By Madison Dobie (Associate) and Brendan Cash (Partner) in Dentons Kensington Swan’s Major Projects and Construction team.
Producer statements play a critical part in establishing compliance with the New Zealand Building Code. Under the Building Act 2004 (the Act) producer statements have no legal status. They exist simply because Building Consent Authorities (BCA) and industry deem them to be the best way to demonstrate compliance.
Despite their lack of statutory basis, significant legal consequences can flow from issuing a producer statement such as liability in tort (negligent misstatement) and professional disciplinary action.
It is also possible that an offence under the Act may be committed by the issue of a producer statement in certain circumstances. For example, section 369 makes it an offence to make a false or misleading statement in communication made or given under the Act (which would include a producer statement). Such an offence gives rise to a $20,000 fine (in the case of an individual) and a $60,000 fine for a company.
An offence under section 40, however, would present a far larger stick.
Section 40 states that it is an offence to carry out building work except in accordance with a building consent. Breach of the section can result in a charge being brought by the BCA. If convicted, a person who breaches the section is liable to a fine of up to $200,000 and, where the offence continues, a further fine of up to $10,000 per day or part day that the offence continues.
Principals have traditionally been the focus of charges under section 40, however, two recent cases have raised the question of whether engineers and their companies may also be liable under section 40 of the Act for such an offence by issuing a producer statement in certain circumstances.
In both cases, the engineer and their company were convicted under section 40 in the lower courts and the defendants appealed their convictions to the High Court. The issue before the High Court in both cases was whether, for the purposes of section 40, the issuing of a producer statement constitutes ‘building work’.
Issuing a producer statement before building consent is issued – Andrew Lenvin King-Turner Ltd v Tasman District Council [2021] NZHC 343
Mr King (director and shareholder of Andrew Lenvin King-Turner Ltd) issued a producer statement and work had been undertaken on the building before the Building Consent was issued. Mr King and his company (which specialises in structural engineering) were convicted in the District Court for carrying out building work not in accordance with a building consent in breach of section 40.
Mr King and his company appealed the convictions to the High Court.
Given that producer statements have no formal status under the Act, the Court noted on appeal that it is difficult to see how issuing a producer statement could constitute ‘building work’ as required by section 40.
The Court found that issuing a producer statement by an engineer (or its company) which wrongly confirms that building work complies with the building code and/or a building consent is not capable of constituting an offence under s 40. It is the primary responsibility of a builder to ensure that building work complies with building consents, plans and specification and given that Mr King and his company were designers, they were not responsible for ensuring either that a building consent is obtained or that, once obtained, it is compliant (see section 14D for reference). Therefore, the convictions entered by the District Court were quashed and the appeal was allowed.
Issuing a producer statement for non-compliant building work – Cancian v Tauranga City Council [2022] NZHC 556
Mr Cancian (of Bella Vista Homes Ltd) was a developer leading the Bella Vista Homes subdivision in Tauranga. Engineering Ltd (owned and operated by Mr Cameron, an engineer) was engaged to perform engineering work.
Mr Cameron signed a PS4 confirming that work had been carried out in accordance with the building consent. However, it became clear that the building work was non-compliant.
Mr Cameron and his company (along with Mr Cancian, the property developer) were convicted under section 40 of the Act by the District Court.
On appeal from the District Court, one of the issues was whether the act of providing a producer statement could give rise to a charge under section 40.
The High Court emphasized the value placed on producer statements as they avoid the need for building consent authorities to expand their resources in having to inspect every item of work. The introduction of the Act in 2004 had not reduced the use of producer statements in the industry and they do remain widely used and relied on.
In applying Andrew, the court held that to establish liability under s 40, the key question must be whether the work was carried out in accordance with the building consent. The relevant building consent did not refer to producer statements and therefore did not provide standards and/or requirements for information to be provided in a producer statement. This meant that Mr Cameron and the engineer could not issue a producer statement that breached the building consent, and therefore there could not be liability under section 40.
It is possible, therefore, that where the building consent does require a producer statement which confirmed compliance with the building consent and code and that producer statement is wrongfully issued, there may be a breach of section 40.
In any case, the Court gave a word of warning noting that just because an engineer may not be liable under section 40 for issuing a producer statement, due to the reliance placed on producer statements, where such issue is unjustified, consequences will ‘inevitably follow’. The Court noted these consequences could include liability in tort, disciplinary action or under section 369 of the Act.
Implications?
In July 2022, Tauranga City Council were granted leave to appeal to the Court of Appeal on the question of whether the High Court was correct to find that the issue of producer statements in relation to non-compliant building work does not give rise to liability under section 40 of the Act.
Regardless of where the Court of Appeal falls on the issue, these cases represent a timely reminder that while producer statements do not have legal status under the Act, significant consequences flow from their wrongful issue.
If the Court of Appeal reverses the High Court’s findings or if the circumstances of the case differ from those in Andrew and Cancian, conviction under section 40 could be added to the already long list of such consequences.
This publication is not designed to provide legal or other advice and you should not take, or refrain from taking, action based on its content. Dentons Kensington Swan does not accept any liability other than to its clients, and then only in relation to specific requests for advice. For specific advice, contact your legal advisor or the Major Projects and Construction Team at Dentons Kensington Swan on (09) 379 4196.
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