A little knowledge can carry a wealth of legal responsibility

Many will recall the shocking photos of a broken Stadium Southland when its roof literally collapsed under the weight of heavy snow back in 2010. The collapse has subsequently been attributed to defective remedial work undertaken to address a previously identified construction issue, and has sparked years of legal wrangling between insurers for the Stadium and the local Council over where the ultimate liability lies.

The Court of Appeal has recently issued a landmark decision that, when it comes to ‘duty of care’, has significant implications for trustees and for Councils all over the country.

Stadium Southland, Invercargill, was built in 2000 under a project and lease agreement between the Invercargill City Council (ICC) and the Southland Indoor Leisure Centre Charitable Trust (the Trust). During construction, a lighter gauge steel was used for the roof than the design required; as a result the roof visibly sagged. Remedial work was completed, but not as the engineer had specified, yet both the engineer and ICC failed to check that the work meet specifications before signing it off.

In 2006, the Trustees raised concerns about the roof’s flexibility when subjected to wind load and expressed concern over its potential for collapse after heavy snow. They sought advice from the engineer involved in the Stadium design, he recommended further remedial work, but the Trustees failed to ensure that the required changes were indeed delivered to standard.

While the High Court found the Council negligent for issuing the code of compliance for the works, on appeal the focus of the legal debate centred around whether or not a local authority (whose contracting agents had built a defective building) owed a duty of care to the Trust as developer of the stadium.

The Trustees’ legal position argued that the Invercargill City Council was liable in negligent misstatement for issuing a code of compliance certificate which itself required proof of structural resilience. The ICC, in turn,  denied that it owed a duty of care at all.

The Court of Appeal issued a surprising but logical decision.  They looked at all the evidence around the stadium planning, repairs, and in particular, whether the Trustees had relied solely on the Council’s actions. The Court determined that the Trustees had, in fact, sufficient prior knowledge about the vulnerability of the structure not to be solely reliant on the Council compliance process.

The Trust was, in effect, put on notice by the fact they had raised concerns about the roof in the first place and therefore the Trustees had they failed to deliver on their duty of care by not having had an engineer inspect the trusses and welds after the 2006 remedial work.

 The Court found that the Trustees were remiss in thinking they could simply pass their responsibility as owners and developers of the Stadium over to the ICC, who were only fulfilling a statutory duty.  

The case highlights the fact that Trustees’ duties are indeed very broad. The fact that the Trustees, in this instance,  were volunteers, is somewhat irrelevant. Their actions were still subject to review particularly because “the trustees were community and business leaders — representatives from banks, retail, local government and the Community Trust of Southland”.  Arguably, they weren’t devoid of commercial nouse and therefore their voluntary status wasn’t a justification for passing over responsibility to Council.

This decision doesn’t absolve Councils of duty, but the ambit of that duty is less than many may assume. Councils simply do not have a duty to a developer/building owner who is responsible for the defects in the first place, either through its own actions or those of its negligent professional. 

So in the case of Stadium Southland, the message is clear – the Trustees knew enough to do more. And by failing to do so, the renegged on their statutory duty of care to the Trust.

If you’re involved in a trust related insurance claim and wish to know more about your responsibilities and obligations as a trustee, then please contact us on 64 3 374 68888 or visit www.tp.co.nz.team