Chapter 3
The appropriate liability system for multiple defendants

Submitter comments

3.28The majority of submissions were concerned with leaky building problems, coming from the various perspectives of local authorities, builders, architects, other professionals involved in construction, and homeowners. These submitters frequently emphasised the need for a warranty scheme and many also expressed concern with single-build companies and current insolvency law. They also emphasised the need to address the overall framework for residential building in New Zealand. For example, the Home Owners and Buyers Association of New Zealand (HOBANZ) stated:

The key to resolving the issues faced by both consumers and those involved in construction of homes is to move the focus away from liability and on to compliance and quality.

Many local authorities also commented that piecemeal litigation by individual homeowners is a poor solution to a systemic problem such as the leaky building crisis.54 Making a different point but with similar ramifications, the New Zealand Law Society (NZLS) stated:

It would be imprudent to make adjustments to the general law that are the result of very specific issues arising out of the leaky building crisis.

3.29Submissions from local authorities emphasised the aggregate effects of joint and several liability on local authorities given the scale of the leaky building problem and the likelihood that other liable parties will have become unavailable by the time the homeowner discovers the damage. Organisations representing builders and architects highlighted that their members were fully committed to standing behind their work, but felt aggrieved by joint and several liability as they consider it penalises one party for the negligence and unavailability of another.

3.30Many of the issues raised by leaky home defendants are likely to arise whenever loss is caused by concurrent wrongdoers. It is common in such situations to have a “perfect storm” of causative factors; the loss may only arise because multiple parties have all failed to some degree. The extent of the loss may therefore be greater than the sum of the losses that would have resulted had each instance of negligence occurred in isolation. For example, the negligence of the architect who designed a house with monolithic cladding, with no cavity and without eaves is compounded by the negligence of the builder who used untreated timber and did not install window flashings properly. From the perspective of either one of the defendants, it may seem obvious that the damage is disproportionate to their failures, but from the plaintiff’s perspective, it may seem obvious that anyone who caused the loss should be required to provide full compensation.

3.31We also received substantial comment from accountants regarding liability for audits. This sector raised concern around potential future liability rather than experience arising out of an existing liability crisis. In particular, accountants argued that tortious liability is not needed to ensure high quality audits in a properly regulated environment. Furthermore, it was argued that the potential for liability may drive risk-averse behaviour that does not serve the public interest, for example leading auditors to refuse to undertake some audits or some types of audit or to increase fees significantly.

3.32While common themes run through submissions from different sectors or groups, the submissions also raise issues that are unique to particular sectors or groups, for instance the position of local authorities as building consent authorities, or the risk of catastrophic loss to large-scale audit firms. We will examine in Chapters 7 and 8 whether some of these specific factors require specific responses.

54It is worth noting that this point has also been made by the Court of Appeal – see North Shore City Council v Body Corporate 188529 [2010] NZCA 64, [2010] 3 NZLR 486 [Sunset Terraces] at [212] per Arnold J. This point would apply equally under a system of proportionate liability or a hybrid system.