Can directors of building company be personally liable for leaky homes?

Drillien v Tubberty (High Court, Auckland CIV 2004-404-2873, 15 February 2005, Associate Judge Faire)

The leaky building saga has seen plaintiffs seek to make liable all of those involved in the construction of a property. In this case the defendant and his wife were the directors and shareholders of a company that purchased, developed, and sold residential properties in Auckland. This was an attempt by the plaintiff to make the defendant personally liable for the defects in the cladding, the external joinery, the roof and the structural framing timbers, on the basis that he owed them, as purchasers of the building, a personal duty of care in its construction.

The leading case in New Zealand in respect of the personal liability of company directors is Trevor Ivory Ltd v Anderson [1992] 2 NZLR 517. When a limited liability company was formed it was made plain to all the world that limited liability was intended. Such a limitation was a common fact of business life and in relation to economic loss and duties of care the consequences should be accepted in the absence of special circumstances. This case thus made it clear that a special case must be established to make directors liable. As part of that case it must clearly be shown that the director assumed personal responsibility on his or her part as distinct from any assumption of responsibility by the company he or she controlled.

The evidence pointed against any assumption of personal responsibility by the defendant. It was the company which owned the land, and which sought and obtained the building consent for the property. The company also paid for the materials and engaged the appropriate contractors, usually on a labour-only basis, to construct the building in accordance with plans approved by the council. The defendant did not himself carry out any physical building work for the company in respect of those parts of the building that were the subject of the complaint. Instead, he coordinated the supply and delivery of materials, arranged payment for them using the company’s resources, and arranged the various required council inspections. There was no personal contact between the plaintiffs and the defendant prior to completion of the house purchase, although there was some contact in relation to the completion of the special conditions and in remedying faults. There was simply no evidence to suggest that the defendant was directly responsible for the work that was said to be defective, and which led to the plaintiff’s claim. The cause of action could not succeed.

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