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Reliance on, and co-ordination of trade and consultant advice

Several claims have revolved around whether the architect was prudent or competent in applying the advice from others.  A claim based on co-ordination issues is also likely to involve the architect.  The corollary is that an architect is expected to have the competence to recognise when specialist input is required, and to communicate that need to the client.

In general terms an architect is not expected to be an expert in all things, but because the architect’s documentation usually co-ordinates the input of others, the architect is required to exhibit prudence and competence in that task.  The level of skill required is that of a competent architect engaged on a similar project:  it is not necessary to “second guess”, nor to take responsibility for the inputs of others. 

Sources of information from “others” includes – but is not limited to – technical data from trade suppliers,  input from specialist consultants (eg engineers),  local body records and requirements,  and the owners/clients/users.  The limitations of such inputs are that the information may be of a generalist nature applicable to all projects;  based on only a partial (and perhaps evolving) knowledge of project requirements;  focussed only on the interests of the particular author or product;  incompatible with associated construction elements;  wrong, inadequate or inaccurate;  require a level of accuracy or project resources beyond the usual;  or some combination of any and all of these circumstances!

Examples from claims where this reliance and co-ordination has created a liability:

  • The allocation of responsibility for co-ordination needs to be clearly acknowledged.  To what extent does it fall to the project manager, or the architect, or is within the scope of other specialist consultants?  Who is observing the contract (and to what level)?  Who is administering it?  Examples:  geotech advice via structural engineer to architect or PM;  QS input in relation to design constraints;  PM/client instructions to design team;  separate contractors versus sub-contractors or nominated subcontractors.
  • Wind and corrosion zones affect weathering details and fixing requirements:  those shown on the TA maps may not be appropriate to a specific site, or for a particular feature of the building.
  • Minimum deck or roof falls permitted by trade data or building code compliance may not be appropriate.  Consider (at least):  moisture held by wind-blown detritus;  substrate or structural deflection;   applied finishes (perhaps tiling);  construction tolerances;  penetrations;  perimeter detailing;  expected level of installation workmanship;  post-construction foot traffic;  expected level of maintenance;  faith in the likely performance of the product;  possible heavy short-term weather events…..
  • Standard details:  Suppliers provide these to copy/paste into drawings but it is still necessary for the architect to be satisfied they are suitable.  If it is necessary to “tweak” them to suit the project, they are no longer “standard” and may not fit within the compliance statements offered by the supplier.  Similarly the details in the NZBC Acceptable Solutions.
  • Certificates, Appraisals, Codemarks, warranties and guarantees:  What will happen if these are required but not provided?  Are they current, relevant, enforceable, applicable or worth anything?  We have had claims where such things have been withdrawn or expired before (or soon after) design but before the product failed;  others where the product was covered but not its installation;  others where overseas documentation was not appropriate for NZ.  Where such documents are subject to ongoing maintenance, that needs to be known to those responsible for it. 
  • Design-build:  the integration and coordination of façade panel systems, roof sandwich panel systems, window assemblies and other elements may be dependent on preliminary information which may create later difficulties.  Whilst the detailing of each element may work, mixing and matching them might not, and may prevent the issue of a completion statement.  It is by no means unknown for design-build proposals to be withdrawn or substituted.  Or unrealistic.  These constraints need to be acknowledged ahead of time so that they can be resolved in the usual course of business, instead of being a problem later on.
  • Dimensional tolerances:  Where the installation of one item is dependent on another there is a need to accommodate variances and construction requirements.  Structural deflections are a reality, as are dimensional deviations, moisture-induced movement and long-term creep.  A well-considered design should be easier to build and continue to function as expected.
  • The owner’s understandings of boundary positions, covenants and cross leases, relationships with neighbours, or applicable workplace/usage regulations may be inadequate or wrong.  Where these are critical to the project, the architect needs to have the proper legal or surveying advice.
  • When the architect’s conception of a suitable design/material/detail is supplanted by the client’s specific direction, it needs to be on record that the responsibility for that design decision lies with the client not the architect.  Better still if the architect’s objection is made known along with the reasons for it.  A similar situation may apply with project managers, other consultants, and to substitutions by the builder.
  • When project documentation proceeds on the basis of outline information provided by a specialist consultant, it should be reviewed before work is done on site, and signed off on completion by that consultant.  (Fire engineering is a typical example).  If that is not done, there is a good chance the architect will become embroiled in the later shortcomings. 

