Body Corporate No 207624 v North Shore City Council (Spencer on Byron)

Supreme Court, 11 October 2012, [2012] NZSC 83

A majority of the Supreme Court (Elias CJ, Tipping, McGrath and Chambers JJ) has held that local authorities owe a duty of care to owners of commercial and other non-residential premises when approving plans and inspecting construction.

The Court's decision concerns the leaky Spencer on Byron building in Takapuna, which was designed to include both hotel facilities and residential apartment units. The Court held that the Court of Appeal had been wrong to strike out the owners' claim against the (former) North Shore City Council and enter summary judgment. The issue of whether the Council was in fact negligent is a matter to be determined at trial.

Spencer on Byron follows on from the Court's earlier decision in North Shore City Council v Body Corporate 188529 [2010] NZSC 58 (Sunset Terraces), where it confirmed that local authorities owe a duty of care to building owners when inspecting residential buildings, but left open the question of whether such a duty is owed in respect of non-residential premises.

The holding in Spencer on Byron is restricted to local authorities' work performed while the Building Act 1991 was in force (now succeeded by the Building Act 2004). However, the Court notes that, while it is a question for another day, a similar duty is likely to be owed in respect of the 2004 Act.

The majority considered that this finding was consistent with previous authority and the provisions of the Building Act 1991. In its view, there was no principled basis to distinguish between liability in respect of residential and non-residential buildings. Further, the relationship between the owners and the local authority was sufficiently proximate to give rise to a duty of care, and there were no policy considerations which would render the duty of care imposed unfair or unreasonable.

The case opens the door for local authorities to be found liable for damage to non-residential leaky buildings, but by no means assures that they will be. In particular, plaintiffs will still be required to prove that local authorities have breached their duty of care, by failing to exercise reasonable care.