The Insurance Council of Nz Incorporated v Christchurch City Council v University of Canterbury v Body Corporate 423446 (Oxford Body Corporate)

JurisdictionNew Zealand
CourtHigh Court
JudgePanckhurst J
Judgment Date04 February 2013
Neutral Citation[2013] NZHC 51
Docket NumberCIV 2012-409-2444

[2013] NZHC 51

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

Court:

Panckhurst J

CIV 2012-409-2444

Between
The Insurance Council of NZ Incorporated
Applicant
and
Christchurch City Council
Respondent

And

University of Canterbury
Second Respondent

And

Body Corporate 423446 (Oxford Body Corporate)
Third Respondent
counsel:

D J Goddard QC and T A Spinka for Applicant

DJS Laing and J A Cheyne for First Respondent

T C Weston QC and A D McBeath for Second Respondent

C A McVeigh QC and S T Cottrell for Third Respondent

Application for judicial review of the respondent's Earthquake-Prone, Dangerous and Insanitary Buildings Policy 2010 on the basis it was unlawful, invalid and overreached the respondent's statutory powers under the Building Act 2004 (“BA”) — applicant claimed the policy allowed the respondent to require strengthening of earthquake — prone buildings to a level higher than that prescribed in regulations made under the BA — concerned that costs of earthquake repairs for building owners would be increased and they would claim against their insurers — whether the respondent could require building owners to carry out work on an earthquake-prone building only to the level necessary to reduce or remove the danger that rendered the building earthquake-prone under s124 BA (powers of territorial authorities in respect of earthquake — prone buildings — work can be ordered to reduce or remove the danger).

The issue was whether the Council could require building owners to carry out work on an earthquake-prone building only to the level necessary to reduce or remove the danger that rendered the building earthquake-prone under s124 BA.

Held: The following propositions applied:

  • *The danger in s124(1)(c)(i) BA referred to both s121 and s122 BA, being a shorthand for the risk from dangerous and earthquake-prone buildings.

  • *The danger was the likelihood of injury, death or damage to other property from the inherent danger (in the ordinary course of events), fire or earthquake-prone risk posed by a building.

  • *Earthquake-prone in s122(1) BA, however, was defined by reference to both capacity and consequence, whereas there was no similar qualitative characteristic to the definition of inherently dangerous buildings or buildings that posed a fire risk.

  • *Territorial authorities were empowered to require work to either reduce or remove the danger, a legislative recognition that elimination of the risk might not be reasonably attainable so that an exercise of judgment was required.

  • *The primary focus in requiring work on earthquake-prone buildings was on managing the likely risk of collapse causing injury or death, or damage to other property; but in the context that collapse was defined with reference to buildings with an ultimate capacity under 34% of the NBS.

  • *Accordingly, territorial authorities could not use s124 BA notices to advance a policy of increasing building capacity to a level above 34% of the NBS. However, they were not prevented from requiring work to reduce or remove specific vulnerabilities capable of causing injury, death or property damage where the subject building was also under 34% of the NBS.

There was nothing to prevent territorial authorities from encouraging strengthening of buildings to 67% of the NBS. Likewise, if the only practicable method of strengthening a building to 34% of the NBS achieved strengthening above that level, a territorial authority could require that method of construction.

Placing the provisions within the broader context of other section of the BA did not alter these conclusions which were reached by virtue of a contextual analysis. The various provisions of the BA indicated a statutory scheme. The building code governed building requirements in New Zealand. Compliance with the code was required in relation to new building work. Persons may not be required to achieve performance criteria above those prescribed in the code. That supported the conclusions reached as to the interpretation of s124(1)(c)(i) BA. It would be anomalous if territorial authorities could use utilise s124 BA notices to achieve a strengthening performance criteria higher than that used to define an earthquake-prone building.

The relief sought by the Insurance Council was expansive given the relatively narrow ambit of the application. Nor was it advisable to make a declaration relating to s124 BA including reference to the point at which a building was no longer earthquake-prone, given the finding that there were two dimensions to that concept. A percentage of the NBS seemed to be a clearer approach to identifying the limits of seismic strengthening.