The short point is that the architect should not blindly accept and incorporate inputs by others, but in each case consider whether it is reasonable to do so.  The role includes seeking clarification, weighing priorities where there are competing or conflicting issues, alerting others to their responsibilities, and refining the project parameters where necessary.  To be blunt, it also requires good records to cover your backside if things go wrong!

Pro-bono work and PJs

Pro-bono jobs are done without a fee.  Or perhaps at some concessional fee such as meeting basic costs but not time and labour.  Do not assume that because you are gifting your skills and resources, those that might make a claim against you will take an equally charitable approach.  Your responsibilities are the same, and the other risks remain the same, regardless of whether fees are paid or not.

“PJs”  (private jobs) are a time-honoured way that employees widen their experience or carry out work for friends and family.  An employee acting in the “normal course of their employment” would generally be protected by the employer’s PI cover:  that would exclude PJs.  An employee doing work on their own account will be carrying the risk, and it is up to them whether they are insured or not.

But the problem is that in the event of a claim, the employer – even if unaware of the project – is likely to be in the claimant’s cross-hairs.  Employers should deal with these matters in their staff terms of engagement.  Written consent of the directors should be a precondition for staff to engage in related business interests, and all subsequent arrangements should be in writing:  a congenial/collegial chat is not sufficient.

The employer, if allowing staff to carry out PJs, should:

  • Remind such staff of the risks of carrying out professional work without the protection of insurance;  and of the necessity to meet the requirements of the NZRAB Code of Ethics.
  • Insist that the client is made aware that the practice is not involved in the project – perhaps by drafting a letter to the client – and should keep a written copy of that communication.
  • Make clear that there must be no use of office reputation and/or intellectual property, materials, addresses, details, resources, staff, or management.
  • Confirm that using your firm in any way comes as a cost to the firm which could either be classed as stealing or employee benefit, as may be agreed (or not).
  • Watch out for watermarks on prints, email signatures, digital files, timesheet records, etc..
  • Require that any and all communications in respect of the project should be through a job-specific email address, and not refer to or be recorded in or be part of the office system.

The better course of action may be to encourage the employee to bring the project into the office, along with whatever arrangements might be required in respect of fee-sharing or rewards, including the level of responsibility within the firm for that job.  The firm still needs to take care in monitoring actions and communications between employee and client:  there is the likelihood some will be “informal” and outside usual office circumstances.  

Pre-design site information

A search for “Site” under the resources section of the NZACS website brings up several articles highlighting the necessity of getting a firm grip on site information before pencil hits paper (or mouse is engaged).  A couple of recent claims has prompted a list of some (not all-inclusive!) things to think about:

  • Overhead power lines including Transpower lines
  • Internal legal boundaries subdividing a site
  • Boundaries which may be in doubt or ill-defined
  • Flood plains and overland flow paths – is your site vulnerable to flooding?  Where is surface water coming from, where does it go, what affect will your building have on it?
  • Underground services, including unmapped and unregistered public SS and SW lines, gas pipes, electrical cables, private services.
  • Regional overlays on your site – Check with regional authority.  May override local council requirements.
  • Set-backs due to specific regional/local conditions such as railway lines, power lines or transmission towers
  • Possible redundant offal pits and/or aquifers on site, or other ground contamination.
  • Cross-lease, ROW restrictions and easements
  • Check site coverage, HIRTB, etc. Recent changes may have affected your site.
  • Unstable land – by definition if sloping.  Do the trees on site look unusual?  Does the vegetation suggest dampness or recent re-establishment?
  • Localised or site-specific vegetation/subgrade/wind/rain/drainage issues which may or may not be recorded on publicly available information.
  • Protected or notable trees.
  • Covenants on the land protecting views etc. 
  • Nearby properties or activities which may require specific design in relation to privacy or environmental issues (smells, noise, irregular activities, animals, and others not necessarily subject to regulatory control)
  • Coastal land instability.  For example, Auckland Council has mapped the coastline that could be affected by coastal erosion and instability under a range of climate change (sea-level rise) scenarios and timeframes (2050, 2080, 2130).  This Area Susceptible to Coastal Instability and Erosion (ASCIE) mapping has been done at a regional-scale but is refined depending on site-specific assessments.  This will have significant implications on coastal properties.  Other regions will have similar issues.
  • Some of the things members can do to ensure a successful project:
  • Visit the site in person and record everything you can
  • Be satisfied that the site setout is as designed (or if not, is as it should be!)
  • Have a survey done showing all legal boundaries, topo levels, easements, services
  • If justified, have a GRP survey done for all underground services.  Map LL and ILs
  • Check local council GIS maps for all property information including any encumbrances or local council requirements which are outside the legal boundary but which might affect your site.  
  • Download the local council Property File
  • View all official or historical information with a critical eye, and reconcile it with your observations and common sense.  Information at a macro level may not provide the detailed information required for the specific site.
  • Obtain the Certificate of Title to confirm any legal constraints, and if necessary seek legal interpretation of them.
  • If appropriate, check with any architect or fellow professional who may have worked on the site previously.
  • If appropriate, have a geotech assessment completed.

