You have been introduced to the main legislation that impacts construction in New Zealand. It can also be helpful to identify potential legal risks and determine how these risks can be mitigated. This involves identifying the legislation and other control mechanisms that can be useful in mitigating risks.
Tip
Risk is the possibility of something harmful occurring. If the harmful thing occurs, this is referred to as the risk being realised.
Legal risk refers to the danger of operating in a way that contravenes legislative requirements. A legal risk would occur if a construction manager failed to act in accordance with mandatory Acts or regulations. This failure can be deliberate or inadvertent. In New Zealand, ignorance of the law is not an excuse for committing an offence. This is why construction managers need to be aware of their legal obligations.
If a construction company contravenes legislative requirements, it may result in the following:
- criminal charges
- fines and restoration costs
- project shutdowns
- liability claims and contractual penalties
- loss of building licenses
- reputational damage.
Examples
Examples of legal risks could include the following:
- A health and safety violation resulting in workplace injury or death.
- The project causing environmental damage.
- Non-compliance with employment law in worker pay and benefits.
- Constructing a building that does not meet the requirements of the Building Code.
- Failure to gain the required consent for the building project.
- Failure to use LBPs when required.
Mitigating Legal Risks
A construction manager should take the following steps to reduce legal risks.
- Stay up to date with legislative changes along with changes to other relevant codes and standards.
- Ensure employment contracts fulfil legislative requirements.
- Develop plans for health and safety compliance and communicate them to all workers.
- Maintain all records scrupulously including contracts, permits, plans and stakeholder correspondence.
- Ensure you employ workers with the required qualifications and licenses. Upskill workers where applicable.
- Ensure you have comprehensive insurance.
- Ensure all required permits have been applied for and granted before starting any construction.
- Monitor all work done on-site to ensure it complies with the building consent and relevant legislation.
- Monitor the construction site to ensure all environmental regulations are adhered to, e.g. monitor noise and waste disposal.
Assessment Tip
You will be completing an assessment task on legal risks associated with the RMA when you get to Assessment 02A1.
For the following activities, you will read about some real examples of legal risks taken in the construction industry which resulted in prosecution.
Activity
Click on the link to access the article titled Hefty fines imposed for breach of Resource Management and Building Acts.
Read the article and reflect on the following:
- What legal risk was taken by the defendants (people charged with the offence) – what legislation was contravened?
- What was wrong with the building?
- What penalties were handed down to the defendants?
Activity
In the following exercise, you will review two court decisions where companies were prosecuted by WorkSafe.
H5P here
Activity
In this activity, you will review a determination made by MBEI relating to a refusal to issue a CCC (Code Compliance Certificate). Signoff was refused because the building was determined by the local council not to have met several clauses of the Building Code.
Tip
Determinations are made by MBEI. They judge whether building work complies with building legislation. Their decisions are legally binding.
H5P here
Summary
Remember that legal risk refers to the danger of operating in a way that contravenes legislative requirements. The role of a construction manager involves identifying legal risk and avoiding it, while adhering to legislative requirements. The case studies included in this topic demonstrate how risk taking can negatively impact a project and the professionals working on that project.
