John Goddard: Confusion and lack of clarity around assessing quake-damaged buildings

Asteron Centre tenant Inland Revenue commissioned its own report on the building in the wake of the November 14 ...
CAMERON BURNELL/FAIRFAX NZ

Asteron Centre tenant Inland Revenue commissioned its own report on the building in the wake of the November 14 earthquake. The report revealed damage to internal staircases and the building was then evacuated in order for further repairs to be carried out.

OPINION: The 5.5 magnitude aftershock on December 4 is a stark reminder that earthquakes can occur at any time and can further compromise buildings which have already suffered damage.  

How can owners and occupiers of buildings know they are safe?  What are the rules and requirements for assessing damaged buildings?  How serious does an aftershock need to be in order for previously damaged buildings to be rechecked? How is it possible for engineers to reach different conclusions about the safety of buildings?

The Asteron Centre is a case in point.  Located opposite Wellington Railway Station and situated on reclaimed land, it was constructed in September 2010 at a cost of $120,000,000.  Tenants of the 15-storey building include Inland Revenue.  After the 2013 earthquake, the Asteron Centre was damaged and repaired cosmetically, with no structural repairs being carried out.  Following the 7.8 earthquake of November 14, the building was reassessed. The building owner's engineer deemed the Asteron Centre to be safe. Inland Revenue commissioned its own report, which revealed damage to internal staircases and raised concerns around the ability to evacuate employees in the event of another earthquake. After this assessment, the building was evacuated in order for further repairs to be carried out.  

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The evacuation of the Asteron Centre raises questions over the rules and requirements for assessing damage to earthquake-damaged buildings. These rules are now found in three different statutes: the Building Act 2004, the Health and Safety at Work Act 2015 and the Civil Defence Emergency Management legislation. These regimes all have their own individual characteristics, which are set out below.

The Building Act Regime

Under the Building Act, a building is dangerous if it is likely to cause injury or death to anyone in it in the ordinary course of events. The ordinary course of events excludes the occurrence of earthquakes. Therefore, when assessing whether or not a building is dangerous, no regard can be had to the probability that further earthquakes will occur or that those earthquakes could be significant (as the December 4 aftershock was). 

An affected building is a building which is adjacent to, adjoining or near to a dangerous building. If a building is dangerous or affected, a local authority can put up a hoarding or fence to prevent people from approaching the building, attach a notice warning people not to approach the building and issue a notice requiring work to be carried out to the building to reduce or remove the danger.

If a local authority considers that required work has not been carried out or is not proceeding with reasonable speed, it may apply to a District Court for an order authorising the local authority to carry out the work.  Any work carried out by a local authority under court order must be paid for by the building owner.  These costs may be recovered from the owner and the amount recoverable becomes a charge on the land on which the work is carried out.  

A structural engineer could be briefed to report to a building owner on whether a building is either dangerous or affected under the Building Act and to determine whether repairs need to be carried out.  Presumably, any repairs which result in a building being neither dangerous nor affected would be sufficient under the Building Act regime.  There is no requirement for future proofing.

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It is unclear how an owner can find out whether their building is adjacent to a dangerous building. Even if an owner finds out that their building is adjacent to a dangerous building, it is unlikely that an owner can do anything about the condition of the adjacent building.  

Both definitions are couched in general language which could be interpreted in a range of different ways.  A building owner who wants to reduce their costs could justify doing the bare minimum and still meet the act's requirements.  

The Health and Safety at Work Act Regime 

The Health and safety at Work Act ("HSWA") has introduced a new regime for regulating health and safety in New Zealand.  A key concept of the HSWA is that of a person conducting a business or undertaking ("PCBU").  

A PCBU is under a primary duty of care to provide for safety at its place of work. The primary duty requires it to:

* Ensure the health and safety of workers who work for the PCBU while they are at work, and

* Ensure that the health and safety of other people is not put at risk from work carried out as part of the conduct of the business.  

As far as is reasonably practicable, PCBUs must provide and maintain a work environment that is without risks to health and safety, ensure the safe use, handling and storage of plant, structures and substances and provide adequate facilities at work for the welfare of workers.

