt with ventilating cavities - had dropped in value.

The council saved its trumpcard for closing submissions - challenging the jurisdiction of the adjudicator, saying Dean must determine the case on the evidence presented rather than applying his industry knowledge. Dean, who had promised a verdict by Christmas, would feel compelled to await the outcome of a District Court appeal concerning adjudicators' powers.

The hearing for the most part was technical: the merits of mechanical versus silicon flashings, the qualities of Triple S, correct application of waterproofing membrane, the distinctions between a project manager, site manager and a builder.

Expert witnesses came and went, most made to look foolish under cross-examination.

Harrison - the Silver Fox - and Dean, a white-bearded, stately figure, would spar occasionally, as Harrison chipped away at the weathertight legislation and Dean's jurisdictional powers.

But Dean, cajoling one minute, stern arbiter the next, might as well have been a judge, occasionally compelled to remind the lawyers of his industry knowledge and arbitration skills.

Manning's barrister, William McCartney, applied a blowtorch to site manager Steve Lay over the extent of his responsibilities and his building experience.

Unit 6 owner Mike Shepherd was also grilled, over his claim that his decision to buy was influenced by Manning's personal guarantee. Several claimants sat through the lot.

The notable absentees were Architectural Waterproofing - which refused to attend - and Manning. After the opening, he would breeze in and just as quickly disappear.

Not until the hearing's final week, in early December, did he take the stand for cross-examination. Wearing smart-casual clothes, hair neatly cropped, he looked and played the part of a busy, successful operator. He seemed one step removed from it all, giving rambling, circular replies.

At one point, Dean congratulated him for a one-word response. At others, his replies verged on the glib. "Gotcha" and "yep" he would tell cross-examining lawyers. "I've completed 45 developments in my career and I'm only being sued on two."

His signature might appear on documents, but he had not necessarily written or read them. "I'm dyslexic. Most of the time I skim and get people at work to tell me the important bits."

It would emerge that Ponsonby Gardens had run badly off the rails; the budget blew out from $2.5 million to $3.5 million. Manning wanted it reined in. There were moves to reduce architect Townsend's role and change Lay's terms of employment, with incentives to bring the project in on time.

It was Lay who suggested the use of Triple S backing and other cost savings. Lay's former employer Ted Manson said Lay had built 30 buildings for him and "just about all" developed leaks. He said Lay once told him he "bluffed his way through it - he wasn't really a builder".

Lay's lawyer, Matt Casey, challenged Manning's claim that Lay, rather than Townsend, was responsible for obtaining building code compliance.

Casey: That was not part of Steve Lay's brief when he was engaged?

Manning: I wouldn't agree with that.

Casey: Can you point me to the document that says it was?

Manning: Can you point me to one that says it wasn't?

In his opening statement, Manning's lawyer, McCartney, said the construction faults at Ponsonby Gardens were "the result of problems within the whole industry" and individual contractors should bear most responsibility.

BY THE END, IT WAS GRAY who felt guilt - for the frustration he believed he caused the adjudicator. He says the process also raised concerns about natural justice for respondents.

He regretted going in without a lawyer. "If we all went in unrepresented it would be fine but to have barristers and Queen's Counsellors up there - it's unfair on the adjudicator, the claimants and the respondents."

Last Friday, two days after the District Court appeal threatening the powers of adjudicators was thrown out, Dean's findings were released. It was accompanied by a press release from the weathertight service, hailing the decision as proof that the service "is delivering flexible and cost-effective resolutions".

Service manager Lisa Ferguson went on television, trumpeting that Ponsonby Gardens showed how motivated claimants could progress through adjudication without a lawyer and emerge with $700,000.

The claimants were aghast. "Nobody else could have done what John Gray did," said Lynne Roborgh.

The claimants spent $33,000 on legal advice and an expert witness. They estimate full legal representation would have cost them $150,000.

"The act was obviously too hastily put together," says Gray. "The legislation is not tight enough. It doesn't give compensation for legal expenses and it needs to be broadened to deal with other building defects.

"The Government is sweeping it under the carpet. It should be a service for non-compliant buildings."

He hopes their experience will not deter thousands of other leaky-building owners who have yet to come forward. But how many possess his skills or determination?

Sitting at the back for much of the hearing was a St Mary's Bay resident whose leaky home needs $350,000 spent on it.

She could not afford a lawyer to take court action and saw the weathertight service as her only option. She watched in tears as McCartney cross-examined Lay and Shepherd, and as Harrison chipped away at Gray and debated legal niceties with Dean.

"I couldn't represent myself like [Gray] is doing," she said. "I'd get eaten alive."

Other leaky-home victims, there for the start of the hearing, had long since reached the same conclusion and drifted away.