Brian Rudman: Leaky building law makes drips of ratepayers

What a sick joke the Government's attempts to resolve the leaky building scandal has become. If the recent decision of the Weathertight Homes Resolution Service on the Ponsonby Gardens townhouse complex is any precedent, serial leaky building developers like Tim Manning will walk away without paying a cent compensation, but innocent ratepayers like you and me will be in the gun for many millions of dollars.

Mr Manning - also the developer of the leaking disasters of Sacramento at Botany Downs, West End in Grey Lynn and the Grange, Albany - has escaped with his wallet intact for two reasons.

First, like many of his kind in the feverish housing construction boom, he created a special limited liability company to build this development, then swiftly put it into liquidation when things turned to custard. This closed the door on any compensation claims by disgruntled purchasers.

Second, weathertight resolution service adjudicator Tony Dean has ruled Mr Manning had no personal liability as a director because he had not "worked at the coalface" at Ponsonby Gardens. "He may have encouraged his people to cut costs, time and corners, but he never instructed his people to build in contravention of the building code."

So much for the captain being in charge of his ship and all that.

Instead, Mr Dean has pinned the blame further down the chain of command, on the site manager, project manager, architect, waterproofing contractor and Auckland City Council. The latter as guardians of the building codes. And that's where you and I end up holding the can.

In the Ponsonby Gardens case, Auckland City was found liable for $120,000 of the $700,000 award. On top of that it spent $320,000 on legal fees. This is just the tip of the compensation iceberg. Auckland City, it seems, has paid at least $5 million already to settle claims and faces another 1000 or more claims in forthcoming court or resolution service adjudications. Nationwide, there's another 1000 or more.

Even more worrying is the warning of Auckland City's incoming chief executive David Rankin, that under the law of joint and several liability, councils could end up also paying the compensation awarded against other parties, if they go missing or into liquidation. That's because councils can't do a runner, or escape via the Bankruptcy Act.

In this, the so-called age of personal responsibility, there's been little sign of people putting their hands up.

Back in 2002, when the scandal broke, Mr Manning claimed to be "totally gutted". Now he feels hard done by because of all the bad publicity. Well there's an easy solution to that. Stop hiding behind the limited liability protections of the Companies Act, and pay compensation for the cruddy work committed in his name.

There's also been a total absence of contrition within council circles for any shortcomings in the building inspectorate. With legal actions still pending, this is understandable. But my eyes did start to roll reading the evidence of Robert de Leur, principal building officer and a veteran of 17 years at Auckland City Council.

He said; "I would anticipate that anybody intending to purchase a property would carry out their own assessment as to its condition and would not simply rely on anything that they imagined the council may or may not have done."

Buyer beware is all very well. And having personally open-homed some of these polystyrene-coated, Noddy-houses, there was no way I would have risked my life savings on one.

But that doesn't mean that a purchaser shouldn't have an expectation that a new house, built to Government codes and inspected by council officials, is not of merchantable quality.

Yet the homes at Ponsonby Gardens and Sacramento patently were not. Top of the blame list should be Mr Manning.

But close behind would be the permissive 1991 Building Act, naive enough to believe developers could be trusted not to cut corners, and a Commerce Act which allows them to escape their responsibilities when things get sticky.

With compensation awards about to blow out of control, and ratepayers in line to have to fork out big time, the Government should move quickly to ensure developers become personally responsible for their mistakes. Make it retrospective if necessary.

Second, the Government should accept its responsibilities for the weak legislation, and contribute to a fair compensation package that prevents innocent ratepayers becoming additional victims of the leaky homes scandal.