Judgment finds in favour of the plaintiffs — but there’s only two solvent defendants!

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Timothy Bates of Auckland law firm Legal Vision.

The Nautilus is a multi-unit residential complex situated in Orewa in close proximity to Orewa Beach.It is a 12-level mixed use development, with shops and cafes on the ground level, two levels of car parks, and residential units contained in the floors thereafter.

It was constructed between 2002 and 2004 at a cost of $35 million, and it was alleged by the plaintiffs that it would cost more than $23 million to repair it.

A claim was brought by the plaintiffs, being the body corporate/unit owners as against the builder (Multiplex), the council, the architect (Walker Architects Ltd), the cladding manufacturer/installer (Facade Technologies Ltd), and the waterproof membrane installer (Charles Norager & Sons Ltd).

The plaintiffs contended that due to failings in the construction work completed by these parties, the complex suffered from water ingress. The council joined in Bostik New Zealand Ltd as a third party contending that the liquid membrane it supplied for use on the decks was defective.

Justice Gilbert found for the plaintiffs, with the lion’s share of the judgment to be met by the council, due to the insolvency of the other parties responsible for the construction defects.

The plaintiffs claimed that the complex suffered from a long list of defects typically associated with leaky building syndrome. The construction defects were contained within the following building components — roof and roof edge, cladding, decks, balustrades and podium.

The claim brought against the council was threefold. It was alleged that it had not reached the requisite standard of care in terms of its issue of the consent, the inspections it carried out and the Code of Compliance Certificate issued.

The claim as against the architect was twofold. First, it was claimed that it had not reached the requisite standard of care in terms of the design details it provided, but part of the claim brought related to its contract administration and observation role.

In summary, the council was found liable for the remedial costs associated with the defects in the plant room on the roof but not for the skylights.

It was also found responsible for all of the costs associated with the cladding defects, including the roof edge. It was also responsible for the damages in relation to the podium walls, but not in relation to the incompatible membranes at the base of the stairs.

It was not found liable for all of the defects localised on the decks, but since all the repair work to the balustrades was required to remedy the defects for which the council was found responsible on the decks, all repair costs to the balustrades were ruled recoverable from the council.

As head contractor, Multiplex was found liable for all defects. Walker Architects were found liable for all defects other than the skylights and the absence of cap flashings on the podium.

Charles Norager & Son Ltd was found liable for the damages associated with the decks and the discontinuous membrane at the base of the podium stairs.

However, since it was decided that Multiplex had no insurance cover for the liability claim brought, it means the council and Charles Norager & Sons Ltd are the only solvent parties that the plaintiffs can execute judgment against.

This is particularly grim news for the council and/or their underwriters, as Charles Norager & Sons Ltd was only found liable for the damages associated with the decks and the discontinuous membrane at the base of the podium stairs.

In respect of the deck, it was ruled that the apportionment of liability as between the council and Norager was 20%/80% respectively.

I note that this success for the plaintiffs is claimed to be the largest leaky building award thus far, with the value of it recorded as $25.7 million in a New Zealand Herald article.

However, the insolvency of the responsible parties means that, proportionately, the council must meet the majority of that liability on its own, with the exception being the costs to repair the deck which it shares with Charles Norager on the proportions as set out above.

It is for this reason that the finding made in favour of Zurich Insurance — that there was no cover for Multiplex — is critical, and may become the subject of further scrutiny.

Note: This article is not intended to be legal advice (nor a substitute for legal advice). No responsibility or liability is accepted by Legal Vision or Building Today to anyone who relies on the information contained in this article.

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