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University of Canterbury v Insurance Council of New Zealand Inc [2014] NZSC 193

Written by Christina Bryant, Nick Gillies, Stephanie Corban and Gennise Luen on December 23rd, 2014.

The Supreme Court has upheld the Court of Appeal’s interpretation of the statutory powers of territorial authorities to require that work be undertaken on buildings which are earthquake-prone.
Under s 122 of the Building Act 2004, a building is earthquake-prone if:
a.         its ultimate capacity will be exceeded in a moderate earthquake (being an earthquake that would generate shaking that is of the same duration, but is one third as strong, as the earthquake shaking that would be used to design a new building at that site); and
b.         it would be likely to collapse causing injury or death or damage to other property.
The full bench of the Supreme Court confirmed that both criteria had to be met before a building was earthquake-prone.  Only buildings with a capacity of less than 34% of the New Building Standard (NBS) are capable of being earthquake-prone.
The Court split 3: 2 on the question of whether a territorial authority could require an owner to undertake work on an earthquake-prone building which was necessary to remove the likelihood of collapse but which would take the capacity of the building above 34% NBS. 
Section 124(2)(c) of the Act empowers a territorial authority to issue a notice requiring work to be carried out on an earthquake-prone building to “reduce or remove the danger”.  The minority held that “the danger” was the danger of collapse in a moderate earthquake.  If the building’s characteristics meant that the danger could only be reduced if the building was strengthened above 34% NBS, then the territorial authority was empowered under s 124(2)(c) to order that work be done.  The majority, by contrast, took the view that the work required was limited to that necessary to ensure that the building was no longer earthquake-prone (i.e. that its capacity met 34% NBS).
The effect of this judgment is that a territorial authority cannot require a building to be strengthened to a capacity of more than 34% NBS, even if the strengthened building has features which make it likely to collapse in a moderate earthquake. 
As noted in our report on the Court of Appeal judgment (click here), these decisions highlight the tension between the imposition of a nation-wide standard and the desire for Councils to respond to regional circumstances and/or deal with specific characteristics which make a building vulnerable to collapse.  The history of the Canterbury earthquakes makes it clear that buildings which meet 34% NBS may still have features which make them deadly when an earthquake strikes. 
The Supreme Court’s judgment is consistent with the current draft of the Building (Earthquake-prone Buildings) Amendment Bill, which leaves the benchmark of 34% NBS as “the standard at which a building is considered sufficiently safe to take it outside the scope of the power given to territorial authorities… to require strengthening work to be undertaken.”[1] 

[1] Majority at [63]
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