Deloitte administrators overseeing the $240 million leaky building disaster at St Lukes are asking a court to indemnify them from personal liability to prevent apartment owners suing them over any alleged negligence.
A lawyer representing an owner who opposes the application says the professional administrators earn up to $900 an hour at one of the country’s biggest insolvency firms and should be accountable if they fail to exercise due skill and care.
“The worry is that if they get what they are after, which is complete indemnity from any liability that they may have, that in essence nobody can be held to account,” barrister Tim Rainey told the Herald.
The High Court appointed Robert Campbell and David Webb to manage the massive remediation project in July last year after repeated delays and budget blowouts at the 17-building, 285-unit complex.
The Herald has reported on the plight of beleaguered owners who face financial ruin or are desperately clinging on amid exorbitant levy demands for what many believe is an unmitigated calamity.
In a letter to unit owners last week, Campbell explained why he and Webb had applied to the High Court for better legal protection while they carried out their court-appointed role managing the project.
He said the court removed an indemnity clause providing liability protection when approving the administration scheme in December.
“The court’s view was that as we are professional advisers, we are paid professional rates and can obtain professional indemnity insurance. The court therefore did not consider the clause was necessary at that time.”
However, the administrators argued “appropriate liability protections” were needed.
It was not considered “practical or appropriate” for them to carry personal risk for any claims made against them for carrying out complex work, in good faith, while administering the scheme on behalf of owners.
St Lukes Garden Apartments is a 17-building 285-unit project built between 2003 and 2011. Photo / Mike Scott
Defending any such claims could also result in significant costs, delays and diversion of resources from the project itself.
They were asking the court to reinstate a modified protection clause indemnifying them against anything other than “wilful misconduct or gross negligence”.
Or alternatively, one that excluded personal liability for Campbell and Webb, but channelled any claim relating to their appointment back to Deloitte, with an overall cap on potential damages.
They had asked the court to make any such protection retrospective.
A notice of opposition had been filed by one unit owner and the matter would now be decided at a hearing this month.
‘It just doesn’t seem fair’
Rainey is representing that owner, who is based in Hong Kong but has children who are New Zealand citizens.
He said his clients purchased the apartment as an investment for their children using their life savings, but now faced repair costs of between $800,000 and $900,000.
Many other owners were deeply concerned at how the project’s costs had ballooned since a 2019 $70m settlement involving the Auckland Council and how the remediation project had been managed, Rainey said.
The administrators’ application would provide “complete indemnity” from any liability, precluding owners from future legal avenues, he told the Herald.
“If people have dropped the ball, if poor decisions have been made that have added to the cost, [his clients] want to reserve their position to maybe look at other people for having given poor advice or not acting appropriately.
“The effect of this change would be to effectively cut off at the pass any ability to challenge that.”
Lawyer Tim Rainey says it unfair that owners should be asked to assume risk by indemnifying Deloitte administrators. Photo / Sylvie Whinray
Rainey acknowledged that the administrators could not be held accountable for decisions made prior to their appointment last year.
He said Deloitte was one of the country’s largest insolvency firms and would already carry significant indemnity insurance cover. He believed the application was likely motivated by Deloitte’s seeking to reduce risk and therefore its insurance premiums.
But the proposed changes would mean unit owners fully indemnifying the administrators, meaning they would collectively assume the risk of any future claim.
“That just doesn’t seem fair.”
Rainey said he felt for leaky unit owners who were trapped by the situation they were in, with many facing huge stress and financial losses.
“The consequences are just devastating.”
A Deloitte spokesperson said the indemnity protection being sought had been approved by owners prior to the administrators’ appointment when the scheme was put to a vote.
The spokesperson declined to comment further while the application was before the court.
Lane Nichols is Auckland Desk Editor and a senior journalist for the New Zealand Herald with more than 20 years’ experience in the industry.