Observation

Our website has several articles on  “observation”.  When claims are based on building failures, inevitably the role of observation comes under scrutiny.  This article is the combination of thoughts from four NZACS Directors:  Peter Marshall, Alec Couchman, Michael Davis, and Colin Orchiston.

Observation versus Contract Administration

The current standard forms of engagement and contract intermingle observation with contract administration, and whilst they are interdependent, they are also separate.  This separation of roles is likely to increase, and the NZIA is actively involved in current MBIE consultations around establishing the contract administration role as a stand-alone.

If you are engaged for observation you can report on what you have observed, but the duty to administer the contract – including ruling on variations, certifying payments and completion – rests with the contract administrator. 

A consequence of separating the roles might be that rectification needed as a result of the observation role cannot be enforced because the leverage obtainable by with-holding payments is at the discretion of the separate contract administrator.

The role of Observation by the Architect primarily arises out of the terms of engagement between the Principal and the Architect.  The role of Contract Administration arises out of the (building) contract between the Principal and the Contractor.  If a building contract provides for independent observation (as does NZIA SCC at 8.8 and NZS3910 at 6.4) then those terms will provide the scope and rights/obligations applicable.  If the building contract does not provide for independent contract administration or observation, and/or is inconsistent with the architect’s terms of engagement, the scope and terms will need to be agreed elsewhere, failing which they will be uncertain.

In a larger practice, the roles of designer, contract administrator and observation can be parcelled out to different staff, and the bigger projects suggest repetition of some site activities;  when the same person does all three roles, the familiarity with the project suggests that critical aspects for observation should be known.

Partial Observation is a high-risk option

Any hint that the terms of engagement include observation will lead to assertions that building failures are the result of the architect failing to correct the work at the time it was done. 

This makes the provision of “partial services” or “limited observation” or “site attendance on request only” or some fixed (eg weekly or monthly) site visit frequency a risky proposition which should be resisted.  These arrangements may remove or diminish your control over the sufficiency of your observation, and yet you may still be held responsible for the full weight of “proper” observation. 

It would be nice to just say “don’t do it” but the reality in the market is that it is necessary to view it as an unwelcome option that requires careful risk management. 

  • Who is to say what you could or should have seen when you went on site? 
  • Or whether you were on site sufficiently? 
  • Or for the right reasons or at a critical point in time? 

Our website has several articles on “Partial Services” and they are not the focus of this article, but it is difficult to defend an allegation of inadequate observation on the basis that only “limited” oversight was intended, or was possible. 

One of the early WHRS claims considered the defence offered by a Building Inspector that he was over-worked and the available resources provided by his employer meant that he could not adequately carry out the level of inspection necessary:  unsurprisingly the Court took the view that the regulatory duties were not diminished because of management failures by the provider! 

Against that background, there has to be a very thorough defence to justify why an architect engaged for observation did not – or could not –instruct rectification of observably defective work.

The Observation role should be whole-hearted, with attendances as and when required, with fair and commensurate fees, and with scope and fees sufficiently flexible to deal with changes in the circumstances of the project. 

How much is “enough”?

The Project Architect should assess the level of observation and the frequency of site visits at time of agreeing the terms of engagement.  It is (possibly) more important to set out what you won’t do, than to say what you will do;  and essential to provide for changes to reflect the changing circumstances of the project.  The architect’s risks are compounded if the level of observation as agreed in the original terms of engagement does not correlate with the level of observation later required or sought. 

