University of Canterbury v The Insurance Council of New Zealand Incorporated

• Jurisdiction: New Zealand
• Judge: O'Regan J,Arnold J
• Judgment Date: 22 December 2014
• Neutral Citation: [2014] NZSC 193
• Docket Number: SC 120/2013
• Court: Supreme Court
• Date: 22 December 2014

BETWEEN

University of Canterbury

Appellant

and

The Insurance Council of New Zealand Incorporated

First Respondent

Christchurch City Council

Second Respondent

Body Corporate 423446 (Oxford Body Corporate)

Third Respondent

[2014] NZSC 193

Court:

McGrath, Glazebrook, Arnold, O'Regan and Blanchard JJ

SC 120/2013

IN THE SUPREME COURT OF NEW ZEALAND

Appeal from a Court of Appeal (“CA”) decision which held that where a building was an earthquake-prone building in terms of s122(1) Building Act 2004 (“BA”) (meaning of earthquake-prone building), a council was not entitled under s124(1)(c)(i) BA (earthquake-prone buildings: powers of territorial authority) to require the building to be strengthened to an extent greater than necessary to ensure that the building would not have its ultimate capacity exceeded in a moderate earthquake, as defined in reg 7 Building (Specified Systems, Change the Use and Earthquake-prone Buildings) Regulations 2005 — what was the meaning of the two limbs of s122 BA (s122(1)(a) will have its ultimate capacity exceeded in a moderate earthquake and s122(1)(b) would be likely to collapse) — what was the definition of “reduce or remove the danger” in s124(2)(c)(i), BA in relation to an earthquake-prone building.

Counsel:

T C Weston QC and D A Webb for Appellant

D J Goddard QC and G J Jones for First Respondent

No appearances for Second and Third Respondents

• A The appeal is dismissed.

• B The appellant must pay the first respondent costs of $25,000 and reasonable disbursements (to be fixed by the Registrar if necessary).

JUDGMENT OF THE COURT

REASONS

	Para No.
McGrath, O'Regan and Blanchard JJ	[1]
Glazebrook and Arnold JJ	[67]

MCGRATH, O'REGAN AND BLANCHARD JJ

(Given by O'Regan J)

Table of Contents

	Para No
Introduction	[1]
Factual context	[4]
Statutory and policy context	[8]
The Building Act	[8]
The City Council Policy	[22]
NZSEE Recommendations	[24]
Engineering evidence	[26]
Department of Building and Housing policy guidance	[30]
The broader statutory framework	[33]
The High Court decision	[37]
The Court of Appeal decision	[39]
Two stages	[41]
Section 122 of the Building Act	[42]
Section 124 of the Building Act	[50]
The “danger”	[52]
Another approach	[59]
Conclusion	[64]
Result	[65]
Costs	[66]

Introduction

1 This appeal raises an issue of interpretation of certain provisions of the Building Act 2004 relating to earthquake-prone buildings. Leave to appeal was granted on the following question: 1

Where a building is an earthquake-prone building in terms of s 122(1) of the Building Act 2004, is a council entitled under's 124(1)(c)(i) of the Act to require the building to be strengthened to an extent greater than is necessary to ensure that the building will not have its ultimate capacity exceeded in a moderate earthquake (as defined in reg 7 of the Building (Specified Systems, Change the Use and Earthquake-prone Buildings) Regulations 2005)?

2 In broad terms, the Insurance Council of New Zealand Inc says that the answer to the question is “No”. Its position found favour with the High Court, 2 the

of Appeal 3 and the Canterbury Earthquakes Royal Commission. 4 The University of Canterbury argues that a territorial authority is entitled to require that buildings be strengthened to a greater extent than that specified in the question. It accepts that the interpretation that has found favour in the Courts below and with the Royal Commission is an available interpretation, but argues that its proposed interpretation better reflects the statutory context and, in particular, the focus on safety in the Building Act and the instruments that give effect to that Act

3 We propose to approach the question by first providing the factual context, then setting out the statutory provisions in issue and finally addressing the competing interpretations and the reasons advanced in favour of each of them.

