A Tale of Two Countries: reflections on cladding and fire safety issues in the United Kingdom and “leaky building” issues in New Zealand

By Marina Samountry, Associate

Introduction

Nearly two years ago this April, the Building Safety Act 2022 (the “BSA”) received Royal Assent, heralding a new building safety regime for the construction sector. Following the Grenfell Tower fire, the government established an independent review led by Dame Judith Hackitt to examine existing building regulations and fire safety measures. Her final report, “Building a Safer Future” (the “Hackitt Report”), published in May 2018, highlighted “deep flaws” within the construction industry, calling for a cultural shift to instil the principles of safer high-rise buildings following a national tragedy. The Hackitt Report identified “many shared issues and challenges through its consideration of other countries’ regulatory frameworks” and cited international evidence pointing to the need for wide culture change including a case study of New Zealand.1

This New Zealand-qualified lawyer cannot help but draw comparisons between the ongoing fire safety and cladding issues in the United Kingdom and the systemic weathertightness or “leaky building” issues prevalent in New Zealand homes from the mid-1990s. While this article could delve at length into a myriad of comparisons, consequences, and lessons learned, given the ongoing nature of the topic, it will primarily offer some remarks of these parallel experiences.   

Background

Before turning to how both countries responded to these issues, it is helpful to paint a brief picture of the background in which these issues arose. 

New Zealand

From the mid-1990s onwards, many New Zealand homeowners found themselves grappling with homes that leaked. Water ingress resulted in damp and humid environments which caused mould to develop requiring costly remediation. The Building Industry Authority commissioned the Hunn Report in 2002 which confirmed leaky buildings were a substantial issue in New Zealand. This would cost homeowners billions in remediation costs (not to mention legal costs associated with bringing claims against parties involved in the construction) over the next two decades. A conservative estimate in 2009 placed the cost at $11 billion (NZD).2

There is no single cause of how leaky buildings arose but the various factors that are often cited include poor workmanship and changes to building methods; inadequacies with the Building Code, Approved Documents and the inspection and consent process; to more environmental factors, such as the inappropriate use of untreated timber and monolithic cladding systems (both considered unsuitable for New Zealand’s climate). One key factor that draws similarities to the UK is the impact of changes to the regulatory regime of the era. This is considered further below. 

UK

The Hackitt Report commented on the key issues underpinning the flaws within the industry including the regulations surrounding fire safety and compliance, such as the Approved Documents being “ambiguous and inconsistent” along with the methods for achieving compliance with building safety requirements being “weak”. Existing guidance has often been misunderstood or misinterpreted leading to a “race to the bottom” culture of seeking the most cost-effective and quick method of achieving compliance, rather than prescribing the safest possible solution. 

The Grenfell Tower Inquiry also raised several concerns with the climate in which the Grenfell Tower fire was able to occur. In his Phase 2 Closing Submissions, Richard Millett KC, as counsel to the Inquiry, summarised several discrete (and familiar) factors, including poor practices in the construction industry, the failure of central government to act on known risks, poor, ill-focused or insufficient training and various deregulatory policies pursued by successive governments.3

The Building Act 1984 notably introduced performance-based reform, sweeping away over 300 pages of previous building regulation (some dating back centuries). Such deregulatory policies over time also include regulatory reform of fire and rescue service legislation such as the Fire and Rescue Services Act 2004 (replacing the Fire Services Act 1947) which abolished national standards of fire cover and has been criticised for leading to slower response times and poorer service.4

Responses

New Zealand

Key legislative changes in New Zealand were reforms to the Building Act and Codes and the establishment of the Weathertight Homes Tribunal (the “WHT”) through the Weathertight Homes Resolution Services Act 2006 (the “WHRS Act”).5

Like the UK, New Zealand launched an inquiry into the issue. The Inquiry into the Weathertightness of Buildings in New Zealand, which was concluded in March 2003, labelled the problem as a systemic one, stating: “Changes to the building control regime brought about by the Building Act, and too greater reliance of market competitiveness have, we believe, contributed to the systemic failure of the building industry”.

The Building Act 1991 (NZ) in question was the product of regulatory reform which established a performance-based6 approach to regulating building work in New Zealand much like the 1984 UK Building Act. To address this, the 1991 Building Act was repealed and replaced by the Building Act 2004 which sought to tighten up building procedures. Industry commentators noted that subsequent revisions of the Building Code from 2013 demonstrated attempts to prescriptively document standard building practices.7 For example, Acceptable Solution B2/AS1 (Durability) reintroduced the requirement for treated timber to prevent rot of internal framing and Acceptable Solution E2/AS1 (External Moisture) introduced a risk matrix to assess weathertightness risk. 

