Council fails to escape liability

September 1, 2009

In July 2009, the High Court at Auckland heard the leaky home case of Peter Hardie McNamara and Patrick Sturgeon McNamara v Malcolm J Lusby Limited & Ors HC AK CIV2006-404-2967 [3 July 2009]. Whilst a private building certifier had issued the Code Compliance Certificate for the leaky home subject to this proceeding, the homeowners still sought to recover costs and damages from their local territorial authority, the Auckland City Council (“ACC”) which had accepted that CCC. The ACC, not unsurprisingly, argued it was absolved from any adverse consequences that arose from the certification process and applied to have the proceeding against it struck out. Associate Judge Christiansen’s decision was as follows:

Background

The Plaintiffs, Peter and Patrick McNamara purchased a home in Arney Crescent, Remuera, Auckland, soon after its completion in 2004. It became apparent shortly thereafter that there were construction issues with the home and the Plaintiffs made the necessary repairs. In bringing the claim, they sought to recover all costs incurred and other damages against some nineteen defendants joined to the proceeding.

Private certifiers

Approved Building Certifiers Limited (“ABC”) were the private building certifiers involved in this case. By way of further background, in December 2002, the Building Industry Authority moved to place limitations on ABC’s ability to issue building certificates in certain circumstances. This included restricting ABC’s ability to approve certification where certain types of exterior cladding had been used.

The exterior cladding used on the leaky home subject to this claim, was one such type of cladding that ABC was prevented from approving. In any event, having carried out inspections between December 2002 and April 2004, a final CCC was issued for the home by ABC. This CCC was accepted by the ACC without question.

How then did the ACC come to be a defendant to this claim? The ACC rightly pointed out that there had been no prior instance of a successful claim against a territorial authority where an independent building certifier’s certificate had been issued. And the reason for this appeared to be vested in s 50 (1) of the Building Act 1991 whereby a territorial authority “shall accept” a CCC where a private certifier is satisfied on reasonable grounds, under s 56 (3) that the “building work complied with the provisions of the building code on the date of certification.”

Claim against ACC

Despite the lack of prior success against a territorial authority, the Plaintiffs still argued that the ACC owed a common law duty of care to them to both reject ABC’s certificates and to take steps to conduct appropriate inspections concerning the exterior cladding which ABC approved, but which it was not in fact permitted to do so. Conversely, the ACC argued that the wording of s 50 (1) of the Building Act 1991 obligated it to accept ABC’s certificates, and therefore the ACC owed no duty of care to the owners of the leaky home.

Decision

Associate Judge Christiansen did not agree that s 50 (1) could absolve the ACC from all responsibility arising from the certification process. In fact, His Honour considered that a territorial authority’s responsibility is not clear cut; whilst it may include an obligation to accept at face value a certificate issued by a certifier, it also has a duty to check that the certifier’s field of expertise covers the elements for which the certificate was issued and inspect those parts of the building works not covered by a certificate.

In rejecting the ACC’s submission that it did not owe a duty of care to the Plaintiffs in this case, the court determined that unless a private certifier is expressly authorised to certify that items of building work comply with the building code, then the duty remains with and reverts to the territorial authority. In this instance, His Honour considered that the certificates issued by ABC not only did not comply but were invalid as ABC could only certify items that were not excluded by any limitation on the building certifier?s approval. The ACC could only accept approved certificates under s 50 (1), not just any certificate.

Moreover, the ACC had conceded during the course of the hearing that it knew or was on sufficient notice to have known the limitations imposed on ABC’s approval by the Building Industry Authority. It was therefore not acceptable that the ACC had then relied upon a private certifier that had abused its powers, or otherwise acted without authority, in issuing a CCC. The court believed it was an abdication of the ACC’s responsibility to rely upon the CCC issued by ABC without inspecting the building works and matters outside the scope of ABC’s approval.

Thus, the Plaintiffs had an arguable case against the ACC, and the application for strike out was dismissed.

Decision to be reviewed

In something of a novel and important case, the decision of Associate Judge Christiansen highlighted that a territorial authority cannot avoid a general duty of care when accepting certificates issued by a private certifier.

However, counsel for the ACC has since filed an application to commence the review process against the decision made. The basis for granting the application for review was that the claim against the Council raises “important issues in the ‘leaky homes’ area. There is a real prospect that the Council would suffer a miscarriage of justice if it was not able to test the Associate Judge’s decision.” So it remains to be seen whether Associate Judge Christiansen’s decision will stand up against review or whether it will be overturned.