Council owes no duty to owners who built a defective building

Invercargill City Council v Southland Indoor Leisure Centre Charitable Trust [2017] NZCA 68


The primary issue in this case, and the main focus of this appeal, is whether a local authority owes a duty of care to the owner of the stadium whose contracting agents, such as contractors and engineers, had built a defective building.   

The Facts

The Southland Indoor Leisure Centre was built on Council land, which the Council leased to the Southland Indoor Leisure Centre Charitable Trust (the Trust).  The Trust then built a sporting complex for the southland community on this land.  A design fault in the construction of the roof caused it to sag.  The Trust arranged for remedial work to be done which was designed and approved by engineers.  The Council required one engineer to certify by producer statement that the completed work met the design of another engineer to be code compliant. 

The design required steel trusses to exhibit a small upward camber (pre-camber), measuring 85mm at the midpoint.  Unfortunately the steel fabricators did not complete the remedial work to the appropriate specifications and this was not detected during inspections.  As the Council was relying on the engineer’s certification of the work, it never inspected the work either. 

Without receiving the engineer’s producer statement, the Council issued a code of compliance for the remedial work.  When, over a year later, the engineer provided producer statements omitting the pre-camber measurements, the Council failed to follow up.  Had the Council insisted on measurements they would have known some of the trusses still sagged. 

During the winter of 2006 the Trust was concerned about the movement of the roof in the wind and took advice from the design engineer who recommended an inspection of the pre-camber and welds.   The Trust did not follow his advice and, during a heavy snowstorm in September 2010, the roof collapsed under the weight of the snow. 

In the High Court the Council was found to be negligent for issuing the code of compliance.  The Council appealed on the basis that it owed no duty of care to the Trust and was therefore not negligent.

The Decision

The three appeal judges held differing opinions on whether a duty applied on these facts.

Harrison and Copper JJ found that it was unreasonable to impose a duty on the Council based on attribution -- a policy ground.  The defects in the remedial work which caused the building’s roof to collapse were created solely by the negligence of the Trust’s agents, who were directly responsible for the design and construction of the roof and the remedial work.  As the Trust’s agents brought about the loss to the Trust, the consequences of their failures must be attributed to the Trust.  Harrison and Cooper JJ found that “the Trust cannot then assert that the Council owed a separate duty of care to protect it against the same negligence and indemnify it against the same loss. Such a result would not be fair, just or reasonable.”

Miller J on the other hand found that there was a duty of care owed by the Council to the Trust.  He found that the Council had assumed responsibility for checking that an appropriately qualified person had supplied adequate evidence that the consent conditions had been met.  In this case, this meant the Council had a duty to check the engineer’s producer statements.

Miller J reached the same result as the majority, however, but by a different route.  He found that the Council’s breach of duty did not cause the loss.  Specifically he said “the evidence indicates that … the Trust did not rely on the Council’s code of compliance certificate for assurance that the work complied with the building code.  It relied rather on its own agents.”  Reliance on the Trust’s agents was evidenced by the Trust approaching the original design engineer with concerns about the movement of the roof in the wind despite having been issued a code of compliance.   Miller J also made note of the fact the Trust had never involved the Council in its investigations. 

Why is this case significant?

Philippa Fee from Fee Langstone says that this decision is an important restriction on Council’s liability.  The leaky building crisis, as insurers know, concerned the liability of local authorities to subsequent purchasers who bought a property unaware of the defect.  Philippa says that this decision rejects the Council having a duty to a building owner who was responsible for creating the defects, either through its own actions or those of its negligent professional.  In such a case the building owner’s remedy will lie only against its professionals not the Council.