During the winter of 1998, John Gray pulled into the internal garage of his two-storey townhouse to find water cascading down the walls.

Repairs were carried out, but leaks continued to develop in the $500,000 townhouse. When the shower fell through the floor, it was the final straw.

His neighbours in the 10-unit Ponsonby Gardens development were having similar nightmares. Far from being built with a cavity lining to drain away water, the cladding was backed with wood-fibre panels that soaked up water.

But the developer had gone into liquidation and couldn't be touched. The architect, waterproofers, builders and the city council which signed off the project all ducked for cover.

The owners had to rebuild at their own expense.

Gray, an airline pilot, developed a career-threatening respiratory condition from toxic mould and the saga took a toll on his partner Lorraine and their two young children.

In early 2003 the Government set up the Weathertight Homes Resolution Service to deal with leaky-home disputes, and Gray was one of the first to apply for compensation for himself and neighbours in six other units.

The case would expose gaping holes in the hastily conceived legislation supposed to help leaky-home owners.

Claims were restricted to faults caused by external leaks. The waterproofing firm placed itself in liquidation on the eve of the hearing and the Government's Building Industry Authority was exempted.

But the residents won. The threat of appeals hovered until August when the city council relented and the owners were paid $700,000 in compensation.

The case prompted a Government review of the legislation and changes are before a select committee.

Gray provided input into the review and now represents thousands of claimants as chairman of the Leaky Homes Action Group.

He says he initially wanted justice for himself and his neighbours. "Then it became a bit of a campaign so this whole sorry mess could be exposed."