The Hackitt Report refers to New Zealand as a case study of regulatory reform stating, “widespread issues with the weather-tightness of buildings acted as a tipping point for regulators and industry to recognise systematic failure, particularly with regards to competence and standards”.8 This is not too dissimilar from the tipping point (the Grenfell Tower fire) faced by the UK and the need to confront systemic failures as they relate to cladding and fire safety. 

Both New Zealand and the UK introduced limited means of financial assistance to help homeowners and leaseholders with remediation. In New Zealand, this was the implementation of the WHT and financial assistance packages. The WHT gave leaky building homeowners a “fast-track” way of adjudicating claims against responsible parties. The WHRS Act also provided for financial assistance packages until 2016, although this funding was limited to up to 50% of the agreed remediation cost. For this reason, it often made more sense to proceed to recover the cost of remediation through the Courts. As a result, the case law regarding liability and recovering those losses is well developed (as will be discussed below). 

UK

The most significant response to the Grenfell Tower fire is the introduction of the BSA. Much has already been written about the BSA, but the overall message behind it is clear: its priority is to address fire safety concerns arising out of the Grenfell Tower fire by creating new lines of accountability so that those who are responsible can be held to account. Some ways in which this is demonstrated include the amendment of the Defective Premises Act 1972 (the “DPA”) which extends the limitation period to 30 years retrospectively and 15 years prospectively for claims. 

By comparison, New Zealand’s equivalent in section 393 of the Building Act 2004 (NZ) provides for a 10-year “long-stop” limitation period in relation to “civil proceedings relating to building work”. Although not without criticism, this demonstrates a clear intent to give those affected a pathway to recover for the costs of remediation over a remarkably extended period that the BSA affords.

Following the Hackitt Report, the government published the Building a Safer Future implementation plan signalling its intention for “fundamental reform of building safety” and “more effective regulatory and accountability framework”. The UK, like New Zealand, has also adopted some prescriptive measures, for example, the ban of the use of combustible cladding in certain high-rise buildings9 and amendments to Approved Document B clarifying the role of desktop assessments in high-rise buildings over 18 metres demonstrating this shift towards greater regulation.

To date, the government has established several schemes to provide financial assistance, including the Building Safety Fund (“BSF”) in 2020 (for buildings over 18 metres in London) and the Cladding Safety Scheme (“CSS”) in 2023 (for buildings between 11 and 18 metres in England) to address unsafe cladding on residential buildings where developers or building owners are not currently doing so. Unlike New Zealand, the UK currently has a much easier environment in which it is possible to go through the developers to pay for remediation, for example, developers who are members of the Responsible Actors Scheme are obliged to either self-remediate their buildings or reimburse the government for taxpayer funded remediation such as the BSF and CSS. 

However, these funds are not a silver bullet. On top of the need to remove and replace unsafe cladding, buildings will often require work to non-cladding fire safety issues to make the building safe, but such works might not be covered by the BSF or CSS. Leaseholders are also required to exhaust other avenues before making a successful application, for instance, through insurance claims, warranties or legal action.10 Therefore, much like in New Zealand, despite some government funding, it is inevitable that UK courts and tribunals will see plenty of action parties seek to recover their costs or losses.

Development of case law

Case law from both jurisdictions offer insights into the different ways of reaching a similar result, that is to ensure that those who have suffered loss have clear ways to recover from those responsible.  

New Zealand

A distinct feature of the law related to leaky building claims in New Zealand is the ability to recover the costs of remediation for leaky homes from a local authority through a claim in negligence; perhaps due to an absence of legislative direction similar to the UK DPA. This is significant in New Zealand because local authorities often remain the last solvent party.11

In New Zealand, the legal approach regarding the liability of local authorities notably diverges from the UK’s approach. New Zealand’s position is clear: a local authority owes a duty of care to homeowners and can be held liable for negligence for its roles in inspection and issuing building consents. This principle is established in landmark cases such as Invercargill City Council v Hamlin [1996]12 (rejecting the UK case of Murphy v Brentwood District Council13) which held that a duty of care could apply to pure economic loss such as the cost of remediation. This was upheld in later key leaky building decisions Sunset Terraces14 andByron Avenue.15

One of the reasons for the departure from UK precedent was because there were distinct differences in the New Zealand housing scene and social circumstances compared to the UK which justified local authorities owing a duty of care.16 This was set out in Hamlin (and affirmed in Sunset Terraces on appeal to the New Zealand Supreme Court). It was, therefore, a matter of policy which prompted and shaped the landscape which ensured New Zealand homeowners could recover against at least one party involved in the building work.

