Leaky home specialists, law firm Grimshaw & Co, was ordered to pay $3.2 million damages after failing to properly advise on distribution of a twenty million dollar 2013 settlement for remediation of Spencer on Byron in Takapuna, Auckland.
Cost increases incurred while apartment owners fought over division of the pie were a direct result of Grimshaw not properly identifying owners’ rights, the High Court ruled.
Twenty storeys high, Spencer on Byron stands out on the North Shore skyline. It was plagued by construction defects. The Spencer body corporate hired Grimshaw as legal adviser. Grimshaw negotiated a twenty million dollar out of court settlement with builder Multiplex and Auckland City Council.
As is common with expensive remediations, a legal claim was first filed forcing both Multiplex and the Council into mediation. Named as plaintiffs were both the Spencer body corporate and named apartment owners.
Not all apartment owners signed up, though all were levied for payment of ongoing legal and consultancy fees. Arguments over whether apartment owners who had not joined the legal action were entitled to share in the twenty million dollar settlement led to remediation delays. On Grimshaw’s advice, the court was asked to rule on apartment holders’ entitlements. This delay resulted in further legal costs and an increase in remediation costs. Grimshaw was held liable for these increased costs: $3.2 million.
In anticipation of the 2013 settlement, Grimshaw had prepared three years prior a distribution agreement setting out a formula for division between apartment owners who had signed up (compensation for cost of apartment repairs) and the body corporate (for repair of common areas). Apartment owners who did not sign up took the view that they would benefit at least from the body corporate repairing common areas that all made use of.
But Unit Titles Act rules changed between the time a draft distribution agreement was floated and the time it was actioned; apartment owners no longer shared ownership of common areas, ownership lay with the body corporate. Apartment owners who had not joined the legal action missed out, the body corporate said. All settlement money would go to those who signed up.
Justice Tahana ruled Grimshaw was negligent in not advising a redraft of the distribution agreement in light of the Unit Titles rule change. Legal costs disputing application of the distribution agreement and subsequent remediation delays were a direct result of this failure, she said.
The court was told a mediation agreed between all apartment owners in 2015 resulted in eighty per cent of the twenty million dollar settlement directed to remediation of common areas, the balance to apartment holders who had signed up for the initial litigation. Those who had not signed up did not receive a payout.
Body Corporate 2017624 v. Grimshaw & Co – High Court (28.4.23 & 15.05.23)
23.070