You should use determinations under the Building Act

Getting a ruling on a legal dispute is normally quite expensive. If you elect to sue in court – or you get sued so you have no choice in the matter – the cost of it can make the whole exercise pointless unless there is a substantial amount of money at stake.

Fortunately, if you are a party to a building contract you can normally use the much cheaper and faster process known as adjudication under the Constructions Contracts Act, but even that normally costs upwards of $20,000, so it’s only worth it if you are trying to collect more than that. If you are prepared to take your chances with a non-expert process and the amount at stake is no more than $30,000, then you can always use the extremely cheap, informal and relatively fast Disputes Tribunals (our small claims courts) where you argue your case yourself (without a lawyer) before a Referee (who is not an expert in construction law), and you hope that the Referee sees it your way.

However, if you want an expert ruling for an affordable cost, there are some very cheap ways of getting a ruling that you ought to consider. One way to get a ruling on whether your work was up to scratch is, ironically, to have a complaint made against you (assuming you are a licensed building practitioner) to the Building Practitioners Board. It is not something you would voluntarily subject yourself to (unless you really back yourself), but my point is that it’s not necessarily the end of the world if it does happen. That is because you will be judged by a panel of experts (lawyers, engineers, architects, quantity surveyors, building surveyors, builders, etc.) who understand the industry just like you do. If you have done nothing wrong, they will say so, and that decision goes on the public record so that you can use it in evidence if you are ever challenged later.

But there is an even better way to get an expert ruling on the standard of your workmanship (among other things) and that is to apply to the Chief Executive of the Ministry of Business, Innovation and Employment (MBIE) for what is known as a “determination”. This is a process that has been available ever since the 1991 Building Act (we are now operating under the 2004 version) so it goes back a long way, but it is not very well known or utilised. It can only be used by people or organisations that have an interest in the building work in question, including Councils, property owners, Licensed Building Practitioners (LBPs), and in some cases neighbours.

Determinations have been used for a whole variety of purposes. Manufacturers, importers and suppliers of building materials have used them to demonstrate their products are code-compliant. Property owners who wanted to avoid applying for a building consent have used them to find out whether their project is exempt or not. There have even been a couple of determinations that have chastised Councils for refusing to issue a code compliance certificate simply because the LBP has failed to submit a record of work – a practice that MBIE has confirmed is unjustified.

Determinations have been used in hundreds of leaky home cases as a prelude to holding the responsible parties to account. In the old days if you were a party to a leaky home dispute, and it was being dealt with in the Weathertight Homes Resolution Service (which is no longer accepting new cases, unfortunately) then instead of paying $10,000-$15,000 for a building surveyor’s report on where the leaks were coming from and what it would take to fix them, you paid only a few hundred dollars and the Government paid the rest.

Admittedly the building surveyor’s report was an expert opinion rather than a ruling, but it carried a lot of weight. Now that that service is no longer available, you can still get something similar using the determination system, for much the same cost. Although the Government says that determinations are not for disputes about workmanship, you can in fact use them for that purpose, especially when someone is questioning whether your work complies with the building code or the building consent. The MBIE can only refuse to accept your application if you don’t qualify to apply for it, or it has already been applied for, or your application is “not genuine or is vexatious or frivolous”. And the best news of all? It only costs $287.50 including GST if it involves a single house, an attached house, flats and apartment blocks of up to four units, or a garage or shed, or $575.00 including GST if it is any other type of building. There are two things you can apply for a determination for:

1. Whether or not particular work is or will be code-compliant. 2. Whether or not the stance that the Council has taken was right – in relation to such things as building consents, extensions of time, code compliance certificates, notices to fix, waivers or modifications of the building code, compliance schedules, certificates of acceptance, and exemptions from building consent requirements. So, don’t believe it when they say, “You can’t fight City Hall”. You sure can, using a determination. And the process is relatively quick – the MBIE is required to make the determination within three months, although exactly what happens if it misses that deadline isn’t clear. The great thing about determinations is that they are very thoroughly researched and professionally written – and they need to be, because they are like a judgment from a Court. They are legally binding, although you can appeal them to the District Court.

In most cases, determinations are not appealed, but they are not necessarily the end of the matter. Except in the case of Councils – whose decisions can be confirmed, reversed, or modified by the MBIE – a determination cannot directly force anyone to do anything or refrain from doing something. Instead, what it does is provide a ruling on whether the relevant work or materials are code-compliant. If they are not code-compliant, then the Council could use the determination to insist on a design change, or a property owner could use it as evidence that the builder or designer has slipped up. In the latter case the owner would typically then follow up with a claim in the Disputes Tribunal, an application for an adjudication under the Construction Contracts Act, or Court proceedings. In fact, the Building Act expressly says that if the issue in dispute is capable of being resolved by determination, then you are prohibited from commencing proceedings in the District or High Court unless and until you have obtained that determination. Presumably that is because it may well avoid the costly and time-consuming process of litigation. However, like most rules, it is possible to get around this one. In fact, in one case (Minister of Education v. Higgs Construction Ltd) the construction company tried to get the Court case thrown out because no determination had been obtained, but the Associate Judge was having none of it, pointing out that the determination would have only resolved one of the issues, not all of them.

If, once a determination has been obtained, one of the parties then follows up with a Disputes Tribunal claim, an adjudication, or Court proceedings, then an interesting question arises as to whether the Tribunal, Adjudicator or Court is bound by what the MBIE determined. This is known as “issue estoppel” and is designed to prevent the same issues being re-litigated with all the attendant cost and delays, when it has already been conclusively and authoritatively resolved.

The argument was run in the 2015 case of Weaver & Anderson v. HML Nominees Ltd. Although the High Court rejected the argument in that particular case, Justice Katz ruled that it was open to run the same argument in a more appropriate case.

If you want an expert ruling for an affordable cost, there are some very cheap ways of getting a ruling that you ought to consider.

Geoff Hardy is a partner in the Auckland law firm Martelli McKegg Lawyers and is a construction law specialist. Geoff also operates the Business Related Legal helpline for NZCB members, contact Geoff on 09 379 0700 or geoff@martellimckegg.co.nz for 20 minutes of free advice.