On 22 March 2010, the Court of Appeal upheld the High Court judgment of Justice Venning in Body Corporate No. 189855 and Others v North Shore City Council & Others (known as the Byron Avenue decision).
The decision is an important case, as it confirms the far reaching duties owed by developers, councils and others involved in the construction industry to multi-unit residential home owners.
The developer/architect companies designed a 14-unit block of residential apartments at 45 Byron Avenue, Takapuna, North Shore.
The North Shore City Council subsequently issued the building permit, and a construction company was engaged to construct the development. After inspections, the council had largely approved the construction work, and was at the point of issuing a Code Compliance Certificate when water ingress issues were notified to it.
As a result of the water ingress issues, the council never issued the Code Compliance Certificate. The Body Corporate and the unit owners claimed that the developer/architect, North Shore City Council, the plasterer and others were negligent in carrying out their respective roles and were, therefore, liable for the resulting defects and loss suffered.
The High Court made a number of significant findings (some of which were addressed and upheld by the Court of Appeal). Findings of particular note are:
• Investors — the council owes a duty of care to owners (and subsequent owners) where the intended end use of the building is residential (despite the fact that an owner may have purchased the building for investment purposes).
• Body Corporate — in respect of common property, the duty of care owed by the council is owed to the individual unit owners of common property and not the Body Corporate.
Accordingly, a claim by an individual unit owner for damage to the common property can be proportionately reduced to the extent that the defendant may have a defence to the individual owner’s claim in respect of their individual unit.
• Council’s negligence — while the council was largely not negligent in issuing the building consent (despite the supplied plans lacking detail), the council was negligent in carrying out inspections and taking the necessary steps to address issues they identified during inspections.
Most importantly, the mere fact that the council had not issued a Code Compliance Certificate was not sufficient to exclude liability.
• Personal liability of directors — the High Court confirmed the position of Trevor Ivory, namely that an individual director of a company can only be personally liable where they have assumed personal responsibility to the plaintiff.
• Remedial works — while targeted remedial work had been attempted and that work proved to be defective, that remedial work was not a contributing factor to the need for a reclad of the complex. Accordingly, in respect of the entity that carried out the remedial works, the claimants could only recover the cost of that remedial work rather than their total loss suffered.
Such costs, nonetheless, were recoverable from other liable defendants, eg, the council, as it was those defendants that caused the need for remedial work in the first place.
• Contributory negligence — while particular to the circumstances of each purchaser, failure to obtain a pre-purchase inspection report and/or obtain a LIM report and/or make enquiries when put on notice, may amount to contributory negligence on the part of the home owner.
Further, even if the home owner has not been negligent but their solicitor has been, eg, failing to obtain a LIM report which would have identified issues, the home owner may be vicariously liable for their solicitor’s negligence and, hence, held to have been contributorily negligent.
Importance of the Byron Avenue decision for the construction industry
The Byron Avenue decision once again illustrates the court’s reluctance to exclude liability for negligence on the part of those in the construction industry, be they the council, developers or tradespersons.
Nonetheless, the principled judgment given by the court should provide encouragement to those in the construction industry in that claimants must still clearly prove each element of their case, and negligence on their part will not go unnoticed.