BusinessDesk report by Paul McBeth
Auckland Council, the local body for the country’s biggest city, has delayed a $175 million bond offer to retail investors after a Supreme Court ruling opened up the way for commercial property owners to sue councils for leaky building syndrome.
The council has shelved its plan to sell bonds after the majority judgment determined local authorities owed a duty of care to owners of all buildings, regardless of whether they are residential or commercial, it said in a statement.
As there was doubt over the decision, the Auckland body had only provided for potential future liabilities for residential weather-tightness, it said. That liability was valued at $417 million for likely costs incurred from those claims in the bond offer document.
“Because of this decision, council has decided to defer this offer, and will re-launch once council has considered the implications of the decision, including on its offer document,” the council said. “It is expected that the re-launched offer will be made in the near term.”
The judgment was delivered in the Supreme Court in Wellington today, holding the Court of Appeal shouldn’t have struck out a claim by the owners of the building Spencer on Byron in Takapuna, that the-then North Shore District Council only had a duty of care to residential buildings. The body corporate claimed the city had been negligent and was liable for the cost of repairs.
Chief Justice Sian Elias and Justices Andrew Tipping, John McGrath and Robert Chambers found in favour of the body corporate. Justice William Young dissented, saying council only owed a duty of care to the residential portion of the building, namely the penthouse apartments.
Auckland Council said the decision doesn’t affect its obligations under other bond issuances, and doesn’t expect its ability to comply with those obligations will be adversely affected.