Supreme Court confirms local authorities’ duty of care

Late last year, the Supreme Court bought some Christmas cheer to the thousands of leaky home owners when it dismissed appeals by North Shore City Council against the decisions in Sunset Terraces/Byron Avenue in the High Court and Court of Appeal.  In North Shore City Council v Body Corporate 188529 (Sunset Terraces) & Ors; North Shore City Council v Body Corporate 189855 (Byron Avenue) & Ors [2010] NZSC 158 (PDF), (the first ruling by the Supreme Court in a leaky building case), the Court rejected attempts by North Shore City Council to challenge or reduce the duty of care owed by councils to home owners in respect of the issue of building permits/consents, and inspection of building works.

The council attempted to argue that this duty of care (confirmed by the Privy Council in Invercargill City Council v Hamlin [1996] 1 NZLR 513), no longer applied following the passing of the Building Act 1991 (the original Hamlin case concerned a property constructed in 1972). 

Alternatively, it argued that such a duty was not appropriate in large multi-unit developments; should not be owed to owners who did not live in their properties; nor to owners who bought after a time when building defects were discoverable. 

A significant reason why the Supreme Court saw no need to alter or modify the duty was that the Hamlin duty was long-standing, and homeowners had ordered their affairs in reliance on an assumption that council owed this type of duty. 

It also held that the council owed a duty to homeowners, regardless of their use of the property; and that councils owed the duty to subsequent owners, notwithstanding the fact that a previous owner may have already had, or could have, discovered a defect.  The determinant of when council owes a duty will continue to be the use of the building as stated in the building consent documentation, submitted to the council at the time of construction. 

These decisions are a most welcome development for leaky homeowners, as they now confirm one of the key pillars of homeowners’ cases against a negligent council.  The decision will make it easier for homeowners to know when council will owe them a duty of care.  There will always be cases where it is not easy to determine whether a homeowner comes within the ambit of the duty.  But most leaky building homeowners will now have a more predictable path to recovery, when suing a careless council.