Dicks v Hobson Swan Construction & Others

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No doubt most readers are now aware of the decision of Dicks and its implications for the Waitakere City Council. It has received plenty of press in the New Zealand Herald, and the last reports were to the effect that it was not going to be appealed.

The decision was made by Justice Baragwanath at the High Court at Auckland. The facts of this case were that Mrs Dicks contracted with Hobson Swan (HS) to buy a section of land at Hobsonville and a house that was in the course of construction.

The council issued the consent on the house, carried out inspections during the course of construction and ultimately issued a code compliance certificate. Mrs Dicks settled on the purchase of the house which has turned out to be a leaky home.

The expert testimony was to the effect that the house had to be totally reclad due to water ingress, and that the most economical way of achieving this was to demolish and rebuild the house.

A claim was brought against the council in negligence. A claim in negligence was also brought against HS and builder Mr McDonald personally for the fact that the house is a leaky building, and also in contract for breach of a settlement agreement to remedy the house.

In relation to the contract claim, on May 20, 2005, following a Judicial Settlement Conference, Dicks, HS and McDonald entered into an agreement whereby HS would carry out restorative repair work at the property. These works were not performed properly, and this settlement agreement was cancelled by Mrs Dicks.

The focus of the court inquiry was on the liability of the respective parties. As is often the case in leaky building claims, the conclusion that it was a leaky building was easily reached by the court. The key finding as to the cause of water ingress at the house was the fact that HS failed to install any form of sealant at the joints around the windows.

The court held that HS owed Dicks a duty in both contract and tort, and breached a duty to exercise reasonable care to achieve a sound building as is required of a developer.
It also held that Mrs Dicks is entitled to judgment for its failure to maintain proper standards of workmanship in breach of its duty to her.
HS was in liquidation so such a finding would have provided little comfort for Mrs Dicks.

However, the court went on to find Mr McDonald personally liable in negligence to Mrs Dicks. The court ruled that Mr McDonald did not merely direct but actually performed the construction of the house, and was personally responsible for the omission of the seals. He therefore breached the duty of care he owed to Mrs Dicks.

The court also held the council liable. The council had accepted that it owed Mrs Dicks a duty of care, but it disputed the nature of that duty and whether, in this instance, it had breached the duty owed to Mrs Dicks.

In relation to the issue of the building consent, the plans had no directions as to the fitting and sealing of aluminium windows in stucco so as to avoid obvious risk of leakage. The court ruled this as negligent.

In relation to inspections, it was held by the court that it was the task of the council to establish and enforce a system that would give effect to the Building Code.
Because of the crucial importance of seals as the substitute for cavities and flashings, it should have had a system whereby during inspections, there was a check made for the presence of seals.

It was ruled that the council had breached its duty of care by failing to ensure the plans had instruction for seals, and also for failing to check for the presence of seals while carrying out inspections during the course of construction.
Accordingly, the council was found liable to the plaintiffs.

This decision is important in that it lays down at High Court level clearly the liability of the council, and also finds personal liability on parties that go onto a site and carry out some of the construction work, albeit in the name of their company.