The New Zealand Government is appealing against a High Court finding that it is liable to thousands of people owning houses that are literally rotting away.

The Government is confident it can defend itself in court against allegations that its now-defunct Building Industry Authority (BIA) broke laws related to compulsory insurance.

The issue revolves around a longstanding problem related to leaking homes, which were approved by independent certifiers licensed by the BIA. But the BIA failed to ensure the certifiers had civil liability insurance to cover homes for 10 years from completion, as required under the Building Act. Instead, it let them renew their insurance on an annual basis.

Now certifiers and builders around the country are declaring bankruptcy as building-owners seek redress from them for a widespread problem related to leaky building materials.

The High Court case revolved around a housing unit complex that will probably have to be pulled down. The BIA attempted to have three claims of negligence worth about $19 million filed against it by the complex owners. When it failed, the Government filed an appeal against the court finding.

The claim alleges the agency was in charge of regulating the building industry and knew about the crisis in 1998, yet failed to act.

The BIA has since been absorbed into a new government department. It has nearly $NZ7 million in reserve to fight the court case.