In smaller projects this may arise because the client removes observation and contract administration from the architect’s scope during the procurement process. 

In larger projects it would not be unusual for the architect to be appointed early in the process and then later a project manager arrives who then appoints and instructs the consultants;  the architect is removed from the contractor procurement process;  contract administration is undertaken by others;  the architect’s role is limited to clarifying the documentation and restricted site access for monthly reporting;  the consultants remain responsible for observation but do not have the power to obtain rectification;  yet on completion the funding agencies look to the architect to certify completion.

Engineers have a structured approach to determining the level of observation and frequency, but it does not take into account the issues we face as architects carrying out observation.  It is not really about how often one visits the site, but whether the site visits capture the critical issues:  that suggests that the project architect should be keeping an eye on the site progress, identifying what issues are likely to be critical if not performed as required, and planning site visits around those issues.  Subject to ongoing review, an initial assessment might be on the following basis:

OL1        Intermittent Site Visits:  small & simple projects                 fortnightly visit

OL2        Periodic Site Visits:          medium complexity & size           weekly visit

OL3        Regular Site Visits:           larger or more complex                 twice weekly visit

OL4        Constant Site Visits:        major complexity and scale          every second day

This may or may not suit the project, the potential risk, or the fee, and is complicated by:

  • Construction activity varying over the duration of the project, from site mobilisation and excavation through to a myriad of trades finishing works.
  • The skills and experience of the contractors and sub-contractors, which may require more observation to mitigate risk.
  • Progress on site varying from programme or expectations.
  • Sufficiency accuracy and reliability of design and as-built documentation, and the level of co-ordination between consultants, may lead to more on-site queries and site visits.
  • Substitutions or redesign sought by contractors;  client and/or project manager changes, demands, expectations;  similarly, from incoming occupants/owners and their funders, and overlaps with fitout requirements.
  • Critical technical and programme issues, specific design complexities, perhaps where the risk of non-compliance varies disproportionally in relation to cost, scale and complexity.
  • The need to exhibit to the contractor and client that you are “on top of things”
  • The number of site visits not reflecting the duration of the visit, eg 1 hour; 3 hours, etc.

There is also a “bell-curve” which is typical:  for smaller projects especially, a lot of attendance is necessary at the start of the job while the builder is grappling with what is required (and the architect is gauging how much hand-holding or vigilance may be required);  in the middle of the project when there is a lot of repetitive work the only reason to visit might be for the purpose of valuing a progress claim;  at the closing stages monitoring of finishing items may be to the level necessary to keep the client happy.

Observation does not mean inspection, or supervision

Lawyers and the courts do not appear to recognize the fine hair-splitting implied in this statement, and lawyers seemingly make no distinction between undertaking one site visit a month as opposed to a permanent site presence when it comes to blame.  But that doesn’t make the distinction incorrect.  It suggests that we need to do more to communicate the distinction. 

Supervision is the control and direction of the work;  Observation is a review of the work done. 

Observation of a typical installation versus every installation

We are judged against what is deemed to be the actions of a reasonable architect in those circumstances at that time.

If you observe a representative quantum of a particular aspect of work to confirm that it matches your documentation and make the assumption on reasonable grounds that the remainder of that work will be similar, those are the actions of a reasonable architect.  If a client wants more than that they need a clerk of works, and even then there’s no guarantee of perfection.

It is reasonable – in absence of evidence to the contrary – that an Architect assume that the contractor is competent:  if a typical item of work is acceptable, and there was nothing to suggest that the remainder of that type of work would be executed any differently, then those other instances of that work may be assumed to also be acceptable.   

But if a window is leaking because of an obvious and observable fault, and the architect did not notice the poor installation when there was the opportunity and need to do so, then they will be dragged into the issue, regardless.  To claim that inspecting one window is sufficient for all windows would be a weak defence if 90% of the windows subsequently leaked (even if the one window the architect did inspect was perfect). 

If you review an item of construction in detail and it is aligned with the documentation and complies with NZBC you can accept it, but you cannot then step back and not carry out observation of those repeating elements.  At the very least you would need to review the repeated elements to the extent necessary to conclude that they were consistent with the item reviewed in detail.  If the review of several such items revealed a variation in installation quality, the conclusion would be that site quality control is lacking, and more follow-up is required. 

