The BIA and leaky buildings - all care, no responsibility?

It's final. The (now defunct) Building Industry Authority carried little or no legal liability for the 'leaky building' crisis.1

In a split decision, the Supreme Court has closed down one litigation gambit in the leaky buildings saga. But it also identifies weaknesses in the building regulatory regime, and highlights ongoing uncertainties at the heart of the law of negligence in New Zealand.

The case

The North Shore City Council claimed that the BIA had been negligent in giving the Council's inspection processes a 'clean bill of health' in 1995, only to be highly critical of those same practices when a similar review was undertaken in 2003 (after the leaky building crisis had emerged).

The Council argued that, had those criticisms been identified in 1995, it would have improved its inspection regime and many of the defects which caused leaks in the houses at issue would have been detected and corrected during construction.

It also argued that, regardless of whether the 1995 report was negligently prepared, the BIA should have revisited and corrected its 1995 conclusions sometime after 1998, when it became aware of emerging weathertightness problems in the marketplace.

A final claim was that the BIA owed a duty of care directly to homeowners to take steps to mitigate the risk of leaky buildings after the BIA became aware of the problem.

The Council applied to the Supreme Court after failing in the Court of Appeal. The Court of Appeal had taken a similar position on the BIA's responsibilities in the Sacramento decision in 2005. The fact that the Supreme Court has now reinforced this interpretation should mean that the question is settled.

The Court's findings

All members of the Court accepted that it was arguably foreseeable that either the Council or homeowners would suffer loss if the BIA made a poor job of discharging its functions. But foreseeability is not enough. There must also have been sufficient 'proximity' to justify a duty.

The majority found that there was insufficient proximity between the BIA and the Council or homeowners to justify a duty of care. Of most interest are the differences between the reasons given for this conclusion and those supporting the contrary one reached by Chief Justice Elias in her dissenting judgment.

All members of the Court applied much the same methodology, asking two questions:

Does the statutory context create a sufficient relationship of proximity between the BIA and the Council to give rise to a...