Council liable due to failure to issue an NTR

Timothy Bates of Auckland law firm Legal Vision.


In this month’s article I address a new leaky building decision in the case of Lee & Lee v Auckland Council which went on appeal to the High Court from the Weathertight Homes Tribunal (WHT).

I summarise the facts of this decision below:

• GIL was the developer and head contractor of this house which was constructed in 2002/2003.

• The consent plans detailed a solid plaster house. However, the council approved amended plans showing a cladding change from solid plaster on baton to Insulclad.

• Insulclad was ultimately not used but, instead, Styroplast was installed.

• Construction commenced in May 2002, but the council was not called to the site for an inspection until October 18, 2002. At this inspection various checks were made as to weathertightness.

• A failed inspection took place on April 22, 2003, at which point the council issued a field memorandum which noted a number of items requiring attention. The recheck failed on June 5, 2003.  

• A final building recheck was undertaken on November 13, 2003, and it failed for reasons unrelated to the cladding.

• On December 16, 2003, the council sent a letter addressed to the consent holder at the property address, noting that any type of monolithic cladding without a cavity that had no specific inspections to deal with weathertightness issues would be reviewed on a case-by-case basis before determining whether a CCC could be issued.

• The property was sold on December 24, 2003, to J Ratcliffe, followed by two subsequent sales.

• On March 4, 2004, the council wrote to Mr Kim and advised that it would not issue a CCC on the house due to its inability to verify compliance with E2 (external moisture).

• Mr and Mrs Lee purchased the property from a friend in December 2004 — no LIM was requested.

• The council had not issued a CCC in respect of it for, among other reasons, concerns about weathertightness.

• On or about August 3, 2012, Mr and Mrs Lee became aware that this house was a leaky building.

Whilst Mr and Mrs Lee were successful in the WHT as against the developer GIL, they failed entirely in their claim against the council.

The issues on appeal upon which I want to focus were as follows:

(a) Whether the council’s inspections and/or inspection process fell short of the standard of reasonable care, and

(b) Whether the council’s failure to issue a Notice to Rectify (NTR) caused Mr and Mrs Lee’s loss.


Council inspection process

The court ruled that there was no evidence that the council ever inspected the cladding, so it was not incumbent upon it to have discovered that an unconsented cladding material had been used, namely the Styroplast.

Having just approved the use of Insulclad, and having required the production of a PS3 (Producer Statement) in respect of its correct install, it was entitled to assume that Insulclad was being installed.

In terms of the allegation that the council ought to have specifically directed inspections to the installation of the cladding, the court ruled that acceptance of the PS3 producer statement was a reasonable step to take in lieu of specific inspections, in terms of satisfying itself that the cladding system specified was in compliance with the Building Code.

This was especially so in this particular instance because the council had required a PS3 from the installers that carried out the construction works that the installation accorded with manufacturer specifications, together with certification by Plaster Systems being the system manufacturer.


Failure to issue an NTR

Did failure to issue an NTR cause Mr and Mrs Lee’s loss? The court agreed with the WHT finding that the council breached its mandatory duty to issue an NTR on March 4, 2004.

At the time, it wrote to Mr Kim stating that it would not be issuing a CCC because of the cladding system being used with no cavity. In short, an NTR ought to have been issued contemporaneously.

The more vexed issue was whether this had caused loss to Mr and Mrs Lee. The court ruled that the council was liable for all reasonably foreseeable losses to an injured party caused by the careless breach of its duty to issue an NTR.

Once it was established that the councill negligently omitted to issue an NTR to the builder and current owner back on March 4, 2004, it was liable to Mr and Mrs Lee for any foreseeable losses, namely, in this instance, purchasing a leaky building without knowledge.

Accordingly, both GIL (the developer) and the council were found liable to Mr and Mrs Lee, albeit that a contributory negligence deduction of 50% was applied against them for choosing to purchase without a LIM.  


To be noted

On the strength of this decision, expect to see councils always issuing an NTR where it declines to issue a CCC, to limit exposure to liability.


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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