The question is whether what was observed was representative of that part of the construction:  inspecting a window “type A” may or may not inform about the installation of types B,C etc.  If there are 100 similar items then a reasonable assessment has to be made whether to observe in detail 1,10, or any number of them to be satisfied that the work is being done as required.  Were they installed by the same persons at a similar point in time?  By skilled or unskilled staff?  What quality controls were in place?  What are the consequences of failure?  Who is likely to respond – and how – in the event of failure?  For marginally acceptable items, how does the installed item compare to independent benchmarks or to supplier’s requirements?

Be very wary of providing any sort of statement as to quality/completion/compliance

Your observation role is to report on whether the work done complies with the contract requirements;  your reporting can only be on the basis of what you have seen, and what you can reasonably infer from what you have seen.  Your reporting will be dependent on the conditions under which the observation took place:  the weather, the available access, whether the item was complete or in progress, and what information was provided to you by those on site who directed the work.  If your reporting is based on assumptions, make those assumptions known. 

Your observation reports will be used for two purposes:  to inform the contract administrator about the progress and compliance with the contract requirements, and to provide ammunition to those who want to pin liability on you for subsequent shortcomings.

NZRAB Disciplinary costs

NZRAB’s recent newsletter sets out their revised approach to the allocation of the costs of complaints.  They indicate that if a complaint goes to review by the Investigating Panel, the costs recoverable from the architect are likely to be in the order of $5000, and if it proceeds to a Disciplinary Hearing, $60,000.  NZACS’s insurance brokers Aon advise that the current PI policy wording is limited to the costs of defending the complaint, and does not extend to costs awards against the member.  NZACS Statutory liability insurance includes prosecution costs as part of the penalties cover, however there are limitations around the type of NZRAB complaint covered by this policy.

That means that a client suggestion of lodging an NZRAB complaint carries the threat of a substantial uninsured loss. 

NZACS’s view – made known to both NZRAB and the LBP Board – is that disciplinary proceedings should not be put in hand until the civil claims are resolved.  Despite the obvious logic of proving the case in a civil or contractual forum, both NZRAB and the LBP Board appear to be bound to pursue a complaint after only preliminary review.

The terms of engagement provide for dispute resolution, and the path to negotiated settlements on sensible business terms is well-trodden.  The outcome will indicate whether the architect should or should not face disciplinary action.  But unfortunately, upset (or unscrupulous) clients consider that lodging a complaint carries minimal cost and no downside to them, whilst exerting leverage on the architect to settle on unfavourable terms.  The architect who successfully defends faces the costs of the process and the client only loses face.  The architect who unsuccessfully defends faces not only substantial uninsured costs but also the prospect that the outcome will establish precedent for a potential civil claim.  There is room – and pressure – for the architect to admit to some of the claim in order to avoid uninsured costs:  in this situation the client’s case remains untested beyond a preliminary overview.  NZACS is aware of such a case where the outcomes were driven by the client’s untested allegations which were later found to be untruthful.

The only good news in this matter is that the statistics indicate that the vast majority of complaints to the NZRAB are about architects who are not members of NZACS.  This suggests that our members are aware of and manage their risks by attending to (at least) 3 key factors:

  1. Communications:  Being alert to client attitudes and concerns, maintaining open communications with project stakeholders and keeping clients informed at all times.  Taking the opportunity to see things from their point of view, and remaining humble enough to compromise when necessary.
  2. Obligations:  Maintaining professional and technical competence, and seeking external advice when appropriate.  Connecting with NZIA resources and fellow professionals including the NZACS Claims Committee members if required.  Reviewing and confirming actions and obligations against the contract requirements.
  3. Records:  Retaining good records in a way that can be easily referenced.  Filing everything for later referral if necessary, digitising the hard-copies of documents when practicable, keeping regular file back-ups as well as on and off-site records.

NZACS – A Short History 1972 to 2022

Prior to the collapse of the West Gate bridge in Melbourne on 15 Oct 1970, common law had expanded contractual liability to others who did not have a contractual relationship with a plaintiff.  [Donaghue v Stephenson 1932 (Snail in the ginger beer bottle)]  The West Gate bridge designer and bridge constructor were each seen as having considerable exposure to legal liability under both contract and tort. 

With this background threat looming, NZACS was established in 1972 as a co-operative society under the Industrial and Provident Societies Act 1908, to be owned and managed by architects, and to provide its members with a vehicle for the purchase of high quality, group professional indemnity insurance, on a voluntary basis. 

