Liability of the BIA and BRANZ for a leaky building — Fair Trading Act only


This month’s article focuses on a decision which considered the liability of the BIA and BRANZ to the owners of a leaky building.


The decision is that of Struthers and Struthers v Patterson Co-Partners Architects Ltd & Others.


The High Court of Auckland was asked to consider whether causes of action in negligence against the BIA, and negligence and the Fair Trading Act 1986 against BRANZ, ought to be struck out, on the basis that these particular causes of action were so untenable that they had no hope of succeeding.


The causes of action in general terms against theses two parties were as follows:

The BIA owed a duty to the plaintiffs to exercise all reasonable care in connection with its responsibilities and, in particular, negligently adopted a revised Standard NZS3602:1995 in its Acceptable Solution B2/AS1, which effectively approved timber without a fungicide (untreated timber) for structural framing in dwelling houses.

That BRANZ owed the plaintiffs a duty to exercise all reasonable care when appraising the framing timber, the Hardibacker sheet and Duraplast/Hardibacker system used in the construction of their home to ensure they met the requirements of the building code, and to amend or revoke its appraisal/approval of the products and system when it received information which indicated otherwise.

Further against BRANZ, that in trade, it issued appraisal certificates which represented that the building products or systems would meet the building code, and that these appraisal certificates were false and misleading in that the products that these certificates relate to, do not meet the code.


Sacramento decision

You may be aware that the liability of the BIA and BRANZ had been carefully considered in the Sacramento decision of the Court of Appeal.


It was categorically ruled that neither the BIA nor BRANZ owed a duty of care to leaky homes owners in that decision. The High Court was bound to follow Sacramento in this case, and so it did.


In relation to the claim against the BIA, it felt bound by the Court of Appeal’s findings in Sacramento to the effect that:

the relationship between the BIA and the building owners was extremely limited,

the responsibility for the durability of the building rested more directly on the builder and code compliance certifiers,

the owners were not especially vulnerable to inaction by the BIA,

the relevant roles of the BIA under the Act were of quasi-legislative and quasi-judicial nature, and

the BIA did not owe a positive duty of care extending to general superintendence over the building industry.


Struck out

The court ruled that the proposed duties of care against the BIA could not be substantiated, and all claims against the BIA were struck out.


As regards the cause of action in negligence against BRANZ, the judge found it significant that territorial authorities were not obliged to rely on BRANZ’s appraisal certificates, and that they had to satisfy themselves whether a building would be code compliant.


The judge went on to decide that the plaintiffs were not especially vulnerable to any action or inaction of BRANZ. They had a much closer relationship with their architects and builders, and no contractual relationship with BRANZ.


Applying the Sacramento finding, the High Court ruled there was no duty to warn obligation upon BRANZ, and that the negligence cause of action against them ought to be struck out.


However, the court ruled that the Fair Trading Act causes of action against BRANZ ought to remain. The judge, at paragraph 137 states:

“I accept that with the benefit of expert evidence the plaintiffs may be able to establish that the certificates contained a material omission which was misleading.


Half truth

That could have been in the form of a half truth (where a positive representation omits crucial information and is thereby misleading) or because circumstances (such as the availability of the Prendos information) meant that a positive representation which was true when made became untrue.”


He also ruled that it was not fatal to the plaintiff’s claim that they were not the immediate recipients of the appraisal certificates.


Accordingly, it was ruled that the Fair Trading Act causes of action ought to remain.


I suppose this decision may have “opened the door” slightly as regards the bringing of proceedings against BRANZ pursuant to the Fair Trading Act 1986.


But it seems that “the door remains firmly shut” as regards negligence proceedings being brought against the BIA and/or BRANZ.