A High Court judgment this week for the Insurance Council of NZ (ICNZ) should remove an impediment to the Christchurch rebuild.
Some repairs have been put on hold due to an impasse between Christchurch City Council and insurers over what level of seismic strengthening the Council can require – whether the 34% of New Building Standard (NBS) specified by the building code or the 67% adopted by the Council as its preferred minimum in 2010.
But the High Court has now ruled that the Council cannot over-reach the code.
The ICNZ sought a judicial review of the Council’s Earthquake-Prone, Dangerous and Insanitary Buildings Policy 2010, arguing that it was unlawful and invalid because it over-reached the Council’s statutory powers under the Building Act 2004 (the Act).
The policy draws as its “preferred basis for defining technical requirements and criteria” on the recommendation of the New Zealand Society of Earthquake Engineers that 67% of NBS is a “reasonable level of strengthening to reduce the risk posed by existing buildings”.
The Court noted that the 67% standard was applied by the Council as a “preferred outcome” rather than a minimum requirement and that – invariably – a process of negotiation would be held with the property owner to achieve a compromise between risk reduction and affordability.
It was the content of these negotiations – and the subsequent dealings between the owners and their insurers concerning the extent of cover under individual policies – which led to the legal challenge. No section 124 notices requiring work to be carried out on an earthquake prone building have yet been issued by the Council. Part of the reason for this lack of progress has been the dispute over the scope and reach of the Council’s powers.
Insurance cover commonly provides indemnity for the cost of reinstating a property to its pre-event condition, including the cost of repairs necessary to comply with any law.
The Court found that the Act applied the building code, the relevant provision of which was that existing buildings reach 34% of NBS. Councils can enforce compliance with the code by issuing section 124 notices but they may not require work to achieve criteria which are higher than those specified in the code:
“The building code governs building requirements in New Zealand...Persons may not be required to achieve performance criteria above those prescribed in the code....It would be anomalous if territorial authorities could as a matter of policy utilise s 124 notices to achieve a strengthening performance criteria higher than that used to define an earthquake-prone building”.