The model chosen followed a similar scheme initiated by CEAS (the consulting engineers) a few years prior, with Denis Adam as the insurance broking catalyst.  Throughout the formation phase and for many years following, his vision and involvement in the insurance industry was vital to the establishment and ultimate success of NZACS.

The founding directors and key initiators involved in establishing NZACS were Bruce Girdlestone, Graham Kofoed and Stuart Mitchinson.  A proposal was taken to the NZIA Council for support, and they agreed to underwrite the legal preparation of the Society’s rules and registration costs up to $1000. 

By year nine, NZACS membership totalled 187.  There had been 178 claim notifications and of these, 53 remained open awaiting settlement.  (By comparison, NZACS’s current membership is about 800 firms with a further 50 associate members.  These typically register about 120 new claim notification annually).

During the first 15 years of operation, the directors took no payment for the considerable time they committed to the affairs of NZACS.  To them goes the gratitude of past and present member firms and the profession for their vision, drive and commitment in establishing NZACS. 

A central vision of NZACS had always been for architects to be the “first responders” when members notify a claim.  This has been achieved by having a “Claims Committee” of experienced architects available to provide assistance to members facing a claim, and an architectural view on matters to lawyers and insurers.  That strategy has enabled claims to be settled on the best terms for both the insured and the insurers, and has gained a long-term commercial advantage in negotiating appropriate policy terms and premium costs.

From the outset, NZACS has been active in a wide range of matters affecting risk management and liability in relation to architects.  This has included liaison with both NZIA and NZRAB;  review and submissions on contract terms for construction and for engagement;  likewise for government procurement terms and pipelines, legislation and regulation;  and in providing education, publications and the promotion of risk management in the profession and in allied tertiary education courses.  NZACS was a founding sponsor and stakeholder in the Professionals Superannuation and Benefits Group (PSBG) and maintained a Board presence until the scheme was overtaken by KiwiSaver in 2013.

It had always been the intention of the original directors to acquire sufficient operating and investment capital to establish an insurance company similar to that operated by CEAS.  In 1982, with a capital of $200,000 and the placement of $1m with the Public Trustee as required at that time, Acanthus was set up as a wholly-owned insurance company, with Graham Kofoed as chairman.  The NZACS directors became ex-officio directors of Acanthus.

The notes for inclusion within the Memorandum of Association and Articles of Association included the following statement:-

“A suggested name (from Bruce Girdlestone?) which has been received with some enthusiasm is – The Acanthus Insurance Company Limited.  Acanthus is a word associated with a measure of romantic architectural tradition, neither supporting nor opposing any form of insurance the company may operate, but its architectural flavour is readily discernible.”

Acanthus enabled a saving of PI costs to members by taking on the risks of the numerous low-value claims, while the insurance market got a smaller slice of the revenues and covered the fewer larger claims.  It also gained some leverage over how policy terms were negotiated and claims settled.  

To succeed, Acanthus needed to diversify its risk, spread its investments and increase its market share.  Investment returns can be problematic, and cyclic, especially when long-tailed claims settlement occurs at a time when architectural fee incomes are low and premium payments based upon fee income are also low.

To that end, NZACS became involved with ARMS, a similar newly-formed co-operative of Melbourne architects.  Victorian legislation required all new residential construction to be fully insured against legal liability risks, and for disputes to be referred to a Disputes Tribunal.  After a couple of years it became apparent that expert witness and administration costs often exceeded the damages sought or awarded, and Acanthus withdrew.  It did, however, continue with profitable reinsurance arrangements with kindred societies here and overseas, and in independently managed investments.

Following the collapse of some insurance companies here and in Australia and elsewhere, the Government introduced the Insurance (Prudential Supervision) Act 2010.  The resulting increase in compliance costs without commensurate benefit has led to the decision to wind up Acanthus in 2022/23.  NZACS will continue the PI insurance arrangements with Aon and our external insurers, and the claims committee will continue in its existing role.

NZACS is a co-operative – run by and for its members – and is proud of its 50 years of service and membership support.  We aim to – and expect to – maintain our position as the trend-setters in architectural PI policy terms and the largest participant in the NZ architectural PI insurance market.  

NZACS/Acanthus:  Directors and Officers

Kendons have been our board secretary and accountant and Aon our insurance broker and insurance advisor since 1983.

