KEY POINTS:
Below is a summary of the court ruling which awarded a leaky home owner $250,000. Information provided by law firm Grimshaw and Co
High Court concludes that Council evidence of systematically low standards suggests systemic failure by Councils to perform their obligations under the Building Act 1991
Baragwanath J has recently delivered an important judgment concerning, amongst other things, whether the local territorial authority was negligent when issuing a building consent for a stucco domestic dwelling, whether there was in place a satisfactory system of inspections and, whether adequate inspections of the property had been carried out in accordance with that system.
Neither flashings nor a cavity between the exterior stucco wall and the interior wooden frames were specified in the plans and specifications approved by the Council.
The Court held that the standards were so low at the time that Councils accepted in lieu of the well-proven cavity and flashing requirements of the previous permit regime:
- only a perfunctory examination of plans and specifications;
- accepted the use of unproven techniques and materials without any systematic response to such use;
- accepted substitutes for cavities and flashings (in this case "proprietary seals") and not subjecting the substitutes to proper scrutiny.
The Court concluded that the Councils were not permitted to pay lip service to the legislation; rather their task was to implement it. The standard of care the Council had to exercise was one of reasonable skill and care, even if at the material time general standards of Councils may have been lower.
Because of the crucial importance of such seals as the substitute for cavities and flashings, the Council should have established and enforced a system that would give effect to the Building Code; i.e., by ensuring that such seals were in place (whether through instruction and/or the inspection process). What had occurred had been a simple abdication of responsibility by the Council at the organisational level.
As the Court also noted, the Council's power to charge fees and its duties to determine whether a Certificate of Compliance should be issued and, if not, to issue a Notice to Rectify points to a legislative policy that the Council should carry any loss if it neglects its duty to inspect.
The owner was successful in her claims not only against the Council, but also the builder. Damages were awarded for the costs of repair which requiring a total reclad, was the cost of demolishing and rebuilding the house. General damages for anxiety and distress were awarded in the sum of $22,500.
Finally, the following words of the Judge should be repeated.
"The importance of the issue may be discerned from the evidence of a Council witness that there are some 40,000 leaky homes… It tends to suggest a wholesale failure by Councils to face systematically and robustly the reality that without firm control of standards the temptation for developers to throw up cheap buildings of defective quality would be irresistible."
Grimshaw & Co. acted for the successful plaintiff in this proceeding.
Colleen Dicks v Waitakere City Council & Ors, (22 December 2006, CIV 2004-404-1068, High Court, Auckland Registry, Baragwanath J).
High Court decision again shows the consequences of not providing a payment schedule in accordance with the Construction Contracts Act
Mules Construction Limited ("Mules") entered into a number of construction contracts with Wedding Earthmovers Limited ("Wedding"). Mules then claimed it performed its obligations and invoiced Wedding a total of $432,618.28. After Wedding's failure to pay, Mules then issued payment claims to Wedding for the total amount pursuant to section 20 of the Act. Mules asserted that Wedding had failed to exercise its rights under section 21 of the Act to provide payment schedules for any amounts it claimed were in dispute. Wedding on the other hand contended it did provide a payment schedule in the form of a letter. Mules did not treat the letter as a payment schedule or otherwise regard it as justification for non-payment of the monies the subject of the payment claims.
Mules accordingly proceeded to file and serve proceedings including an application for summary judgment. Wedding maintained that as its liability to make further payments was disputed, the dispute should not be dealt with by way of summary judgment. The Associate Judge dealt with the question of whether Wedding's letter could be capable of being treated as a payment schedule under section 21 of the Act. The Court, whilst acknowledging a payment schedule could be in letter form, reiterated that it still had to meet the minimum requirements of section 21 of the Act and what was provided to the payee must be recognisable as a payment schedule. Otherwise the express purposes of section 3(a) of the Act would be frustrated.
In holding that the letter left the payee with an unacceptable level of uncertainty as to the payer's intention, the Court concluded: "If the payer does not issue a document that could be reasonably viewed as a statement addressed to the payee to the effect that the payer does not accept liability for part of the claimed amounts, then the payer will not be protected from the enforcement provisions contained in the Act. A payee should not have to second guess at the payer's intention."
Thus the letter could not be capable of being treated as a payment schedule. It failed to adequately particularise a scheduled amount or identified same in response to the payment claims made in accordance with section 21(2) and, additionally, no calculations were provided as required by section 21(3)(a) of the Act. As the Court noted: "The key to section 21 is the provision of sufficient information to make clear the manner in which the scheduled amount has been calculated."
Accordingly, the Court was satisfied that Wedding had no defence to Mules' claim for summary judgment. Mules Construction Limited v Wedding Earthmovers Limited (28 November 2006, CIV 2006-404-4570, High Court, Auckland Registry, Associate Judge Sargisson).
