KEY POINTS:
A court ruling released this month could open the floodgates for leaky building claims against the state.
The ruling backs a council's plea for the Government to take some blame for its role in the leaky home scandal.
Justice Pamela Andrews' reserved decision in the High Court at Auckland ruled in favour of North Shore City Council's plea to bring former state agency, the Building Industry Authority (BIA), into litigation.
Court action is being taken by owners of The Grange, a building complex at Albany.
The owners are suing many parties over weathertightness issues, including the council which signed off the building, inspected it and issued building consent, as well as developer Taradale Properties, Stan Powley Architects and others.
The council has called for the courts to hold the BIA responsible for its role in the leaky building issue and says that if a territorial authority is to be held negligent, then so should the state authority.
Previous court decisions have ruled the BIA was not liable and should not be joined in litigation.
The Court of Appeal's decision on the large-scale, South Auckland Sacramento housing estate ruled the Wellington-based BIA was too far removed from the situation to be held accountable.
But the latest decision takes the opposite stance, a move Greg O'Sullivan, of building consultants Prendos, said was potentially hugely significant.
"This is a totally different cause of action to Sacramento and it raises a whole lot of issues," he said.
But he also predicted an appeal against the ruling.
"I would be surprised if the BIA didn't appeal this. I've never known the Crown to lie down easily yet."
The Attorney-General has 20 working days after the decision to appeal and is expected to lodge its challenge before the end of the month.
Auckland lawyer David Heaney, of Heaney & Co, which represents many councils in leaky building litigation, has been credited with deciding to take the novel approach in The Grange case to pull the reluctant state into the scrap. But not everyone benefits. Owners at The Grange are now stalled in their attempts to proceed with their legal action against any of the parties until the dispute between the council and authority is sorted out.
The written decision from Judge Andrews, released on October 1, said the Grange case was different from the Sacramento case. The Court of Appeal held that the BIA did not owe a duty of care to the South Auckland homeowners affected by weathertightness problems, but in the Grange case, it was the council seeking that the BIA be joined into the litigation.
Judge Andrews said part of the BIA's functions included reviews of territorial authorities and in 1995, it had reviewed the North Shore City Council and made recommendations.
The case went to court on August 29 and 30.
"The council denies that it carried out any of its functions negligently. It has joined the Attorney-General, as the successor to the assets and liabilities of the Building Industry Authority," Judge Andrews said.
"The council alleges that the BIA was the national regulatory body responsible for building matters.
"The council's claim, in essence, is that if it was negligent for the council to fail to understand and take steps to guard against the weathertightness risks attached to the use of monolithic face-fixed cladding, then it was negligent for the BIA to fail to understand and warn about such risks.
"It alleges that the BIA was negligent in the performance of its statutory functions under the Building Act 1991," Judge Andrews said.
The authority fought against the council's attempts to have it joined into the action, saying it could not be held liable as it did not owe a duty of care to the council.
Mary Scholtens, QC, for the Attorney-General, submitted that the authority should not be liable because it did not become aware of issues surrounding untreated timber and monolithic cladding until 1998.
That was three years after the authority reviewed the North Shore City Council.
Also, the 1995 review by the authority was to help the council in its own evaluation of its procedures and the authority had no direct power over councils and could not force them to change their procedures, she said.
But David Goddard, QC, acting for the North Shore City Council, said there was a close and substantial nexus between the authority's review and the council's not taking any steps to change its processes.
Judge Andrews agreed.
"The present case is distinguishable from Sacramento in that the duty of care in this case is alleged to be owed by the BIA to the council and it is alleged that there is a much more direct link between the BIA and the council as a result of the 1995 review and report than there was between the BIA and the home-owners in Sacramento," the decision said.
John Gray, president of the Homeowners and Buyers Association, said the decision was not great for owners at The Grange.
"This is not quite the silver bullet. The homeowners won't get anything out of the BIA, as it [the ruling] has only opened the way for the council to seek a contribution from the BIA to offset what the councils are found liable for.
"If the council are found liable and are able to seek a contribution from the BIA, that won't necessarily improve the homeowners' position."
Gray said that might make it worse if they are dragged through an appeal and delays to finalising the case.
"The long-term position might be that the council lawyers take their foot off the throat of the homeowner, given that their exposure is limited by being able to get a contribution from the BIA," Gray said.
"We are saddened by the ongoing litigation around this issue and call on the Government to simply stump up and provide a rescue package for all leaky home owners."
THE GRANGE
* 105-unit housing estate at 92 Bush Rd, Albany.
* Developed by Tim Manning's Taradale Properties.
* Body corporate is taking court action.
