The Supreme Court decision in North Shore City Council v Body Corporate 188529 (Sunset Terraces) and Body Corporate 189855 (Byron Avenue) issued in December 2010 confirmed that the Council did owe a duty of care for leaking building matters which result in loss in value or the cost of repairs to residential units.
Since the 1996 Privy Council decision Invercargill City Council v Hamlin (1996) it has become an established principle in New Zealand that Councils owe a common law duty of care in discharging their statutory responsibilities of inspection and approval.
Counsel for the North Shore City Council argued that a more restrictive duty should be imposed. However, the Court upheld the principle in New Zealand that territorial authorities were liable to the original and all subsequent homeowners for loss caused by the failure of building inspectors to carry out their inspection functions with reasonable skill and care.
The Court confirmed that Councils played a pivotal role in the building control process in New Zealand and there was a high expectation of reliance held by the public when acquiring residential property.
Further, the Court considered it irrelevant whether owners bought from the developer or from original purchasers, and whether they were owner occupiers or rented properties. The focus was on the use of the premises, not on what relationship owners have to their premises.