The Supreme Court, in what has become commonly known as the Spencer on Byron case, has allowed an appeal by the owners of the Spencer on Byron hotel, Takapuna, in their leaky building claim against the former North Shore City Council (now part of Auckland Council). In the High Court and Court of Appeal the Council had successfully argued that it should not owe a duty of care to owners of commercial buildings (or buildings containing a mixture of both commercial and residential components) in respect of the Council’s building inspection and certification roles. The Council’s luck ran out in the Supreme Court, which confirmed that there is no legal basis on which to distinguish between residential and commercial building owners in leaky/defective building claims against local authorities. Both categories of owners are generally reliant on local authorities to take reasonable care that buildings are constructed in accordance with the Building Code. The Supreme Court’s decision is restricted to work done by local authorities while the Building Act 1991 was in force. It seems unlikely, however, that the outcome will be any different in respect of work done under the current Building Act 2004. The Supreme Court did not face the task of deciding whether the Council had in fact been negligent – that will be a matter for trial in the High Court. But the owners are over the first (and probably the highest) hurdle in establishing that the Council is liable for at least some of the defects in the Spencer on Byron building. The impact of this decision will be significant. Local authorities are now clearly exposed to leaky/defective commercial buildings claims arising from building inspections carried out within the last 10 years.
By Chris Patterson