Relief was reserved to allow for consultation, to be followed by the submission of a draft order.

JUDGMENT OF Panckhurst J

An application for judicial review
1

The applicant, the Insurance Council of NZ Incorporated (ICNZ) seeks judicial review of a policy of the Christchurch City Council (the Council), the Earthquake–Prone, Dangerous and Insanitary Buildings Policy 2010 (the Policy). ICNZ claims that the Policy is unlawful and invalid, at least in part, because its terms overreach the Council's statutory powers under the Building Act 2004 (the Act). In particular, the applicant claims that the Policy provides that the Council can require the strengthening of earthquake-prone buildings to a level higher than that prescribed in regulations made under the Act.

2

The concern of ICNZ is that the Policy, if allowed to stand, will result in buildings damaged in the Christchurch earthquakes being strengthened beyond the level at which they are defined as earthquake-prone. This will increase the cost of earthquake repairs for building owners, who will in turn seek to claim against their insurers. The estimated increase to the repair bill of insurers may be several hundred million dollars.

3

The Council contends that the terms of the Policy reflect a proper exercise of the statutory power conferred under the Act. Despite the magnitude of the sum potentially at stake the issue for determination, one of statutory interpretation, is within a relatively narrow compass.

The Proceeding: The Parties
ICNZ
4

ICNZ is a long established industry organisation which represents insurers who write approximately 95% of New Zealand's property and casualty insurance business. Members of ICNZ have been asked to indemnify building owners holding material damage insurance policies for the cost of strengthening earthquake damaged buildings to 67% of the new building standard. The insurers consider they are only liable to indemnify up to 34% of that standard. Material damage policies commonly provide indemnity for the cost of reinstatement of a property to its pre event condition, but including the cost of repairs necessary to comply with any law. Hence, whether as a matter of law seismic strengthening must be to 67% of the new building standard, or only to 34%, is of vital concern to both the insured and the insurer.

5

An affidavit sworn by John Lucas in support of ICNZ's case records that an impasse has developed concerning the level of seismic strengthening that may be legally required by the Council. As a result repairs to some earthquake damaged buildings in Christchurch are on hold. Building owners are reliant upon indemnity from their insurers, but the extent of insurance cover is in doubt. ICNZ further anticipates that if seismic strengthening to 67% is required the cost of reinsurance will increase and the willingness of reinsurers to invest in the New Zealand insurance market may be compromised.

The Council
6

Three affidavits were filed on behalf of the Council; from Christian van den Bosch (the Engineering Services Manager), Stephen McCarthy (the Resource Consents and Building Policy Manager) and John Hare (an earthquake engineer). These outline the history of the Policy and explain the Council's approach to its implementation.

7

A Policy was adopted by the Council in May 2006. Section 132 of the Act required that the initial policy be reviewed within 5 years and this was in train at the time of the first Christchurch earthquake on 4 September 2010. On 10 September 2010 the new Policy was adopted, at an extraordinary meeting of the Council. I shall refer to the aspects of the Policy which are challenged shortly.

8

Applications for a consent to effect building repairs must be accompanied by plans and specifications. If the building is earthquake-prone the Council also requires the applicant to provide an engineering assessment. Although the Policy identifies 67% of the new building standard as the preferred level of seismic strengthening, this is an aim of the Council not a fixed requirement. Invariably, a process of negotiation follows. The extent of the damage, the level of danger posed by the building, the cost of repairs and the use to which the building is to be put all influence the Council's assessment of the strengthening required in an individual case. The capacity of a building, expressed as a percentage of the new building standard, is but one part of the exercise. Many buildings, particularly older ones, are a danger to occupants, pedestrians and others on account of the danger posed by specific parts of the building – facades and chimneys for example – as opposed to their structural strength.

9

The negotiation process enables a compromise to be achieved between risk reduction and affordability. The primary concern of Council staff in assessing a strengthening proposal is whether the particular risks associated with the building have been assessed and addressed, not whether the proposal attains the 67% standard, although this remains the preferred outcome.

10

In practice owners want their buildings strengthened to the 67% threshold or more. Strengthening to this level is perceived as good practice, better addresses risk and is therefore commercially...

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