Court of Appeal 'leaky homes' decision to be discussed at Auckland Mayoral Forum

North Shore Mayor Andrew Williams will discuss yesterday’s Court of Appeal decision with his colleagues on the Auckland Mayoral Forum, which meets this Friday, Mayor Williams said today.

“The Court of Appeal decision has implications for many of the existing councils, and naturally has implications for the new Auckland Council once it takes over in November this year,” Mayor Williams said.

“The vast bulk of leaky homes are in Auckland, and with estimates of the repair bill across the country ranging from between $11 billion and $20 billion, the liability on ‘super city’ ratepayers could be very significant indeed, perhaps amounting to several billion dollars.”

Mayor Williams said the decision to take the appeal which led to yesterday’s Court of Appeal decision was taken by the Council’s insurers, partly to seek clarification on points of law, and any possible future decision to appeal to the Court of Appeal decisions to the Supreme Court would also primarily rest with the Council’s insurers.

“However, it is appropriate that the other Auckland mayors receive a briefing on the decisions released yesterday and that they have an opportunity to discuss the wider public policy issues raised in the decisions,” Mayor Williams said.

“In the initial decision on Byron Avenue, in concluding observations His Honour Justice Venning said:

“although in cases of this nature the Courts routinely allocate the Council’s responsibility (where the Council is found to have contributed to the defects in the buildings) at between 10 and 25 percent, the practical reality is that with the insolvency of others more directly responsible for the defects, such as developers, building companies and, in some instances, architects, the burden of meeting the entire judgment is likely to fall on Councils and through Councils, individual ratepayers. Whether that is a fair result given the limited responsibility for the defects and whether it is sustainable long-term is a matter that this Court is not able to address. But it is an issue that deserves discussion and further consideration in an appropriate forum.”

“Justice Venning gets right to the nub of the issue facing the North Shore City Council and other Auckland councils with leaky homes claims, which put simply is that local councils cannot possibly carry the enormous burden of this multi-billion dollar national crisis alone.”

“Furthermore, in the Court of Appeal decision, His Honour Justice Arnold makes the additional comment that:

“It is also plain that the leaky home problem is the result of what can fairly be described as a systemic failure, occurring at all levels within the building industry, in both the public and private sectors” and that “market forces, compliance regimes and insurance arrangements did not in fact operate to protect the interests of homeowners and prevent the construction, on a large scale, of residential properties that are not weather-tight. The sheer size of the problem points to a systemic failure rather than simply failures by individual players within the industry.”

“Justice Arnold hits the nail on the head, in my view, in linking the deregulation of the building industry by the central government back in the 1990s – the replacement of the highly prescriptive building code with a performance-based permissive code which focused on market forces – to be the root cause of the leaky homes national disaster.”

“Central government must accept its own liability for the deregulation experiment inflicted on the building industry and local government, and take responsibility for the liability accumulated by the private sector builders, designers, architects and certifiers who are now insolvent and unable to meet their responsibilities to leaky home owners.”

“In my view, the central government liability clearly exceeds that of local government, which is routinely around 25 percent of the repair cost but is usually more because local councils are often the ‘last man standing’.”

“Unless these wider issues are dealt with, and dealt with soon, the ratepayers of the new super city will be burdened for years to come and the government’s brave new world for Auckland governance will never be fully realised,” Mayor Williams said.