vector-img
Construction

Update on PS4 producer statement liability

The Court of Appeal in Solicitor-General’s Reference (No 1 of 2022) [2024] NZCA 514 has issued a decision confirming that Councils may prosecute parties who issue incorrect construction monitoring Producer Statements (PS4s) under s 40 of the Building Act 2004.

Published on 24 Oct, 2024

THE COURT OF APPEAL HAS CONFIRMED CRIMIAL LIABILITY CAN FLOW FROM ISSUE OF A PS4  

Court of Appeal decision

The Court of Appeal in Solicitor-General’s Reference (No 1 of 2022) [2024] NZCA 514 has issued a decision confirming that Councils may prosecute parties who issue incorrect construction monitoring Producer Statements (PS4s) under s 40 of the Building Act 2004.

Under s 40 of the Building Act 2004 it is an offence to carry out building work except in accordance with a building consent. If convicted, parties may be fined up to $200,000 and, in the case of a continuing offence, up to a further $10,000 per day for every day the offence continues.

The key question in the Solicitor-General’s Reference (No 1 of 2022) was whether issuing an incorrect PS4 is “building work” not in compliance with a building consent for the purposes of a possible prosecution under s 40.

Key points from the decision

The key points from the decision include:

  • The definition of ‘building work’ is broad and includes work performed onsite to assess compliance, for example construction monitoring.
  • Just because a builder’s work doesn’t comply with the building consent, that doesn’t automatically mean a PS4 is incorrect. The focus is on the work carried out by the author of the Producer Statement.
  • A key inquiry will be whether the author of the PS4 met the requisite standard of inspections and had reasonable grounds for belief in the assertions in the PS4.
  • The engineer who issued the PS4s in the case considered by the Court of Appeal was found to have failed to adequately inspect, and to have failed to notice significant departures from the consented plans. His statement that the building work complied with the relevant Building Code clauses was incorrect.
  • Both the individual who signs the PS4 and the company issuing the PS4 may be prosecuted.

Decision whether to prosecute

Whether a Council prosecutes for breaches in relation to PS4s is likely to come down to the particular circumstances and Council involved. The Solicitor-General’s Prosecution Guidelines are relevant. These require prosecutions only to be initiated or continued where the Test for Prosecution is met, i.e. only where:

  1. The evidence which can be adduced in Court is sufficient to provide a reasonable prospect of conviction (the Evidential Test); and
  2. Prosecution is required in the public interest (the Public Interest Test).

Relevant considerations for satisfying the Public Interest Test include:

  1. The seriousness of the offence;
  2. Whether there are grounds for believing that the offence is likely to be continued or repeated, including whether the defendant has history of recurring conduct and/or relevant previous convictions or cautions;
  3. Whether the offence is prevalent;
  4. Whether the offence was premeditated;
  5. Whether the defendant has created a serious risk of harm;
  6. Whether the offence has resulted in serious financial loss;
  7. Whether the defendant was in a position of authority or trust and the offence is an abuse of that position;
  8. Whether there is any element of corruption.

Where there is, for example, a repeated offence, causing significant risk of harm and financial loss, a Council may be more likely to bring a prosecution. That was the case in Solicitor-General’s Reference (No 1 of 2022), where the engineer in question had provided PS4s in respect of a number of houses in a subdivision, many of which were found to be so badly constructed that they were either dangerous or affected buildings.

Our key practical recommendations

  • Check at the beginning of the project whether a PS4 may be required and think about what you will need to inspect and when for the relevant level of construction monitoring.
  • Make sure you carry out adequate inspections for the level of construction monitoring.
  • Record your construction monitoring. This may include file notes and photos of each inspection, and records of any issues and how they have been resolved to your satisfaction to enable the issue of the PS4.
  • Ensure that any PS4s issued reflect the engagement. This means that the PS4 should be specific about what it covers (and what it doesn’t cover), including:
    • Areas of the building;
    • The building work in question;
    • What Code clauses the PS4 confirms compliance with.
  • Include in the schedule to the PS4 your supporting material which clearly records the basis upon which the views in the PS4 were reached. This material is important to demonstrate that you had reasonable grounds for the assertions in the PS4.
  • Make sure that the person authoring the PS4 has the requisite expertise and qualifications to make the statements – ensure the statements are within the author’s area/s of expertise.
  • If there are any exclusions, or anything the PS4 doesn’t cover, make sure that is clear.
  • Check your insurance will respond to any s 40 prosecutions, both against individuals issuing Producer Statements and the company.

No doubt the above is already part of your normal processes, but this is a timely reminder that issue of a PS4 is not just a procedural box to tick – if it is not correct, it opens both the author and the company up to civil and criminal liability, so it is important that it is done right.

image

Disclaimer: The information contained in this publication is of a general nature and is not intended as legal advice. It is important that you seek legal advice that is specific to your circumstances.