Lee & Lee v Auckland Council: Council negligent by omission to issue a Notice to Rectify

December 5, 2016

In this month’s article I address a new leaky building decision which went on appeal to the High Court from the Weathertight Homes Tribunal (WHT).  I summarise the facts of this decision below:-

  • GIL was the developer and head contractor of this house which was constructed in 2002/2003;
  • The consent plans detailed a solid plaster house, however the Council approved amended plans showing a cladding change from solid plaster on baton to Insulclad;
  • Insulclad was ultimately not used but instead Styroplast was installed;
  • Construction commenced in May 2002 but Council was not called to site for an inspection until 18 October 2002.  At this inspection various checks were made as to weathertightness;
  • A failed inspection took place on 22 April 2003 at which point the Council issued a field memorandum which noted a number of items requiring attention.  The recheck failed on 5 June 2003;
  • A final building recheck was undertaken on 13 November 2003 and it failed for reasons unrelated to the cladding;
  • On 16 December 2003 Council sent a letter addressed to the consent-holder at the property address, noting that any type of monolithic cladding without a cavity that had no specific inspections to deal with weathertightness issues would be reviewed on a case by case basis before determining whether a CCC could be issued;
  • The property was sold on 24 December 2003 to J Ratcliffe followed by two subsequent sales;
  • On 4 March 2004 the Council wrote to Mr Kim and advised that it would not issue a CCC on the house due to its inability to verify compliance with E2 (external moisture);
  • Mr and Mrs Lee purchased the property from a friend on December 2004, no LIM was requested;
  • Council had not issued a CCC in respect of it for, among other reasons, concerns about weathertightness;
  • On or about 3 August 2012 Mr and Mrs Lee became aware that this house was a leaky building.

Whilst Mr and Mrs Lee were successful in the WHT as against the developer GIL, they failed entirely in their claim against the Council.  The issues on appeal upon which I want to focus were as follows:-

(a)  Whether the Council’s inspections and/or inspection process fell short of the standard of reasonable care;

(b)  Whether the Council’s failure to issue a Notice to Rectify (NTR) caused Mr and Mrs Lee’s loss.

(a)  Council inspection process. 

The Court ruled that there was no evidence that the Council ever inspected the cladding, so it was not incumbent upon it to have discovered that an unconsented cladding material had been used, namely the Styroplast.  Having just approved the use of Insulclad, and having required the production of a PS3 (Producer Statement) in respect of its correct install, it was entitled to assume that Insulclad was being installed.

In terms of the allegation that the Council ought to have specifically directed inspections to the installation of the cladding, the Court ruled that acceptance of a producer statement (PS3) was a reasonable step to take in lieu of specific inspections, in terms of satisfying itself that the cladding system specified was in compliance with the Building Code.  This was especially so in this particular instance because the Council had required a PS3 from the installers that carried out the construction works that the installation accorded with manufacturer specifications, together with certification by Plaster Systems being the system manufacturer.

(b)  Did failure to issue NTR cause Mr and Mrs Lee’s loss.

The Court agreed with the WHT finding that the Council breached its mandatory duty to issue a NTR on 4 March 2004, at the time it wrote to Mr Kim stating that it would not be issuing a CCC because of the cladding system used with no cavity.  In short a NTR ought to have been issued contemporaneously.

The more vexed issue was whether this had caused loss to Mr and Mrs Lee.  The Court ruled that the Council was liable for all reasonably foreseeable losses to an injured party caused by the careless breach of its duty to issue a NTR.  Once it was established that the Council negligently omitted to issue a NTR to the builder and current owner back on 4 March 2004, it was liable to Mr and Mrs Lee for any foreseeable losses, namely in this instance purchasing a leaky building without knowledge.

Accordingly, both GIL (Developer) and the Council were found liable to Mr and Mrs Lee albeit it that a contributory negligence deduction of 50% was applied against them for choosing to purchase without a LIM.

To be noted.

On the strength of this decision, expect to see Council always issue a NTR where it declines to issue a CCC, to limit exposure to liability.

NOTE: This article is not intended to be legal advice (nor a substitute for legal advice).  No responsibility or liability is accepted by Legal Vision to anyone who relies on the information contained in this article.