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ARBE1301 Construction Law And Legislation

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ARBE1301 Construction Law And Legislation

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Course Code: ARBE1301
University: The University Of Newcastle

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Country: Australia

Question:

When it comes to earthquakes in New Zealand, how architect(designer)’s responsibilities in relation to insurance ? Especially in terms of professional indemnity insurance, Integrated Project Insurance (IPI) and/or other insurance schemes. And their impact on construction industry of the world.

Answer:

Introduction
An individual or person who devices, intends, and appraises the construction of building has been regarded as an architect. In the architectural line of work, technological and ecological skill, design and construction management, and an thoughtfulness of the trades were regarded as significant as design. Though, design has been regarded as the driving power which prevails throughout the project and a architect only accepts a commission from a customer.
As the law imposes a duty on the Architects in order to carry out a reasonable skill and care in doing their work as experts. But it has been clearly stated that they must show a standard of care in order to exercise such skill and care which would be expected of a sensibly competent architect. 
As where a architect design or construct a building and experimented its construction industry then it had a obligation to recognize important deviations from its devices and specifications that effected the structural integrity of  a earthquake.
As in the case of Black v.  Vernooy Architects, 2010 WL 5019659 it was held that the architects had a obligation to its customers in order to make an attempt to guard against such imperfections wherein it was stated that the obligation extended to those individuals who foreseeably subjected to the danger of private harm.
Though, it has been clearly stated under the law of tort that apart from contractual obligation architects has obligation which was foreseen for negligence as strict liability and was almost never imposed on architects. As a duty of care was imposed in order to make sure that another individual does not suffer unreasonable harm which could develop in the construction industry as a result of contractual duty; tort of negligence.
In the precendent case of Donoghue v Stevenson [1932] UKHL 100 it was held that the manufacturer owed a obligation of care towards the client which was violated as it was sensibly foreseeable that failure to make sure that the safey of the goods would lead to harm of clients.
Similarly in another case of Anns v Merton (1978) and Murphy v Brentwood (1991)  it was stated that any individual who had something to do with the plan or construction of a building could be sued by the final occupier, if it consequently emerged that the building was defective.
Earthquake
So, in order to define an extent of architectural expression of certain aspect of actions or conflict of earthquake, idioms ‘earthquake architecture” has been used by Christopher Arnold. The wide breadth of communicative possibilities ranges from figurative utilizations of seismic problems, to the more direct contact of seismic skill. As not as much of renowned instance in relation with the seismic problems in enlightening the architecture of a building took place in the Museum of New Zealand Te Papa Tongarewa, Wellington. As per the intentions of a recognized designer “The requirement for straight relations have led to the beginning of the thought of environmental authority i.e. the Maori god of earthquakes and volcanoes which were articulated as a powerful Wall serving transversely by way of the building.
Similarly, earthquakes still have been observed as the exceptional measures which took place 100 years back. In the face of such an origin, people were disinclined to allocate a major part of the funds on seismic strength, favoring to spend as an alternative on architectural form, which costs less and grants more habitable space.
Architect’s Obligation
As any type of failure of any non- structural elements of a building affected by earthquake may cause death or damage from:

Declining plates, granite or glass;
Collapsed ceiling components;
Declining furniture, etc.

So, the proof from earthquakes which took place around the world depicts that non-structural harm caused to people usually represents the greatest monetary loss to the nation by way of an earthquake.
It has been the configuration of a building known as seismic form which was observed by a designer as more than just a shape and scale with a number of qualities. Also, the constituents which unfavorably have an effect on a seismic act have on structure to be added to building failures in case of earthquake. Frequently the position, shape and kind of these constituents were seen to be determined by the architect before any engineering study or detailed design which was tried. On the other hand, rigid architectural constituents that have an effect on the seismic answers were added when the engineering concept has been indomitable. So, bad structural forms and poor non-structural constituent configurations were frequently permanently decided at the sketch design stage of an architect.
But in Storey v Charles Church Development Ltd [1995] 73 Con LR1 it was stated that by making orientation to the other precedent cases  it was stated that the designer or the architect of the building owes a duty of care under tort law for economic loss suffered.
Although, it has been specifically stated that it has been the duty of the architect to show reasonable skill and care as regarded under law of tort towards its clients.  But, in George Hawkins v Chrysler (UK) Ltd and Burn Associates it has been stated that subject to the express conditions there has been some implied terms also that the design and the construction would be fit for its aim on which the customer may depend so he have a duty towards him.
Also, in Lynch v Beale it was held that a architect could be sued for the loss by the client as the premises collapsed due to subsidence of foundation and inadequate design. Similarly, in case a earthquakes takes place then also the architect would be liable as at the time of making a building he must inspects the  whole place as it has been his duty which ahs been regarded under the law of tort  to foresee the harm and tell the client about the same.
But it was then specifically stated in Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 [2014] HCA 36 it was held beforehand by the HC stated that a builder or architect may owe a duty of care to succeeding purchasers of residential buildings in the context of assertions for pure economic harm. Though, it was after that when it was stated that apparently this duty has not been comprehensive to purchasers of commercial property.
Obligation in relation to payment of Insurance
After such a time, the seismic design was seen to be collective architectural and engineering responsibility. The earthquake harms the building completely and does not differentiate among those constituents which were envisaged by the architect and those planned by the engineer.
Therefore, it has been stated under the Buildings Act 2004 that before approving to the building or design work, a contractor must grant potential residential customers who ask or whose project would charge $30,000 or more (inclusive of GST) with:

A revelation statement comprising of data about abilities, education, licensing status and any insurance or assurances which was interrelated to the work;
A standard checklist that comprises of the data about the steps of a construction and minimum necessities for an agreement.

