In the recent Court of Appeal decision Auckland Council v Body Corporate 366567 [2025] NZCA 78, the court addressed a crucial issue in the ongoing evolution of New Zealand’s building defect jurisprudence — how to determine liability where alleged building defects relate to risks arising from future hypothetical events. This case is particularly relevant for body corporates, apartment owners, and councils involved in or anticipating leaky building or construction defect claims.
Background of the Dispute
The case stems from a 40-level apartment tower on Gore Street in Auckland’s central business district. The Body Corporate and apartment owners sued the Auckland Council, claiming the council was negligent in issuing building consents, conducting inspections, and issuing Code Compliance Certificates. The High Court found the Council liable for some defects — those not barred by statutory limitations and proven to breach the Building Code — but dismissed other claims.
Subsequently, both parties appealed. The Body Corporate sought to amend its cross-appeal to challenge aspects of the High Court’s judgment concerning judicial methodology and evidentiary standards in cases involving future risks. The Council opposed certain amendments, leading to this interlocutory judgment.
The Legal Issue: What Standard of Proof Applies to Future Risk Scenarios?
A central question considered was whether plaintiffs in building defect cases must prove on the balance of probabilities that a building will fail to meet certain performance standards in future hypothetical events, such as a fire. The issue becomes particularly complex in relation to clauses in the Building Code like Clause C4, which sets requirements for structural stability during fire events — something that cannot be directly tested unless a fire occurs.
In the High Court, the Body Corporate argued that a lesser standard should apply in these contexts, suggesting that proving a “lack of reasonable assurance” of compliance should suffice. This argument was drawn in part from dicta in the landmark Spencer on Byron case.
However, the Court of Appeal rejected the attempt to introduce this lower evidential threshold. It held that while the concept of regulatory “assurance” is relevant when evaluating the council’s decision-making processes, it is not sufficient to establish actionable loss. The Body Corporate would still need to show, on the balance of probabilities, that defects constituted breaches of the Building Code — not just that there was a risk or lack of certainty.
Attempt to Introduce a “Loss of Chance” Argument
During the appeal, the Body Corporate introduced a new line of reasoning, referencing common law principles around loss of chance damages, where courts consider the likelihood of future hypothetical outcomes. Cases such as Malec v JC Hutton Pty Ltd and Vero Insurance New Zealand Ltd v Morrison were cited to suggest that the standard of proof for future harm should be probabilistic rather than binary.
The Court of Appeal expressed concern that this argument had not been adequately raised in the High Court or properly articulated in the leave application. It considered the proposed shift too significant and prejudicial at the appellate stage. Consequently, the court denied leave to amend the cross-appeal to include this line of argument.
Judicial Methodology and Burden of Proof
The Body Corporate also alleged that the High Court had erred in its judicial methodology, particularly in over-relying on the burden of proof rather than undertaking its own independent analysis of the evidence. While the Court of Appeal acknowledged this concern, it focused instead on the substantive fairness of introducing new arguments late in proceedings.
The judgment underscores that appellate courts will be reluctant to permit significant shifts in legal arguments unless they were clearly raised in the trial court and would not prejudice the opposing party. As the Court noted, litigation must ultimately reach finality.
Acoustic Evidence and Recovery of Relocation Costs
In a related issue, the court granted the Body Corporate leave to amend its cross-appeal concerning the acoustic standards used to determine whether occupants needed to vacate during building repairs. The trial judge had preferred the Council’s expert, who relied on NZS 6803, a construction noise standard. The Body Corporate sought to argue that a more nuanced or bespoke approach was required, particularly for occupants inside the building.
The Court of Appeal accepted this argument, noting that the Council had ample opportunity to respond to the expert evidence and would not be unfairly prejudiced. This decision may open the door to broader interpretations of what constitutes intolerable living conditions during remediation and the consequent compensable losses.
Key Learnings from the Case
- Balance of Probabilities Prevails: Plaintiffs must still meet the ordinary civil standard, even when claiming damages based on future performance failures of building components.
- Loss of Chance Doctrine Is Limited: Without clear pleading and trial-level articulation, introducing probabilistic reasoning on appeal will not be entertained.
- Judicial Methodology Matters — but Timing is Key: While concerns about how judges weigh expert evidence are legitimate, they must be raised appropriately during trial.
- Expert Evidence Must Fit the Context: The court’s acceptance of a bespoke acoustic analysis reflects a pragmatic approach, especially where existing standards do not squarely apply.
- Finality of Litigation Emphasised: Attempts to raise substantially new arguments late in the process are likely to fail unless exceptional circumstances apply.
Conclusion
This case illustrates the evidentiary challenges faced in proving future risks in construction litigation and reinforces the need for clear, early articulation of all legal arguments. For councils, it provides reassurance that speculative risk arguments will not easily displace the need for robust proof. For body corporates and building owners, it underscores the importance of detailed expert evidence and strategic planning from the outset of litigation.
As building standards evolve and the cost of remediation climbs, this case marks another critical juncture in how New Zealand courts handle large-scale construction defect claims. Legal practitioners should take careful note of how arguments around risk, assurance, and future harm are framed and substantiated in the courtroom.
This article does not constitute legal advice. If you need assistance with your case, please book a consult with our law firm.