Duty of care in mixed residential/commercial use buildings upheld by the Supreme Court

Duty of care in mixed residential/commercial use buildings upheld by the Supreme Court

A recent decision of the Supreme Court has confirmed that the duty of care owed by local bodies to building owners when inspecting residential buildings extends to mixed residential/commercial buildings.

The Supreme Court case in Byron does not amount to a finding of negligence against the Auckland Council.  However, the way is now open for building owners to claim and seek to prove negligence against Councils in ‘leaky building’ cases.

The Supreme Court case

The case related to Spencer on Byron, a high rise building on Auckland’s North Shore containing hotel units and six penthouse apartments. Many owners of the hotel and penthouse units, along with the body corporate, claimed negligence on the part of a number of those responsible for construction of the building (including the former North Shore City Council) in a High Court proceeding. The Council argued successfully in the Court of Appeal that the owners’ case against it should be struck out.

On appeal by the owners, the Supreme Court held that the building owners’ claim that the former North Shore City Council owed them a duty of care when inspecting the building for Building Code compliance was legitimate, and their case should not have been struck out.

Implications for mixed-use building owners

The Supreme Court confirmed last year in a decision relating to a residential complex (Sunset Terraces) that Councils owed a duty of care to building owners when inspecting residential buildings. It has now held that the duty of care confirmed in Sunset Terraces applies regardlessof the nature of the building.

The Councils’ duty of care is restricted to work done by Councils while the Building Act 1991 was in force, and is restricted to taking reasonable care that buildings were constructed in accordance with the Building Code.  The position remains open as to Council’s duty of care under the more recent Building Act 2004, but the expectation is that the same duty of care should apply under that statute, whether the building is used for a residential or commercial purpose.