Whether producer statements can give rise to criminal liability under the Building Act 2004 (the Act) has been the subject of a number of conflicting High Court decisions [1].

The most recent is Cancian v Tauranga City Council [2] – a case related to the beleaguered Bella Vista development in Tauranga. As a result of these differing decisions, the Solicitor General asked the Court of Appeal to consider this point of law and to issue a decision confirming the position.  

Following that referral, the Court of Appeal has now confirmed that a producer statement issued following or resulting from construction monitoring (known as PS4s) may give rise to such liability under section 40 of the Act where the underlying construction work is not compliant with the building consent.  

In this article we consider the decision and some of the potential outcomes. 

The Building Act

Under section 40(1) of the Act a person must not carry out any building work except in accordance with a building consent. Failing to comply with s 40(1) is an offence punishable on conviction by a fine not exceeding $200,000 [3].

A PS4 is a statement supplied by or on behalf of an applicant for a code compliance certificate from a design professional, such as an engineer, who has undertaken construction monitoring or observation. It confirms that, in the opinion of the author, the building work in question has been carried out in accordance with the building consent with respect to particular clauses of the building code. 

While PS4s are not specifically provided for in the Act, they are routinely relied on when councils issue code compliance certificates (as part of being satisfied, on reasonable grounds, that the building work complies with the building consent). They are particularly important given councils will generally not have the resources or in-house expertise to carry out these assessments themselves, particularly for specialist work. 

The decision

The critical questions the Court of Appeal needed to consider were whether issuing a producer statement fits within the definition of “building work” and, if so, whether and in what circumstances a producer statement would be building work not carried out “in accordance with a building consent”.  

In those respects, the Court held that:

• Issuing a PS4 is "building work". It noted the broad definition of that term “clearly captures any work for or in connection with the construction of a building”. It further noted that the definition includes "sitework", which is "work on a building site associated with the construction of a building" and the works required to issue a PS4 easily fit within that definition. 
• While the focus must be on the work of the author of the PS4, rather than the work of the builder, and emphasised that “the liability of the author of the producer statement [and the builder] is not one and the same”, a PS4 could be building work done otherwise than in accordance with the consent in breach of s 40(1) where the underlying building work does not, in fact, comply:
  • Once it is established that there has been non-compliance with the building consent and the building code, it is natural to describe a statement certifying compliance as work, completed in connection with the construction of a building, that is not carried out in accordance with a building consent. There was therefore a breach of s 40(1).

This interpretation was considered to be consistent with both the text and purpose of the Act, because it promotes the accountability of those who need to ensure building work complies with the code. The Court considered, but was not concerned, that its interpretation might involve criminalisation of " the giving of an opinion that in the context of a statutory offence provision that creates strict liability". That was because it said the producer statement is "more than an opinion – it reflects the work the author has carried out to be able to express the opinion, and confirms the author has reasonable grounds for belief in compliance." It further noted that building "consents and the building code have prescriptive and verifiable standards as to what they each require" and the author "will not be criminally liable unless it is established beyond reasonable doubt that the matters certified in the statement are incorrect". 

Analysis

While the importance of PS4s to the building control system cannot be understated, criminal liability is potentially a harsh outcome, particularly where the building code is performance-based rather than prescriptive – in contrast to the Court’s view above. Given the offence is strict liability, the Court’s judgment does (as it recognised) leave open the possibility that an opinion is an offence, if that opinion later turns out to be incorrect even if the author had reasonable grounds for the opinion when it was given. 

That is a positive development for councils in one respect. When issuing code compliance certificates, councils must be satisfied, on reasonable grounds, that the building work complies with the building consent. Authors of PS4s are already exposed to potential civil liability under the Fair Trading Act 1987 and for negligent misstatement, but the potential criminal liability will add to the incentive to get the PS4 right. That will hopefully increase building standards but also mean that that, all else being equal, it will be easier for Councils to say they reasonably relied on the accuracy of a PS4 when defending the claims that they face.

On the other hand, the risk of criminal liability may make it difficult to get PS4s – either at all or on terms that can reasonably be relied on. It is already routine for authors of PS4s to (purport to) limit their liability to the recipient council to a relatively low dollar amount given the potential civil liability referred to above. The additional risk of criminal liability may lead to consultants declining to provide construction monitoring services, or to (heavily) qualifying the PS4s they issue. If so, this would require councils to rely more heavily on their own inspections of work they may not (as above) have the resources or in-house expertise to check. 

There are other potential implications that may have the unintended consequence of increasing the cost of construction (at a time when the government is currently undertaking a review of the building control system to identify opportunities for greater efficiency that would reduce the cost of construction). They include:

• consultants who are willing to provide construction monitoring services may only be prepared to do so with significantly increased inspections and fees related to those services; and
• criminal sanctions may impact on insurance costs and/or insurance may be more difficult to obtain, in particular, for those who have been convicted under the Act.

MinterEllisonRuddWatts has extensive experience advising consultants, designers, contractors, principals and councils on construction-related contracts, projects and disputes. Please contact us if you have any questions or would like to discuss how the implications of this case might impact your organisation.

Footnotes:

[1] Andrew Melvin King-Turner Ltd v Tasman District Council [2021] NZHC 343; Kwak v Park [2016] NZHC 530; Cancian v Tauranga City Council [2022] NZHC 556
[2] Cancian v Tauranga City Council [2022] NZHC 556
[3] s40(2)-(3) Building Act 2004