Local Government Magazine

Obligations to remedy non-compliance by past owners

By Frana Divich, Heaney and Partners.
Recently the High Court was asked to decide what it described as “a short but not particularly easy point” in Waikato Regional Council v The District Court at Hamilton & Anor [2023] NZHC 1271. 

The question posed was: could the applicant, the Waikato Regional Council (the council), issue a notice to fix under s 164 of the Building Act 2004 (the Act) to a subsequent purchaser of non-compliant building works, when the works had been carried out by the previous owner?

This question had been answered “no” in a determination by the Chief Executive of the Ministry of Business, Innovation and Employment (MBIE) and on appeal to the District Court at Hamilton. 

The council sought to review the District Court Judge’s decision. It argued that the Judge had misconstrued ss163 and 164 of the Act and/or misstated and incorrectly relied on irrelevant factors. The council argued that the errors were material and warranted the High Court’s intervention.

The case concerned two effluent ponds constructed in 2015 on a pig farm in Te Aroha. The owner at the time of the pond construction was NZ Pork Ltd.

For the purposes of the Act, effluent ponds are classified as dams. S 7 of the Act defines what is meant by “dams” and “large dams”. Due to its dimensions and volume, the smaller effluent pond was not caught by the definition of a “large dam”. As such it did not require a building consent, however it still had to comply with the building code.

When the council carried out a site inspection of the farm in March 2016 it was concerned about the risk of failure of the smaller effluent pond due to the stability of an embankment.

In August 2016 the council carried out a further inspection of the pond. It subsequently engaged a geotechnical engineer who carried out another inspection later that same month. In September 2016 the engineer provided a report to the council. It was the engineer’s opinion that the pond did not comply with the building code.

On 9 September 2016 the council issued a notice to fix to NZ Pork and it was required to comply with the notice to fix by 1 November 2016 and was advised that if it did not comply it would commit an offence under s 168 of the Act and may be liable to a fine of up to $200,000 and a further fine of up to $200,000 each day or part of a day it failed to comply.

On 15 September 2016 the farm was sold to Poseidon Holdings Ltd (Poseidon). On 11 October 2016 the council served a notice to fix upon Poseidon. Poseidon was required to comply with the notice to fix by 1 November 2016. On 8 February 2017 the council served Poseidon with an infringement notice pursuant to s 168(1) of the Act.

The council and Poseidon were in dialogue until February 2018. Poseidon engaged its own geotechnical engineer and provided its report to the council to consider.

Due to its dimensions and volume, the smaller effluent pond was not caught by the definition of a “large dam”.

On 31 July 2018 Poseidon filed an application for determination by the Chief Executive of MBIE pursuant to s 177 of the Act. As part of the determination process an independent engineer’s report was commissioned by MBIE to consider whether the effluent pond complied with the Act and to review the reports provided by the council and Poseidon. 

The expert concluded that the council had reasonable grounds to consider that the effluent pond did not comply with the building code. The final determination was released by MBIE on 10 August 2020. It reached the conclusion that the notice to fix had been incorrectly issued to Poseidon. The council appealed that decision on 31 August 2020 to the District Court. The District Court reached the same conclusion as the chief executive of MBIE.

A building consent is not required in certain situations including where works are listed in Schedule 1 of the Act. Schedule 1, Part 1, cl 22 exempts dams (other than large dams) from the requirements of a building consent. 

The effluent pond in issue in this case was not a large dam and was therefore exempt from the requirement to obtain a building consent. However, s17 of the Act required that the building work comply with the Building Code.

The various expert reports raised concerns about the stability of the effluent pond’s embankment and suggested that clause B1 had not been complied with.

The High Court considered ss 163 and 164 of the Act. The court accepted that Poseidon was a specified person (as the owner of the land) however the court then considered whether s 17 of the Act imposed an obligation on Poseidon. The court did not consider that Poseidon was “contravening” or “failing to comply” with s 17 simply because it had acquired a non-compliant dam.

The court looked at the responsibilities of owners set out in s 14B of the Act and noted that although the list of responsibilities was not definitive or exhaustive it did provide some guidance on Poseidon’s responsibilities under the Act and none of them were relevant to the notice to fix. Critically the Act does not impose an obligation on a person who becomes the owner of non-compliant building work to ensure that the building work is brought up to standard so that it complies with the building code.

The court concluded by saying that the scheme of the Act suggests that the liability of owners, as defined, was considered by the drafters of the legislation and that policy decisions were made in relation to the obligations of owners. 

The court was not persuaded that there was a gap in the legislation or that it was appropriate to impose an obligation on subsequent purchasers to remedy non-compliance by past owners. The High Court also answered “no” to the question posed.

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