Both landlords and tenants are PCBUs. This means that they have overlapping duties. It is not possible for one PCBU to delegate its obligations to another PCBU.  According to WorkSafe, PCBUs with overlapping duties must work together to fulfil their primary duties of care. This requires PCBUs to communicate, consult, co-operate and co-ordinate their activities to meet their health and safety responsibilities.  

WorkSafe point out that issues can arise when one business assumes the other business is taking care of a particular health or safety risk, the business who manages the risk is not the one in the best position to do so, and businesses do not know what remedial work is happening and when.  

The HSWA also requires officers of PCBUs to exercise due diligence to ensure that the business meets its health and safety obligations. WorkSafe considers that the due diligence duty requires officers to:

* Acquire and keep up to date knowledge of work, health and safety matters.

* Gain an understanding of the nature of the operations of the business and the risks associated with those operations. 

* Ensure the business has available for use and uses appropriate resources and processes to eliminate or minimise risks to health and safety.

* Ensure the business has appropriate processes for receiving, considering and responding in a timely way to information regarding hazards and risks.

Our HSWA is modelled on the Australian model Work Health and Safety Act.  Under that act, courts have held that directors and officers must be active and diligent in requiring information about the nature of the business, the risks, obtaining expert advice and ensuring the safety of employees.

In one case, a director could not show that he concentrated his mind on the risks of the operation and the court convicted him of breaching his due diligence duty.  

In another case, a young boy died when he stood on a corroded pipe which contained an active electrical wire. Three directors were prosecuted. They argued that they could not influence the conduct of the company because they lacked experience and expertise in relation to electrical cabling and they relied on contractors who they considered possessed the necessary expertise.  

The court held that the phrase all due diligence depended upon the circumstances of the case but contemplated the mind concentrated on the likely risks. These directors were convicted because although they had engaged a properly qualified expert, they did not initiate any further steps or make any inquiries to ensure the safety of people at the premises.  

There is no doubt that the condition of a building following an earthquake is a risk that must be eliminated or minimised in order to comply with the HSWA. It is equally clear that directors and officers of PCBUs must be active and diligent and concentrate their minds on these risks.

PCBUs also have a duty to engage with workers. This duty requires PCBUs to:

* Share relevant information in a timely manner (including engineering reports).

* Provide opportunities for workers to express their views.

* Provide opportunities for workers to contribute to any decision-making process regarding any risk.

* Take the views of workers into account.

The penalties under the HSWA are significant. The maximum penalty for breaching health and safety duties for a PCBU is a fine of $3 million or a term of imprisonment of 5 years or both.  For officers, the maximum term of imprisonment is also 5 years but the maximum fine is $300,000.

Considering the primary duty of care, the due diligence duties and the duties owed to employees, it is evident that the HSWA obligations are much clearer, detailed and significantly more robust. The regimes are markedly different. Which regime applies to assessments of earthquake-damaged buildings?  Has the legislation passed under urgency last week and which has been heralded as the law's "best response" to the November 14 earthquake answered the question?  Let's see.

Civil Defence Emergency Management Amendment Act 2016 Amendment Act 2016 ("CDEMAAAA")

This is not a typo. The Civil Defence Emergency Management Amendment Act 2016 ("CDEMAA") received the royal assent on November 15, the day after the earthquake.  The CDEMAAAA was enacted under urgency on November 29.  In New Zealand, Parliament is sovereign and can do absolutely anything it wants to, as fast as it wants to and as foolishly as it wants to.

The amendments bring forward most of the provisions in the recent CDEMAA so that those provisions can be used to support recovery from the Hurunui/ Kaikoura earthquake sequence.

Key provisions include that:

* A recovery manager may direct an owner of a building to obtain an assessment of the effect of the emergency on the building.

* Any direction given to an owner must (1) state the purpose of the assessment and specify the assessment that is required, (2) specify a reasonable time within which the assessment must be carried out and (3) require the owner to provide a copy of the assessment to the recovery manager.

* An owner who is given a direction must obtain an assessment at the owner's expense and provide a copy of the assessment to the recovery manager.

* An owner may appeal to the District Court for relief on the grounds that an order is unreasonable but any relief is limited to the reasonable costs associated with obtaining the assessment.

