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High Court makes leaky building settlements more difficult

By Andrew Steele - 13 Aug 2014

The Fleetwood Apartments leaky building case may be a rare example of strict adherence to the law coming at the expense of an early and cost-saving resolution. As part of settling the claim, the Council effectively bought the apartment owners' claims against the other defendants by taking an assignment. This meant the Council stood in the apartment owners' shoes by pursuing the defendants themselves.

If the assignment were effective the Council would almost recover its settlement contribution. Only any surplus would go to the apartment owners. That would put the Council out of pocket by only a tiny amount, compared to the potential claim it faced.

In the end, the Court overturned the assignment, holding that only the apartment owners could pursue the other defendants. 

On reviewing the settlement terms, the Court emphasised that the law does not allow people who are unrelated to litigation to meddle in and profit from it. The Council was only a defendant. It was not sufficiently interested in the apartment owners' claims to be allowed to pursue them. 

Usually the Courts distribute liability between defendants based on what is fair. If the settlement were effective, it would usurp the Court's power under the Act. In other words, the settlement could result in the Council bearing less than its fair share. 

In the future, it may be expected that settlements will not involve such assignments.  Leaky building owners may now need to pursue their claims to trial themselves in order to secure a just contribution to the cost of repairs.

If you have any questions about how the decision applies to your case, or about your leaky building in general, please contact the litigation team at Martelli McKegg.

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