Owner wins in leak dispute

When Victor Rutherford bought a plush home on the banks of the Waikato River, he dreamed of turning it into a lodge.

Known locally as the Te Awa Hilton, the 1700sq m five-bedroom, five-bathroom mansion is in the middle of bloodstock country.

The wealthy lifestyle block at 103 Te Awa Rd, south of Hamilton, has its own registered boat ramp. Rutherford paid $1.35 million for it in February 1998.

But he bought a house with more water features than just the internal swimming pool and miniature moat.

The 1992 air-conditioned home with its own gate house and four-car garage was clad in Hinuera Stone, but there were problems, revealed at first by large pools of water collecting on the floors during rain.

Rutherford began investigating and found more questions than answers.

He began legal proceedings, got a significant settlement before it went to court and was awarded costs.

Auckland lawyer Paul Grimshaw - who is representing about 600 leaky building victims - represented Rutherford in the case and believes the victory could set a precedent.

Although the full dispute never made it to court, Justice David Baragwanath detailed it in a ruling on costs in the High Court at Hamilton.

The Te Awa house was owned by the Victor Rutherford and Blair Holst Trust, which sued the Waikato District Council for negligence, negligent misrepresentation, breach of the Building Act 1991 and breach of the Local Government Official Information and Meetings Act 1997 by failing to ensure the Land Information Memoranda included reference to the fact that the cladding had been changed from stucco to Hinuera Stone.

The trust also sued Fletcher Concrete and Infrastructure, alleging negligence on behalf of its Firth Industries, which sells the stone and continues to market it as an exterior house cladding.

In his written ruling, Justice Baragwanath said both the council and Fletchers denied liability, asserting contributory negligence.

Just before the case was due to run in court for more than a week, the parties settled.

The result was that in May, Rutherford collected a $407,000 cheque from the offices of Auckland law firm Heaney & Co, acting for Wellington-based Risk Pool, the council's insurance firm.

But no agreement could be reached on costs, so Rutherford engaged Bruce Stewart, QC. Justice Baragwanath was asked to rule on the matter and awarded Rutherford $65,000 of the $70,000 costs claimed.

He summed up the dispute like this:

"The claim arose from a decision to apply to a house exterior cladding known as Hinuera Stone, which did not conform with a building consent granted by the Waikato District Council.

"The plaintiffs bought the building and discovered that the cladding failed to provide adequate weather-proofing, so that it could be penetrated by water, with the result that the exterior cladding fell away. It was necessary, they said, for the stone to be removed and repairs made to the subsheeting and timber framing and for there to be replastering in accordance with the original design.

"The house, which had been purchased for $1.35 million in February 1998, was sold in May 2000 for $850,000. In addition to the loss on resale, the plaintiffs claimed consequential losses exceeding $180,000 and general damages of $50,000."

Waikato District Council chief executive Warwick Bennett said the council had learned from the mistakes made on the house and an employee involved in the case had resigned "following performance measurement reviews".

The council did not perform its duties, Bennett said, but he disputed that the case was about a leaky building, saying instead that it was about the failure of a glue used in the building.

"We did not as a council inspect this property adequately during the building process and we made a mistake," Bennett admitted.

But this had cost the council only $10,000, the excess on its public liability insurance policy, Bennett said. The rest had been paid by the insurance company.

Although Bennett said initially he knew nothing of the case and had not read the court judgment, he feared local authorities could increasingly become targets of litigation by leaky home victims.

"Builders come and go and it always falls back on the local council - this is just what we have to tolerate," Bennett complained.

In the settlement, Rutherford cited complex factual issues in relation to the cause of the cladding failure and marked conflict among experts.

These issues included weatherproofing problems in the building industry, the duties and obligations of building inspectors, the effect of the Building Act and disputes over the house valuation and a boat traded as part of its purchase price.

Rutherford said there was considerable confusion and uncertainty about:

* The number of builders and subcontractors employed on the house, "all of whom denied all responsibility".

* The limited roles of the architect and engineer.

* The death of a Firth representative and general confusion over a brochure circulated by Firth about the method for fixing the stone to the house.

In the case on costs, Justice Baragwanath summed up the defence of the Waikato District Council and Fletchers: They said the matter was a straightforward building defects claim, it was not uncommon for later purchasers of a house to face confusion and uncertainty about the roles of various tradespeople and they denied there were problems with ambiguity in the Firth brochure.

They said Rutherford had "unnecessarily elected to sue several parties rather than only the council", the legal issues were not difficult and the law was reasonably clear.

They challenged Rutherford's claim for the effort involved in briefing two building industry experts, Peter Jordan of Building Condition Assessments and Philip O'Sullivan of Prendos.

"No more than a normal amount of time would have been required for the preparation of that evidence ... the issues were not complex," the defendants said.

But Justice Baragwanath ruled that the party who had failed in proceedings should pay costs and that the award must reflect the complexity and significance of proceedings.

He therefore awarded the $65,000 to Rutherford, which Bennett said was paid in November.

The home has since been sold and its new owner, Rocky Cribb, said he had carried out extensive repairs, upgrading and refurbishment. He has put the house up for sale through Harveys.