* An owner must use reasonable endeavours to notify each owner and occupant of the building of the direction and each owner and occupier of an adjacent building or adjoining land of the direction.

* Each owner must attach a copy of the direction on a prominent place on, or adjacent to, the structure.

* Failing to comply with a direction will be an offence punishable by imprisonment for up to three months and a fine up to $50,000.

So we now have a third regime for assessing the safety of buildings following an earthquake. However, the enactment of the CDEMAAAA leaves some unanswered questions, like:

* If a recovery manager issues a direction, which regime applies? This is important because the regime will influence an engineer's brief or instruction.  Most engineers would say "you give me three different briefs and I will give you three different answers".  This could explain why the Asteron Centre owner's engineer concluded that the building was safe but IRD's engineer identified health and safety concerns linked to the stairway.  It may explain why more buildings housing government departments have been evacuated than buildings which are privately owned and occupied because it seems likely that government departments would have greater regard to the HSWA whereas building owners are more likely to brief engineers in terms of the Building Act.

* "Assessment" is not defined in the CDEMAAAA. It should be so that the definition includes both structural and geotechnical engineering assessments. Geotechnical engineers carry out investigations which usually require drilling in order to assess the ability of land to support a building.  Anyone who has seen photos of the damage to CentrePort will realise how important these assessments are.  Ideally, geotechnical engineers should liaise with structural engineers in order to identify what damage has occurred and how it should be fixed.  Geotechnical assessments should be mandatory for all buildings located on reclaimed land or on land which has been subject to liquefaction. With regard to assessments of buildings carried out after the November 14 earthquake, it is unclear whether sufficient geotechnical investigations have been carried out and whether structural engineers have collaborated with geotechnical engineers before providing findings to their clients.  Potentially, some buildings which are being repaired should have been demolished and cosmetic repair work has been carried out where structural repairs were necessary.

* Adjacent is not defined in the CDEMAAAA.  According to one case, "adjacent is not confined to places adjoining, and it includes places close to or near".  So a high rise building on the other side of the road is likely to be adjacent.  This means that the pool of adjacent owners and occupiers who must be notified is likely to be significant for large buildings.  If a different meaning of adjacent is intended, then Parliament should spell this out.

* If directions are unreasonable, owners can seek reimbursement of reasonable costs associated with obtaining the assessment in the District Court.  But it is unclear whether "reasonable costs" also covers loss of business revenue if businesses must evacuate their premises while remedial works are carried out or if premises are indeed demolished.

* A direction may require an owner to provide a report to a recovery manager but if an owner is contemplating a legal challenge to the reasonableness of a direction, then both an engineer's brief and report are likely to be subject to legal professional privilege and an owner could refuse to provide them to a recovery manager.

* What will a recovery manager do with all of the reports?  Presumably, they will be uploaded to a database.  If so, who will administer the database?  Probably the Ministry of Business, Innovation and Employment (MBIE), as building regulator.  Who will have access to the database?  Engineers? Recovery managers? Owners?  Employees? Everyone? If the public has access, then does this constitute an interference with the property rights of building owners? 

* If MBIE administers the database, will WorkSafe (also part of MBIE) have access to it? If they do, owners could refuse to provide reports based on the privilege against self-incrimination which entitles withholding information where the information, if provided, would be likely to incriminate a person for an offence punishable by a fine or imprisonment.  The CDEMAAAA is silent as to whether the privilege against self-incrimination is removed for the purposes of providing reports on buildings.

 

Overall, much uncertainty remains.  In considering the safety of the Asteron Centre, Inland Revenue has clearly, and to its credit, acted in the best interests of its employees by requiring further repairs to be carried out despite the owner's report deeming the building to be safe. But it would be unfair to blame the building's owner when there is so much confusion over which regime applies and the requirements which must be met.

The CDEMAAAA fails to measure up to its promise of ensuring that the law is "best able to respond" to the November 14 earthquake.  Affected communities should be able to have full confidence in the assessments of earthquake-damaged buildings.  Much greater clarity and leadership is required.  The system for assessing quake-damaged buildings is confused, disjointed and unclear.  Let's fix it.

John Goddard is an Associate in Morrison Kent's dispute resolution team. This article contains general information. It does not constitute legal advice.

 - The Dominion Post

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