Councils in New Zealand will be liable for damages caused by shoddy workmanship after a Court of Appeal decision last week.

The decision by the NZ Court of Appeal means councils which fail to ensure new buildings meet stringent building codes could be sued by tenants who have suffered damages.

The claim by residents of the Sunset Terraces apartment building in Takapuna against North Shore City Council was upheld after Justice David Baragwanath ruled the council was negligent in its duty to ensure new buildings are properly constructed.

“The effect of carelessness in the inspection phase was to lock in a defective condition which was not reasonably detectable by purchasers,” he said in his ruling.

“They were entitled to rely on due performance by the council of its inspection function, whether performed by itself or by an expert.”

The court heard that in January 1998 the council declined to issue a code compliance certificate, despite earlier inspecting and approving parts of the building.

It was the council’s failure to issue the code that allowed residents, who suffered damages to their property caused by leaks, to pursue court action.

The decision follows a 2005 case where the NZ High Court ruled the Crown was not liable for defective work in an Auckland building. In that case, liability rested with the developer, architect, builder and council building inspectors.

Local governments and the NZ Government had been negotiating a deal to fix 42,000 homes with a repair bill of $11.5 billion until meetings were dissolved late last year.