Builder Held Liable Outside 10 Year Liability by High Court after Producer Statements Deemed ‘building work’

By Richard Maiden, Prendos Director, Chartered Surveyor, Chartered Arbitrator with Rainey Law

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The home of Joong and Hye Song Kwak was built by Mario Park who was an unqualified builder and was built with defective waterproof membranes installed to the roofs causing it to leak significantly.

The High Court has found Mr Park liable for the damage cause to the house, which has been described as “close to requiring a total rebuild” and the judge found failure of waterproofing in the roof, decks, gutter and parapets cause “substantial” damage.

Mr Park has been ordered by the High Court to pay $750,000 to Mr Kwak and has been found liable for the damage. The payment comprises of $737,286.80 plus $17,743.00 in court costs.

The three-storey home was built in Birkenhead, North Shore Auckland in 2000 and on sold a year later due to “difficult financial circumstances”. The new owners then on-sold the home to the Kwak’s in 2003. Leaking in the home was noticed four to five years later.

Prendos Director Richard Maiden, whose areas of work include building surveying and dispute resolution, reviewed the property documents, along with the Council files, and concluded that the only element of the building process that was “in time”, as regards s393 of the Building Act, were two producer statements issued by the builder/owner for the waterproof membranes applied to the building.

The owners of the building, Mr and Mrs Kwak, applied for an assessment of their home to the weathertight Homes Resolution Service more than 10 years after the builder, Mr Park, had done any physical building work.

If this had been the end of the builder’s involvement, he would have had the benefit of the 10 year limitation defence of section 393 of the Building Act 2004.

However, Mr Park issued four producer statements within the 10 year long-stop period, two years after the building had been completed. He said that he was the person that had done the work on the roof, decks, balustrades and parapets and that it complied with the building consent and the Building Code.

Mr Maiden said, “Mr Park issued those statements because without them he would not have been able to obtain a code compliance certificate (from a private building certifier who is now insolvent) and sell the house. “After my assessment of the building, my response caused Mr Kwak to explore the producer statement issue to see if it was possible to hold him liable using only these.”

“I advised Mr Kwak, to seek legal advice on the matter but it did appear to me that if a code compliance certificate is defined as building work, then how could a producer statement have a different status?”

A producer statement was defined in the Building Act 1991 as: “Any statement supplied on or on behalf of an applicant for a building consent or by or on behalf of a person who has been granted a building consent that contain work will be or has been carried out in accordance with certain technical specifications” But the 2004 Act does not mention this.

Nevertheless, territorial authorities use producer statements as a means of achieving accreditation, as a Building Consent Authority (“BCA”). Nothing has really changed, except that producer statements are still heavily relied upon by BCA’s in their assessment of whether building work will or has been compliant with the Building Code.

Mr Kwak engaged Rainey Law to prosecute his complaint. They were unable to convince the Weathertight Homes Tribunal that Mr Park owed them a duty of care. Despite the way the claim had been framed, the Tribunal viewed it as a negligent misstatement claim and found it failed for lack of reliance.

Mr Kwak appealed that decision to the High Court, which had the opportunity to consider whether a producer statement fell within the definition of building work substantively for the first time.

The nature of, and liability for, issuing a producer statement had only arisen twice previously, both in summary judgment or strike out proceedings.

In Kwak v Park, the High Court found that issuing a producer statement was building work within the meaning of section 7 of the Building Act 2004; it was “work for, or in connection with, the construction of a building”.

By analogue to the certification work of a council, there was no reason that the words of the Act should be confined to physical work.

Completing that statement was as integral to the construction of the building as installing a membrane. The Court held that it would be an anomaly if liability for design work and certification fell within the definition of building work as had been found in other cases whilst issuing a producer statement would be exempt.

Having taken that logical step, on the facts of this case the High Court was satisfied that there was a sufficient degree of proximity between the issue of the statement and the Kwaks’ loss.

Mr Park had done the work which he later provided a producer statement over. He was in the best position to judge whether he had complied with the Building Code and the consent when performing that work. Without his producer statement, the building certifier would not have issued a code compliance certificate and the house would not have generally come onto the market.

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