Director´s Liability, Leaky Homes And The Tortious Duty Of Councils

By Associate Belinda Barclay, and solicitor Grant Slevin, of the Christchurch Lawlink firm of Wynn Williams & Co.

In the recent "Leaky Homes" case of Dicks v Hobson Swan Construction Limted & Ors, Baragwanath J, HC Auckland, CIV 2004-404-1065, 22 December 2006, the High Court awarded Hobsonville homeowner Colleen Dicks a total of $250,900 to meet the cost of repairing her 12 year old house, to compensate her for three years of distress and to meet the costs of her expert witnesses ($29,684.43).

Judgment was entered against the building company, now in liquidation, its director in person and against Waitakere City Council. Because the builder and his company are unable to pay, the Waitakere City Council is left to bear the whole cost. There will be no appeal from the decision - a happy outcome for Mrs Dicks.

Mrs Dicks' case was brought in negligence against all defendants and in contract against the builder and his company for their breach of a settlement agreement. Promised repairs had been started but not finished, leaving the house uninhabitable.

Soon after she took possession, Mrs Dicks encountered water coming down the inside of windows at her front entrance. This problem was apparently fixed by the builder. Despite a series of "floods" it was not until 2003 that Mrs Dicks realised her house might have serious problems. She obtained an expert report and started proceedings the next year.

Mrs Dicks was fortunate to have commenced her action within 10 years of the home being built, after which she would have been barred from taking action by section 393(2) of the Building Act 2004. Because this kind of damage is usually concealed by the internal linings, many owners of similarly leaky homes will not discover their problems in time and so will be left without any remedy.

Nature Of The Problem

The problem with Mrs Dicks' house is that it is a stucco built property. Stucco buildings have been in use for many years in New Zealand. In Auckland, stucco houses of the 1940's presented no problems of water damage. That is because they were constructed with either metal flashings around the window frames or a cavity between the exterior concrete wall and the interior wooden frame, or both.

Unfortunately, in this case neither flashings nor cavities were either specified in a plan or specification, or required by the Council. The plan showed no detail concerning the sealing of the metal windows when installed in the stucco. In fact the specifications were not directed to a stucco building at all, but had been prepared for a weatherboard house.

Liability of Waitakere City Council

The Dicks judgment sets out clearly the responsibilities of councils to inspect and ensure compliance with the building code before issuing a building consent or code compliance certificate. Under the Building Act 2004, for a code compliance certificate to issue, it is sufficient if the work complies with the building consent, except in certain limited circumstances. Councils have tended to argue, as they did in this case, that their limited inspections and acceptance of what builders were doing after the Building Act 1991 was introduced was all they were in fact required to do by law. The Dicks decision has effectively destroyed that argument, the court saying instead:

It was the task of the Council to establish and enforce a system that would give effect to the Building Code.

The judgment indicates that the court would have held the Council liable in negligence at an organisational level, for its overall failure to address its responsibilities under the Act, as well as on the basis of the negligent acts of its employees in the particular case. While...