The founding directors and key initiators involved in establishing NZACS were Bruce Girdlestone, Graham Kofoed and Stuart Mitchinson.  Bruce and Graham were practising Architects;  Bruce a partner in the firm of Girdlestone & Mitchell in Lower Hutt while Graham was a partner in Kofoed Kenny & Partners in Wellington.  Stuart Mitchinson, after a career in the Ministry of Works, during which time he also edited the NZIA Journal (now Architecture New Zealand), was the then-director of NZIA. 

Three other initial architect directors were David Sayers, of Gillman, Garry, Clapp & Sayers of Hamilton;  Hal Wagstaff (also a yacht designer, who maintained he could keep water out of his boats but not his houses) of Wagstaff and Cockcroft, Wellington;  and Arthur Williment of the Haughton Partnership, Wellington.  To complete the registration process, a seventh signatory was required and this was E. V. (Jim) Dawson, of King and Dawson, Wellington, the then-chairman of the Architects Registration Board.

Bruce Girdlestone was elected the first chairman and Graham Kofoed appointed as the first claims director.  Alan Purdie, the then-secretary of NZIA, also served as the initial secretary of NZACS.

Directors since 1978 have (more or less chronologically) included Alan Fairhead, Gib Pinfold, Peter Wixon, Barry Dacombe, Barry Millage, Graham Strez, Gerry Hodgson, Brian Dodd, John Sutherland, Colin Orchiston, Deb Cranko, Tom Dixon, Hamish Wixon, Malcolm Bowes, Jane Aimer, Alec Couchman, Melanie Lochore, Peter Marshall, Michael Davis, Natasha Markham and Matthew Mitchell.  Graham Strez retired in 2022 after serving on the Board and the Claims Committee since 1983. 

Engineered Stone Risks

The risks of working with engineered stone have recently been in the media, and compared with asbestos risks.  Whilst the current PI cover does not include asbestos risks, there is no such exclusion for engineered stone.  But that might change in the future.

Engineered stone is widely used in benchtops, and usually machined off site, but there could also be some machining on site.  The risks, as now known, are that the machining process produces a fine dust that contains high levels of silica crystals, and this can cause the deadly lung disease silicosis.

A competent architect is likely to be held to know of that problem, and thus to have a responsibility and duty of care to ensure safety measures are taken if the product is being used, as defined by accepted practice.  Worksafe outlines such measures, so an architect has an obligation – to the extent within their control – to see that these are carried out.  

https://www.worksafe.govt.nz/topic-and-industry/dust/accelerated-silicosis/engineered-stone-and-exposure-to-respirable-crystalline-silica/

Obviously an architectural practice has a responsibility to ensure that its employees are aware of the risks and take the necessary precautions on site.  But in addition the architect is in a position to make clients aware of those risks:  that may be relevant in both selecting the product and during its installation.  Whilst the architect might not be able to control the off-site machining of the product, there would be an obligation to select and specify it in a way which recognises the risks and requires them to be addressed both on and off site.

NZACS suggests that engineered stone benchtops are fully pre-templated in MDF to avoid any site cutting;  that all off-site manufacture has to use wet-cutting;  and that a sticker is put on the product to identify the risks.  It is known that some practices have put the product on their prohibited list.

Further information about fabrication guidelines is available at https://impac.co.nz/rcs-accreditation/home/

Does the 10 year longstop still apply?

Not so long ago, in our Communique article “How long to keep records”  we said

“The warm fuzzies induced by the 10 year longstop on liability under the Building Act have been under threat from cases brought to Court.  So far, so good.  But it would be unwise to biff out everything related to a project as soon as the longstop is reached” 

Alas, in May 2021 the decision on the October 2020 hearing of BNZ Branch Properties Limited v Wellington City Council [2021] NZHC 1058  has made good on that threat.  There may be the possibility of an Appeal, but currently, the position is that if (for example) the owner makes a claim on the contractor at 9 years and 364 days, that contractor would have another two years to seek a contribution from you as a “third party”.

The case arises out of the BNZ building on the waterfront in Wellington, which was damaged in the 2016 Kaikoura earthquake and later demolished. 

