The Christchurch earthquakes and structural failure of the PGC, Forsyth Barr,
CTV and Hotel Grand Chancellor buildings has recently drawn attention to the
obligations imposed by the Health and Safety in Employment Act 1992 (HSE
Act) in relation to earthquake-prone buildings.
The risk of a building collapsing in a serious earthquake presents
significant challenges for employers, building owners and tenants.
Merely ensuring buildings are not classified as "earthquake-prone" under the
Building Act 2004 is unlikely to be enough to comply with the higher standards
required by the HSE Act to take "all practicable steps" to minimise hazards in
Building owners, tenants and employers should assess the buildings they
occupy or own to identify earthquake risk and, if necessary, consider improving
the structural performance of buildings to ensure compliance with the HSE Act.
Failing to take adequate steps to protect employees, customers and other third
parties from this risk may result in criminal liability under the HSE Act.
Obligations under the HSE Act
The HSE Act provides a broad framework for managing the health and safety of
those involved in work activities. While the primary focus of the HSE Act
is on employers, there are a number of other duty-holders who may be liable
under the HSE Act. Landlords and tenants may owe duties in various capacities,
including as an employer, principal or "person in control of a place of work".
In particular, a "person in control of a place of work" includes building
owners, tenants, occupiers and persons in possession of a workplace.
Duty holders under the HSE Act must ensure they have an "effective method"
for identifying the risk of serious harm, and take "all practicable steps" to
protect employees, customers, and other third parties from that harm.
While the obligation to take "all practicable steps" is a high standard, the
phrase does not mean "complete protection". What the "all practicable steps"
test requires in any particular case is a question of fact and degree, which
requires the duty holder to engage in a balancing exercise - weighing the risk
of serious harm, the options for minimising the risk, the applicable standards
and the likely costs. Industry standards and best practice guidelines will
likely be relevant. The resources of the duty holder are also relevant when
weighing up what steps are practicable.
"Earthquake-prone buildings" under the Building Act 2004 regime
The Building Act classifies earthquake risk by a percentage of the seismic
design load for a new building. Buildings achieving less than 33% of New
Building Standard or Code are deemed "earthquake-prone buildings". An
earthquake-prone building would "have its ultimate capacity exceeded in a
moderate earthquake" and "would be likely to collapse" causing injury, death or
damage to any other property. Councils may require improvements to
"earthquake-prone buildings" by issuing a section 124 notice.
Buildings that achieve between 33-67 percent of Code are deemed "earthquake
risk buildings". Currently under the Building Act, no further improvements are
required. Unfortunately, complying with the minimum standards of the Building
Act does not necessarily mean compliance with the HSE Act. In our view, a court
is likely to conclude that the "all practicable steps" threshold in the HSE Act
imposes a higher standard on duty holders than that imposed under the Building
The landlord and tenant relationship
The landlord's obligation to undertake earthquake strengthening work, under
the Building Act or the HSA Act, will generally not be addressed under most
commercial leases. In most cases the lease will not require a landlord to
undertake the work, because the landlord's contractual obligation in relation to
the building is likely to be limited to keeping the building in good repair. The
tenant is unlikely, therefore, to be able to compel the landlord to strengthen
the building even if it is earthquake prone for the purposes of the Building
Each council in New Zealand has adopted a policy on buildings which are
(amongst other things) earthquake prone. Each of these policies set out
timelines for the strengthening of earthquake prone buildings in their area. The
time frames within which work must be undertaken vary from council to council
(and vary for different types of buildings) but generally speaking building
owners have a number of years in which to complete work. In Auckland, for
instance, owners have a maximum of thirty years (depending on the type of
building) in which to strengthen a building.
Where the landlord does undertake strengthening works it is unlikely to be
able to recover any part of the costs of the work from the tenant, unless the
work is undertaken after the council has served a section 124 notice on the
tenant pursuant to the Building Act. If a notice has been served the landlord
may be able to charge the tenant an additional rent (calculated as a percentage
of the cost of the strengthening works) although that additional rent may only
be chargeable until the next rent review. The council, however, may not serve a
notice unless the building is dangerous or it appears that the owner is not
intending to comply with the time frame in the council's policy.
We are starting to see some tenants requiring a landlord to agree to carry
out earthquake strengthening works before a right of renewal is exercised or a
new lease is negotiated. Some tenants are also vacating earthquake prone
buildings while negotiating with the landlord for the necessary works to be
completed. If a tenant elects to vacate a building then it will usually be
obliged to continue to pay the rent.
Offences under the HSE Act
There are two types of offences under the HSE Act. The first offence is where
there is a failure to comply with the HSE Act and serious harm results. The HSE
Act deems this to be a strict liability offence, and a person convicted of this
offence faces a fine of up to $250,000.
The second offence occurs when a person takes an action, or does not take an
action, knowing that it is reasonably likely to cause death or serious harm. The
offender may be fined up to $500,000 and imprisoned for a term not exceeding 2
Directors may be exposed to potential secondary liability where they have
authorised or participated in the failure of a body corporate to comply with a
provision of the HSE Act.
What duty holders can do to ensure compliance with the HSE Act
To increase the likelihood of compliance with the HSE, you should address:
the structural integrity of the buildings that you own or occupy, so as to
protect employees customers and third parties from the risk of death or serious
harm from collapsing buildings;
internal hazards arising out of the fit-out (e.g. securing shelving,
providing adequate emergency lighting); and
your response capability in the event of an earthquake under business
continuity plans, including appropriate training.
Employers and other duty holders should view these assessments as a dynamic
exercise, which will need to adapt to any new lessons arising out of the
Canterbury Earthquakes Royal Commission and any changes to the standards in the
Given the widespread damage and deaths arising from the Christchurch
earthquakes, a court is likely to conclude that all employers and owners are now
on notice that buildings may be a source of serious harm, and therefore may
amount to a significant hazard to employees, customers and other third parties.
This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.