In the case of Body Corporate 406198 vs Argon Construction Limited the Court of Appeal found that builders who assume responsibility for construction are, like Councils and developers, generally subject to a legal duty to ensure compliance with the Building Code, even if they have delegated the work to subcontractors.
This is important because it is common for builders to think that they're not responsible for the actions of their subbies.
In this particular case a two tower complex of 157 units was built with widespread defective waterproofing to cantilevered balconies, requiring millions of dollars worth of remediation.
The head contractor argued it should not be liable for the negligent work carried out by its tiling subcontractor. However, the Court rejected that argument.
The key factors underpinning the Court's finding were that the head contractor had:
1. assumed full contractual responsibility for the construction, including responsibility for the acts and omissions of subcontractors, and
2. exercised direct control and supervision over the building works.
The Court did accept that the precise scope of a builder's duty may vary depending on the terms of the particular contract. For example, if the contract specifically excluded responsibility for an inspection, there would be no duty of care to inspect or to carry out any work that the inspection might have identified.
The practical takeaway for builders is clear: where a head contractor assumes broad contractual responsibility for a construction project, it will likely owe a non-delegable duty of care to building owners (including subsequent purchasers) to ensure Building Code compliance across all aspects of the work, regardless of whether particular tasks were performed by subcontractors.
Note: If you do residential building work don't think that it might be smart to add a clause to your contract specifically excluding responsibility for the actions or works of your subbies in order to limit your liability if they do defective work. The Building Act's implied warranties section does not allow builders to contract out of responsibility for the actions of their subbies in a residential setting. For commercial work however you have a much wider scope to manage your liability via contractual terms.
An Auckland developer was convicted of breaching their Resource Consent and fined almost $50,000. Site run off is a common example of a Resource Management Act breach. Statutory liability insurance no longer covers RMA fines.
In a recent case the Court of Appeal found that builders who assume responsibility for construction are, like Councils and developers, generally subject to a legal duty to ensure compliance with the Building Code, even if they have delegated the work to subcontractors. The Building Act already makes this clear for residential building work and builders can’t contract out of it.
Two important but often confused types of insurance that help manage employee risks are Employers Liability and Employment Disputes Liability insurance. While both relate to your obligations as an employer, they protect you from very different threats.
