Litigation, Disputes and Employment
Engineers and insurance providers should be aware that engineers issuing PS4s may face criminal liability under the Building Act 2004 (Act) for inaccurate statements regarding building work compliance in New Zealand.
This is because of the recent Court of Appeal decision (Solicitor General’s Reference (No 1 of 2022) [2024] NZCA 514 (11 October 2024)).
The Court of Appeal decision arose due to a request by the Solicitor General for clarification of whether the issue of producer statements in relation to non-compliant building work can give rise to liability under section 40 of the Act after the Bella Vista development prosecution.
In Bella Vista, Tauranga City Council prosecuted engineer Bruce Cameron and his company for the issue of non-compliant PS4s in connection with a residential building in Tauranga by Bella Vista Homes Ltd. Mr Cameron and his company were convicted in the District Court for issuing PS4s confirming compliant building work for non-compliant building work -- in breach of section 40 of the Act.
On appeal, the High Court overturned the convictions on the basis that issuing a PS4 was not ‘building work’ and that as the building consent did not contain reference to producer statements (i.e. standard or requirement to be complied with), the PS4s could not amount to non-compliant building work.
The acquittals in the High Court decision stand, but the Solicitor General reference to the Court of Appeal sought to clarify the law in relation to the issue of producer statements.
Key points from the Court of Appeal’s decision are:
- Engineers issuing PS4 producer statements can face criminal liability under the Building Act 2004 for inaccurate statements regarding building work compliance.
- PS4s are not statutory documents but have significant legal implications in New Zealand building law. PS4s may be used to confirm an engineers’ potential criminal liability.
- Inaccurate PS4s can lead to criminal liability (discussed below) if they falsely state compliance with the building consent and code, with fines up to $200,000 and additional daily fines for continuing offences (section 40(3) of the Act).
- Issuing a PS4 is considered ‘building work’ under the Act, including sitework performed to assess compliance.
- The Court of Appeal emphasized the importance of PS4s in ensuring building work compliance and rejected the argument that issuing a PS4 is merely ‘design work’.
- The absence of standards or information requirements in the building consent does not mean a compliant producer statement can be issued.
What Engineers should do:
- Engineers must be thorough in construction monitoring, keep good records, and ensure PS4s are accurate, including any assumptions or qualifications.
- Engineers should have clear policies and procedures for construction monitoring and PS4 issuance, avoid providing a modified version of the ENZ / ACE PS4 (without obtaining prior legal advice), and ensure all compliance statements and documents are obtained prior to issuing PS4s.
- Engineers should check that their statutory liability insurance policy covers costs (fines, penalties and defence costs) related to breaches of the Act.
What insurance providers should be aware of:
- As Engineers can now face criminal liability for PS4s, there may be an increased demand for statutory liability insurance policies.
- Increased cover for fines, penalties, and defence costs (which may potentially be higher than before) may require insurance providers to revisit their policies to check what the policy excludes / covers and to consider whether premium and excess rates are appropriate.
Brookfields’ view on criminal liability for issuing inaccurate PS4s:
- Criminal liability requires proof beyond reasonable doubt. Prosecutions are likely to be for serious failures only. This is because the form of the producer statement only requires the maker of the statement to state his/her belief on reasonable grounds that the works comply with the Building Act/ consent. The statement is not a categorical statement of fact that the works have been constructed in accordance with the Act or building consent. Rather, it is a statement that there are reasonable grounds to believe that there is such compliance. The prosecutor will need to prove (beyond reasonable doubt) that the statement is incorrect and non-compliant.
- Each case will be treated differently based on the relevant facts of that case. In the Bella Vista case, the lack of reasonable grounds for the belief was proven by the prosecution, as there was a failure to adequately inspect and notice the significant departures from the consented plans.
