Independent building certifiers

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McNamara, in their capacity as trustees, purchased a house in Remuera, Auckland, just after it had been built in 2004. The house leaked.
McNamara repaired the house and then sought to recover the costs and other damages from a number of defendants, including the Auckland City Council. Importantly, a private building certifier had been engaged to carry out the certification process in this case.

The council, therefore, argued that it was absolved from any adverse consequences that arose from the certification process (given the engagement of a private building certifier).
Relying on this argument, the council sought to have the claim against it struck out in the High Court but was unsuccessful. The council appealed that decision.

The interesting point in this case was the limitations on what the private building certifier could, in fact, certify. At the time when the developer engaged the private building certifier Approved Building Certifiers Ltd (ABC), ABC had general authority to issue Code Compliance Certificates (CCC) in respect of domestic dwellings.
However, on December 4, 2002, the Building Industry Authority (BIA) restricted ABC’s ability to approve certification for certain types of exterior cladding. The exterior cladding used on the subject house was one such type of cladding that ABC was prevented from approving.

The BIA notified this restriction on its web site and in its newsletter. Notwithstanding this, between December 2002 and April 2004, ABC inspected the property and subsequently issued a CCC whereby approval was given to the use of an exterior cladding system that ABC was prevented from approving.
The council accepted ABC’s certificate as evidence of compliance, and issued a LIM stating that a CCC had been issued.

In suing the council in negligence, McNamara submitted that the council owed a general duty of care to building owners whose properties were certified by a building certifier. In addition, it was argued that the council, in this case, owed a duty to them as it knew (or ought to have known) that ABC was not entitled to issue the CCC.
However, the council’s main argument was that the wording of section 50(1) of the Building Act 1991 obligated it to accept ABC’s certificate. The council argued that ABC’s engagement as private certifier limited the council’s responsibility and liability such that it was not required (nor able) to examine ABC’s certificate and ABC’s authority to issue it.

In refusing to strike out the claim against the council, the High Court reasoned that unless a private certifier is expressly authorised to certify that items of building work comply with the Building Code, then the duty remains with, and reverts to, the territorial authority.

The decision
The Court of Appeal disagreed, and accepted that the council had no liability in this case. In doing so, Baragwanath J provided a very succinct and well reasoned judgment.
At paragraph 24, Baragwanath J noted that the clear pattern of the Act was to give the owner an election between the use (in whole or in part) of a certifier and the use (in whole or in part) of the territorial authority.

Where the certifier was retained by the owner to perform the whole task, the authority’s role was limited to an administrative function of receiving, and retaining at least a record of, the owner’s advice of completion at the end of the works, together with the certifier’s CCC.
At paragraph 25 the court went on to note that it was impossible to infer a statutory purpose that territorial authorities should act as “long-stop guarantor” to certifiers that issue a CCC in respect of building work.

Accordingly, a certifier which issued a certificate beyond its capacity, or which approved defective work, would be liable in negligence to the owner, and that liability would be backed by an approved insurer.

It was not contemplated by the Act that the territorial authority should then provide a further backstop for default by the certifier.
In summing up at paragraph 28, Baragwanath J noted that the Hamlin line of authority was focused on addressing a breach by councils of an obligation they had undertaken (inspection and certification of building work where the owner could reasonably expect to rely on its exercise of care when any defects would be covered up as the work proceeded).

In this instance, the only assumption of responsibility was by ABC. The council had not undertaken the inspection and certification process and had, therefore, assumed no responsibility.
The council was, therefore, not liable and was entitled to the substantive relief of summary judgment (and costs). 

Concluding comments
The judgment is well reasoned and, it is suggested, produces a logical result. Accordingly, this judgment reinforces the important limitations on council’s liability where independent building certifiers have been engaged to inspect and certify, even when the private building certifier exceeds its authority.
Claimants therefore need to be wary not to assume the council will be found liable merely because it was the relevant territorial authority at the time.

• For an interesting discussion of the High Court decision (to which this appeal relates), the reader is referred to Legal Vision’s article in Building TodaySeptember 2009.