UK

We are now beginning to see substantial building safety litigation through the courts and tribunals considering how the BSA should be applied. It is becoming clear that the judiciary is eager to enforce the BSA’s provisions, paving way for various parties to more readily recover losses associated with remediation of fire safety issues. For example, one of the key takeaways from URS Corporation Ltd v BDW Trading Ltd17 is that the BSA applied to an existing claim before the BSA came into force. This allowed the developer (BDW) to amend its pleadings to add new claims against the structural engineer (URS) and overcome the limitation argument that its claim seeking to recover remediation costs from URS was time barred.18

Another recent decision, Triathlon Homes LLP v Stratford Village Development Partnership,19 held that a Remediation Contribution Order could be made for remediation costs incurred before the commencement of the BSA noting it was “consistent with the purpose and structure of Part 5 that the radical protection it extends to leaseholders should not be restricted by precise distinctions of time”. The Tribunal summed up the current environment trending towards leaseholders when it went on to say that the effect of this approach “provides for wholesale intervention in and beyond normal contractual relationships in order to transfer the potentially ruinous cost of remediation from individual leaseholders to landlords, and to distribute it between landlords and developers and their associates according to criteria which Parliament has decided are necessary and fair”.

Conclusion

History doesn’t repeat itself, but it often rhymes. The shared experiences and consequences faced by the UK and New Zealand offer interesting insights into present circumstances. Both countries have enacted significant legislation aimed at addressing past shortcomings, and both share a similar stance regarding recovery of costs and losses. It is premature to draw definitive conclusions on the impacts of the government’s intended culture change in building and fire safety, but the current trajectory is promising.  

With thanks to Alex Atherton, paralegal, for additional contribution to the development of this article.

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• 1. Hackitt Report at 10.16 and 10.17.
• 2. Department of Building and Housing Weathertightness – Estimating the Cost (Report prepared by PricewaterhouseCoopers, 29 July 2009).
• 3. Day 312, 10 November 2022, Grenfell Tower Inquiry RT Transcript at 28-30.
• 4. Fire Brigades Union, “The Grenfell Tower fire: Background to an atrocity” (5 September 2018).
• 5. The purpose of the WHRS Act is to “provide owners of dwellinghouses that are leaky buildings with access to speedy, flexible, and cost-effective procedures for assessment and resolution of claims”. There is a notable emphasis on cost over effective dispute resolution.
• 6. It is performance-based in the sense that it set out purposes and objectives to be achieved which allowed flexibility as to how best to achieve those purposes and replaced a previously prescriptive regime.
• 7. Nuth, M. (2020) “Industry Perceptions of Weathertightness Failure in Residential Construction” (BRANZ Study Report SR442) at page 6.
• 8. Hackitt Report at 10.9.
• 9. See the Building (Amendment) Regulations 2018 (SI 2018/1230).
• 10. See Building Safety Fund Guidance for new applications 2022 (accessed 13 March 2024) at: https://www.gov.uk/government/publications/building-safety-fund-guidance....
• 11. This is because in New Zealand parties involved in the building work have joint and several liability. Many companies also go bankrupt before claims can be made against them.
• 12. Invercargill City Council v Hamlin [1994] 3 NZLR 513, [1996] 1 NZLR 513.
• 13. Murphy v Brentwood District Council [1991] UKHL 2, [1991] 1 AC 398.
• 14. North Shore City Council v Body Corporate 188529 (Sunset Terraces) [2010] NZSC 79.
• 15. North Shore City Council v Body Corporate 189855 (Byron Avenue) [2010] NZSC 78.
• 16. Body Corporate 207624 v North Shore City Council [2012] NZSC 83 at [7] and also Hamlin where Richardson J considers six distinct and longstanding features of the New Zealand housing scene which justified a duty of care being owed by the local authorities.
• 17. URS Corporation Ltd v BDW Trading Ltd [2023] EWCA Civ 772.
• 18. Section 135 of the BSA extends the time limit for claims arising before 28 June 2022 from six years to 30 years.
• 19. Triathlon Homes LLP v Stratford Village Development Partnership & Others [2024] UFTT 26 (PC).