Factual context

4 The present proceedings started as an application for judicial review by the Insurance Council of aspects of the Earthquake-prone, Dangerous and Insanitary Buildings Policy 2010 of the Christchurch City Council. We will refer to this as the City Council Policy. The University and Oxford Body Corporate 5 were added as parties as both owned substantial properties in Christchurch that were damaged in the Christchurch earthquakes and had a significant economic interest in the outcome. The High Court Judge recorded that for the University the differential between insurance cover to the level of strengthening advocated for by the Insurance Council and that provided for in the City Council Policy was about $140 million. 6 The Insurance Council's interest arises because of the implications of the City Council Policy for its members that have insured buildings that were damaged in the Christchurch earthquakes. The Insurance Council says the City Council Policy would affect the costs to insurers and building owners of repairing or reinstating

damaged buildings, the level of cover available under material damage insurance policies, and the willingness of reinsurers to invest in the New Zealand market

5 The Insurance Council was successful in the High Court. Certain parts of the City Council Policy were set aside and the following declaration was issued: 7

The Court grants a declaration that in issuing a notice in respect of an earthquake prone building under's 124 of the Building Act 2004 the Christchurch City Council cannot require a building owner to take steps to increase the seismic strength of the building to a greater extent than is necessary to ensure that the building will not have its ultimate capacity exceeded in a moderate earthquake as defined in clause 7 of the Building (Specified Systems Change The Use, and Earthquake-prone Buildings) Regulations 2005.

6 The City Council did not appeal against the High Court decision, but the University and Oxford Body Corporate did. The Court of Appeal dismissed the appeal. 8

7 The University then sought leave to appeal to this Court and this was granted. 9 Neither the City Council nor the Oxford Body Corporate, both of which had been represented in the Court of Appeal, took any part in the hearing before this Court.

Statutory and policy context

The Building Act

8 The provisions directly in issue in this appeal are ss 122 and 124 of the Building Act. They appear in pt 2, subpt 6 of the Building Act, which comprises ss 121 to 133. That subpart is headed “Special provisions for certain categories of buildings”. At the time of the High Court and Court of Appeal hearings, the subpart dealt with dangerous, earthquake-prone and insanitary buildings. The Building Act was amended in November 2013 10 to include a new category, “affected building”,

which is a building that is adjacent to, adjoining or near to a dangerous building or a dangerous dam. 11 The amendment has no effect on the issues in this Court. 12 In argument, counsel referred to the relevant sections as amended (to include reference to affected buildings) and we will do the same, while noting that the relevant provisions did not refer to affected buildings at the time the City Council made its policy

9 Section 131 requires a territorial authority (such as the City Council) to adopt a policy on dangerous, earthquake-prone and insanitary buildings within its district. Under's 131(2), the policy must state:

• (a) the approach that the territorial authority will take in performing its functions under this Part;

• (b) the territorial authority's priorities in performing those functions; and

• (c) how the policy will apply to heritage buildings.

10 Section 132 sets out the way in which the policies must be adopted and also requires that they be reviewed within five years of their adoption and thereafter at intervals of no more than five years. 13

11 In the present case, the City Council first adopted an Earthquake-prone, Dangerous and Insanitary Buildings Policy in 2006. The City Council Policy relevant to this appeal was adopted after the first review in September 2010, a few days after the major earthquake that struck Christchurch on 4 September 2010. This was the first of a number of major earthquakes in Christchurch in 2010 and 2011.

12 Section 121(1) defines a dangerous building as follows:

• (1) A building is dangerous for the purposes of this Act if,-

  • (a) in the ordinary course of events (excluding the occurrence of an earthquake), the building is likely to cause-

    • (i) injury or death (whether by collapse or otherwise) to any persons in it or to persons on other property; or

    • (ii) damage to other property; or

  • (b) in the event of fire, injury or death to any persons in the building or to persons on other property is likely.

13 It is notable that this definition excludes danger arising from an earthquake. That is because there is a separate category to deal with this, namely earthquake-prone buildings. 14

14 Section 122, which is a key provision in the context of this appeal, provides as follows:

122 Meaning of earthquake-prone building

• (1) A building is earthquake prone for the purposes of this Act if, having regard to its condition and to the ground on which it is built, and because of its construction, the building-

  • (a) will have its ultimate capacity exceeded in a moderate earthquake (as defined in the regulations); and

  • (b) would be likely to collapse causing-

    • (i) injury or death to persons in the building or to persons on any other property; or

    • (ii) damage to any other property.

• (2) Subsection (1) does not apply to a building that is used wholly or mainly for residential purposes unless the building-

  • (a) comprises 2 or more storeys; and

  • (b) contains 3 or more household units.

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