Takapuna leaky building claim struck out in High Court

Justice Judith Potter in a High Court decision, released last week, has struck out weathertightness claims brought against the North Shore City Council by 249 owners of units in the Spencer on Byron Hotel in Takapuna.

Spencer on Byron is a multi-storey building on Auckland’s North Shore with weather tightness defects.

D J Goddard QC submitted for the Council that there is no policy need for local authorities to assume responsibility in relation to commercial developments, where there is no “expertise vacuum”.

He said that if the claim against the Council is dismissed the plaintiffs have a number of other remedies. They have claims against the architects, the builder and the project manager as well as claims against the original owner/developer including warranty claims.

The original owner/developer, he said, was well able to retain the necessary expertise upon which reliance could reasonably be placed and to whom the plaintiffs should be looking to recover any economic loss they have suffered.

He submitted it is not for local authorities to effectively provide insurance against any inability to recover. It is not plausible, he said, to suggest that the plaintiffs could reasonably look to the Council to manage their financial risk and protect the value of their investment in this commercial venture.Owners of units in the 23-level building claimed it had defects and that the council and construction parties were responsible for repairs and losses. Most of the units are leased back to the hotel.

In 2001 the council issued code compliance certificates for the building as a commercial hotel rather than as private homes.

In the reserved decision, Justice Judith Potter said the issue was whether the council owed a duty of care to the owners to prevent the type of loss they sought to recover.

Unit owners’ claims included the cost of remedial work and losses of rental income and resale value for a “leaky building”.

The plaintiffs argued that a 1996 court decision showed there was a duty of care because the building contained residential apartments.

Justice Potter said the situation of a building having units for commercial and residential use had not been confronted in previous judgments.

The council’s measure of control was limited by its statutory obligations.

The building’s developer, Charco, had greater control over protecting its owninterests by contracting for such expertise as was required, she said. This included architects, engineers and builders.

“It is not appropriate for local authorities to be called upon to act as fallback insurers in situations where those capable of protecting their own interests either have failed to do so or are unable to recover.”

The council said the decision was in line with Court of Appeal decisions over the past two years.

But it still faces claims from the owners of three penthouses in the building. These were bought as residential units and were not part of Charco’s deal to sell units subject to leasing them back to the hotel for at least 10 years.

A spokesman for the hotel unit owners committee, Wayne Powell, declined to say on whether an appeal would be lodged.

He also would not comment on the amount of the claim for owners’ repairs and economic losses.

Owners wishing to live in their Spencer on Byron units have to get a resource consent from the council.

In late 2006, residential resource consents were granted for 16 units and 87 applications are in the pipeline.