Non-delegable duty (March 2024)

Builders and non-delegable duty. Beware!

A recent High Court judgement brought a clear and current focus onto non-delegable duties owed by builders.[1] This is an issue that is often not understood by builders, but it is of critical importance and builders need to be aware of their potential liability in the daily conduct of their work.

The judgement of Justice Andrew involved a dispute over an apartment building in central Auckland. The building had 179 balconies that were cantilevered out from the building that were effectively entirely outside of the exterior walls. Rainwater caught by the balconies was directed by a slope back towards the building to a gutter cast into the concrete adjacent to the exterior wall. Some of the precast concrete balconies were too long to be craned into position in one piece, so they had a joint, but all of the balconies had a downpipe connection at one end of the gutter. Waterproofing membrane was bonded to the balcony and over that acoustic matting and tiles were placed.

In the ordinary course of events a waterproofing membrane would not be required to protect good quality precast concrete. However, the joints in some of the balconies were grout filled and all of the downpipes sealed to the concrete then a liquid applied membrane was applied over the surface before acoustic matting and tiles were added. What could possibly go wrong?

Well, 3 things went wrong. Some of the joints were not completely filled with grout leaving holes, some of the downpipes were not completely sealed to the concrete and the waterproofing was poorly applied, with inadequate thickness, exposed reinforcing mesh and a few patches missed. As the gutter and downpipes were immediately adjacent to the exterior wall, water that was able to get through some of the joints and a few of the downpipes could get into the outside wall. The building had a good rainscreen cavity to protect the outside wall, so damage was very limited, involving corrosion to cavity battens and a few isolated areas of damage to the exterior wall.

A claim was made in the High Court against the builder, the Council and others involving a long list of defects, claimed repair costs of $60 Million plus damages and consequential costs of about $7 Million, significantly more than the cost of original construction of the building. By the time of trial, the defects list had reduced to only 2 but the damages claimed remained much the same.

The builder claimed that they were not responsible for the defects causing damage, or potential future damage, because waterproofing and tiling was all done by a subcontractor and inspected by the architect. They said that they had no duty to inspect the work of the subcontractor because they believed them to be competent and a specialist in waterproofing. In their defence, they said they could not be held responsible for the negligence of an independent subcontractor.

The law on this has been settled for some time. The claim was brought in negligence. The Plaintiffs must establish on balance of probabilities that,

The defendants owe them a duty of care, (they must be careful to comply with the building code and other standards and regulations)
That the duty was breached, (they did not comply with the building code or other standards and regulations)
The breach of duty caused damage,
Damages resulted in a loss to the Plaintiff’s.

The Privy Council established in 1996 that builders and local authorities owe a duty of care to current and future owners of a building.[2] However, the key issue here was whether the builder owed a non-delegable duty meaning that they could be liable not just for their own work but also for breaches of independent contractors that they hire.

Non delegable duties were established by the Court of Appeal in 1979.[3] Whether a builder owes a non-delegable duty is specific to the facts of each case and depends on their role and responsibilities on a particular project. Whether the builder is actually the head contractor and in control of and supervising the work on site.

Builders duties have been defined in various cases over the last 20 years. Consideration will be given to the contract that established the scope of the builder’s responsibility on the site, whether subcontractors were hired by and under the direct control of the builder as main contractor and the roles and responsibilities of other parties on the project. For the establishment of a non-delegable duty the builder must be in a position of significant control and have the capacity to influence the quality of the construction and compliance with the building consent and building code. The terms of the builders contract with subcontractors will also be important.

Here the builder was found to have a non-delegable duty and was responsible for the acts and omissions of the subcontractor water proofer / tiler. The subcontractor is also responsible for their own acts or omissions but were not a party to the litigation possibly because they were out of business.

Fortunately for the builder, the Judge found that the remedial scope of work proposed by the owner’s experts was “a wholly disproportionate and unreasonable response to the defects for which the defendants might properly be held responsible.” Justice Andrew accepted the builder’s experts alternative repair method resulting is a Judgement of about $5 Million substantially less than the $60 Million claimed. Auckland Council were found liable for a 15% contribution to the total judgement.

The message is very clear for builders. You are responsible for the work of your subcontractors. You should supervise and inspect the work of your subcontractors. The highest risk trade is waterproofing and tiling. Waterproofing contractors in New Zealand have a very poor history with inadequate waterproofing being a main defect in a huge amount of litigation over the last 25 years.

This builder was unfortunate because concrete balconies outside of the building are low risk features that should not result in a significant problem. However, design decisions outside of the builders control contributed to an unusual situation. There are many more common risks with waterproofing that cause very expensive repair works. The defects on this building were atypical.

[1] BODY CORPORATE 406198 v ARGON CONSTRUCTION LTD & OR [2023] NZHC 3034 [30 October 2023]

[2] Invercargill City Council v Hamlin [1996] 1 NZLR 513 (PC)

[3] Mount Albert Borough Council v Johnson [1979] 2 NZLR 234 (CA)