Legal Doctrine, the Leaky Homes Crisis and the Limits of Judicial Law Making

Posted: 4 Nov 2010 Last revised: 8 Apr 2015

See all articles by Geoff McLay

Geoff McLay

Victoria University of Wellington - Law Faculty

Date Written: November 3, 2010


Claims for economic loss remain a controversial part of modern commonwealth tort law. Standard accounts explaining restrictions on the recovery of economic loss generally, or claims against government in particular, tend to focus on the jurisprudential shakiness of such awards. This article reviews the New Zealand experience of allowing recovery against territorial authorities (city and other local councils which have the responsibility for building permissions and inspection) for failures in building control and inspections that lead to building owners having to conduct repairs or suffering loss of value. This article will submit that perhaps the building cases in New Zealand point to a general weakness in judicial lawmaking, that it ultimately reflects the nature of previous decisions, and not necessarily the underlying policy or principle involved. Moreover because of pre-existing doctrine territorial authorities have borne, and will continue to bare, a share of the financial responsibility that is disproportionate to their actual contribution to the problems as a result of joint and several liability and the bankruptcy of the companies that promoted developments. Further, the concepts of corporate personality make it difficult to sue the promoter of a building development through his or her company when they had no personal involvement in the actual construction. Moreover, judicial policy has held that the central government agency, the Building Industry Authority (BIA) has been held not to be liable. That authority had an oversight role over both the construction methods and materials used in leaky homes, and over the inspectors who failed to have proper insurance, has largely escaped legal liability for the key tasks of certifying appropriate building techniques and regulation of private certifiers.

Keywords: tort, defective buildings, government liability

Suggested Citation

McLay, Geoff, Legal Doctrine, the Leaky Homes Crisis and the Limits of Judicial Law Making (November 3, 2010). Available at SSRN:

Geoff McLay (Contact Author)

Victoria University of Wellington - Law Faculty ( email )

PO Box 600
Wellington 6140
New Zealand
64 4 4636320 (Phone)


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