One party that many commentators have said ought to bear some responsibility for the leaky building problem is the former Building Industry Authority (BIA). Although this body no longer exists — it was absorbed into the new Department of Building and Housing — issues as to its liability to owners of leaky buildings are still being considered in the courts.
There has been a recent High Court decision involving perhaps the largest leaky building case so far — the Sacramento apartments at Botany Downs in Auckland. The court was asked to decide whether it was possible for the owners to bring a claim against the BIA.
The BIA had made application to the High Court to have the claim against it struck out. The test that the court had to apply in determining the strike out application was whether, in fact, the causes of action brought against the BIA would definitely fail, no matter what evidence was tendered.
The claims that had been brought against the BIA were under three heads of negligence:
• the way in which it dealt with face-fixed monolithic cladding systems over untreated timber,
• its review of building certifiers in general, and ABC in particular, and
• its failure to ensure ABC had adequate insurance cover for its negligence.
A number of cross-claims were brought by some of the other defendants against the BIA on a very similar basis.
The court’s decision regarding the three allegations made as to negligence were as follows: 1 In February 1998 the BIA issued Acceptable Solution B2/AS1 which stated that the requirements of E2 of the Building Code could be met by “kiln-dried untreated radiata pine framing” provided that it “was not exposed to ground atmosphere or in any position where the timber moisture content will exceed 18%”.
It was claimed that the BIA was repeatedly advised by a firm of building consultants of leaking and excessive moisture under the cladding systems, and the serious implications of using these systems over untreated timber. Nevertheless, the BIA did not alter nor amend the acceptable solution.
It was held by the court that if acceptable solutions were negligently approved or not amended, it would have been foreseeable to the BIA that persons would rely upon them and so might suffer if the BIA negligently approved them or failed to amend them where it was necessary.
Accordingly, the claim against the BIA for this particular head of negligence ought to remain. 2 It is also claimed that the BIA was negligent in its review of the operating systems of ABC, including inspecting a number of homes in which cladding systems had been used over untreated timber but in respect of which CCCs had been issued by ABC.
It was held by the High Court that it was reasonably foreseeable to the BIA that the failure to prevent ABC from continuing to issue CCC and Building Certificates for buildings using these cladding systems over untreated timber could result in loss for the owners of these units.
So this cause of action remained. 3 Finally, it was alleged by the unit owners that the BIA had been negligent in ensuring that the building certifier ABC had in place adequate insurance to cover future claims. It was claimed that the BIA had failed to exercise care when approving the scheme of insurance applying to building certifiers.
In relation to the insurance allegation, it was held that this claim ought to remain against the BIA, because it simply was not capable, on the evidence filed thus far, of making a ruling that such a cause of action could not succeed.
Accordingly, this decision provided some support to parties wanting to bring in the BIA as a potential defendant to leaky building claims. However, since this judgment came out, it has been appealed to the Court of Appeal.