In August 2019, BNZ sued the Wellington City Council for negligence in respect of granting the building consent, inspecting during construction, and issuing a CCC.  A month later, Council sued the engineers, Beca, as a negligent third party, seeking a contribution in accordance with s17 of the Law Reform Act.  Beca argued that it had provided its engineering services in March 2008, more than 10 years before Council filed its claim, and thus the claim was time-barred by s393(2) of the Building Act. 

The issue before the court was not whether or not Beca was negligent, but whether – in consideration of the limitation issues – they were liable.

The Building Act s393(2) states

“….no relief may be granted in respect of civil proceedings relating to building work if those proceedings are brought against a person after 10 years or more from the date of the act or omission on which the proceedings are based.”

In simplistic terms, the understanding has been that you are not liable for your actions (as a building designer) beyond 10 years from the date on which your actions may have given rise to the alleged problems. 

NZ case law has confirmed that in respect of primary claims between plaintiffs and defendants;  but the position has not been so clear in relation to third party claims.  This was a test case for that issue, with about $100 million at stake.

Beca argued that the use of the words “civil proceeding” in s393(2) of the Building Act was intended to include “every form of civil proceeding regardless of its source or makeup”.

The High Court, after a detailed consideration of the relationship between s393 of the Building Act, s17 of the Law Reform Act, and s34 of the Limitation Act 2010, held that the term “civil proceeding” in s393 of the Building Act refers only to a primary claim between a plaintiff and defendant, and does not include a claim for contribution.

Third party claims – such as the Council’s claim against Beca – must be initiated within a two-year period provided for in the Limitation Act 2010.  This judgement establishes that so long as a claim is made on a party within the Building Act 10 year longstop, that party would then have two years in which to make a claim against third parties.

NZACS has previously suggested that the WHRS timelines justify keeping your documents 12 years, not just 10:  such things may (almost) be in the past, but this new case reinstates that recommendation.  Those “warm fuzzies” are now facing the reality of winter.

Do agreements for engagement need to be in writing?

Don’t for a moment think that you (or your client) might be “off the hook” because an agreement or contract has not been signed.

  • A contract can exist even if it isn’t necessarily in writing
  • There may be a difficulty in enforcing terms which are referred to, but not actually provided to the client.
  • Having something in writing is clearer and contractually stronger (and a specific requirement of NZAB ethics Rule 58A)
  • Having something in writing that is signed by both parties deals with an evidential issue and so is stronger again

NZACS has had ongoing involvement in the NZIA terms of engagement as they evolve, and recommends that members use them.

If there is a difficulty in getting the client to respond, then you should set out the necessary information in writing and indicate (for example) “… confirming our conversations yesterday when you instructed that we were to – etc etc – we are now proceeding on the basis of these terms and conditions unless or until you advise otherwise …” 

If there has been some discussion about the terms and conditions (or several variations of them), make sure that it is clear which version is to apply.  You might also refer to them in your first invoice, in which case payment of that invoice may confirm acceptance.

Cyber Cover – matters for firms to review

Some smaller practices may have difficulty in meeting the criteria for cyber cover because they are not undertaking the appropriate security processes in their systems.  Covid, and the increase in working from home, has provided increased scope for opportunistic cyber-crime, and Aon has an Australian U-Tube clip which makes useful viewing (if you can cope with the background music!):  https://www.youtube.com/watch?v=ZjDT1UOPTwQ&t=3s

In reviewing your own systems, the following questions cropped and copied from the last PI renewal form may suggest actions to think about:

  • Are all computer systems, mobile devices and websites firewalled or have intrusion prevention systems on them?
  • How often are protections and procedures updated?      Daily ? – Weekly ?

Does the Practice or Entity:

  • Use firewalls to prevent unauthorised access connections from external networks and computers systems to internal networks?
  • Use anti-virus protection and procedures on all desktops, e-mail systems and mission critical servers to protect against viruses, worms, spyware and other malware?
  • Have physical security controls in place to prohibit and detect unauthorised access to their computer system and data centre?
  • Have access controls in place (e.g. passwords) for employees and other users to deny access to sensitive data on computer systems
  • Have backup and recovery procedures for all data and IT systems
  • Have any domiciled operations or derive revenue from USA, Canada, UK, Europe or Australia?

Has the Practice or Entity sustained a single loss or losses, or suffered from any cyber breaches (including, but not limited to data loss, network intrusion or hack attack including telephone hacking), or been subjected to any fines in the last three years, for which this proposed insurance may be relevant?