So, the designers were less likely to go to the additional mile in order to learn seismic strategies and to engage people unless an individual comes up and begins the trend as this pressure falls on the architect. But they were observed to be immobilized unless there was some kind of public awareness or government regulation. The architect of a building as a result seek more government interference and must depict that there were more profits than mere insurance savings in the matter of an natural calamity.
In Sinclair Refining Co. v. Hamilton & Dotson it was stated that the defendants owed towards the customers a duty of care that was a legal accountability to avert acts that could cause harm to someone else.
It was also stated that although a case may not be a construction case but if there would be illegal death caused then it would grant the backbone for understanding the concept of duty of care and the relevance of the concept with regard to foreseeability under tort law
As in Illidge v. Goodwin it was held that the defendant could only be found accountable for an perverse or foreseeable act if that defendant owed a duty what was known as a duty of care towards the plaintiff.
As with regard to the concept of earthquake engineering which has been an interdisciplinary division of engineering that plans and study the structures like building and bridges keeping in mind the occurrence of a natural calamity. Similarly, an architect aims to build organizations in such a manner which would not be harmed in minor shaking and would avert stringent damage or scrunch up in a major earthquake.
In TJK (NZ) Limited v Mitsui Sumitomo Insurance Company Limited [2013] NZHC 298, it was concluded that “Earthquakes caused harm to Clarendon Tower so as to cause considerable harm for which Mitsui had promised to assure TJK. On those agreed details, and subject to proof of loss, Mitsui must reimburse TJK not less than the insurance value of the construction.
So, the state has made the provisions for the reimbursement of money as per the indemnity value at the same time paying off the amount of insurance by the insurer if the loss has hampered with the amount of loss more than what was covered under the indemnity value.
Professional Indemnity Insurance
As, it has been observed that New Zealand has been a worldwide market leader in the condition of Professional Indemnity in the construction industry. But with new architects and engineers, the authorities have decided to strengthen the construction market leadership as a developing one.
So, the Construction industry experts made a chief part of the state’s Professional Indemnity (PI) portfolio, both in New Zealand and worldwide. It was formed to grant conviction of coverage for architects, engineers, and other construction industry experts, in order to meet the desires of the people or the customers. 
The success of the construction strategy of the government of 2025 has in addition focused on the move towards association and affiliation. Though, it has been stated that the present insurance framework in this industry does not promote the essential joint, blame free culture to make fully execute Building information model an authenticity.
So, the Professional Indemnity (PI) insurance exclusively gives some indispensable monetary safeguards for the Architects and the Designers in order to protect the trades for assertions which were made against them in doing their job or for giving advice to other people. Architects and the designers of a building were usually needed some professional indemnity for complying with the professional association needs, standard laws or to meet the wants of a number of customers.
Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 has been regarded as an English tort law precedent matter relating to pure economic loss, which concluded from a negligent misstatement. But the House of Lords override its previous spot, and stated that liability for pure economic loss not occurring from a contractual association was done by introducing the concept of “assumption of responsibility”. It was in this case that the designers were also included and had owed a duty towards its clients also at the same time they were seen to be covered in PI insurance.
Integrated Project Insurance
Customarily defensive position within the industry which existed previously was nevertheless varying, in part expectant and catalyzed by a variety of government Construction Strategy plans. So, in order to balance these growths, an innovative approach in regard to have insurance was presently being piloted known as Integrated Project Insurance. This was essentially reliant on adequate maintenance and uptake of the insurance market, which would likely pursue an evaluation of the consequences of the pilot projects.
Specifically, it has replaced the liability driven professional indemnity insurance which particularly needs the evidence of fault before answering the financial loss cover where the outturn cost include the target cost plus pain share which was insured.
In Birse Construction Limited v St David Limited [1999] EWHC 253 (TCC) it was held that the conditions were unenforceable for ambiguity. But even so, a number of agreements were still cast in this mould, and customers have sought an insurance regime to in order to assist ease the associating culture.
Insurance Scheme
Some defective constructed and leaking buildings as a result of building practices which took place in the 19th and the 20th century were pricing New Zealand billions of dollars for the harm caused in lost production and mend. The NZ Government over the last 10 years has executed a number of lawful and monetary policies in order to recover the poor quality of building construction. The Building Amendment Bill No 3 was one of such piece of laws and the newest to be approved by the NZ Parliament on the subject.
It would set up “risk based” agreeable procedure for low risk construction work, which would focus more on providing responsibility and liability on designers, building owners and builders to construct properly. At the same time, it would  move liability away from where it mainly lives presently which enforces the responsibility directly on the shoulders of the Local Council of the state of the place of residence.
Similarly, it has been observed that the earthquakes which took place in the state have a major impact on the construction industry all around the world. The Canterbury earthquakes which took place in 2010 and 2011 have had a chief fiscal and economic effect on the area itself and on the state as a whole. As a contrast, the March 2011 earthquake and the natural calamity in Japan was predictable to have caused harm equal to around 3 to 4 % of Japan’s annual GDP.
Similarly, the Christchurch reconstruction was predicted to begin in serious danger during the second half of 2012, enduring through to at least 2016. While service and inhabitants trends were a meticulous apprehension for the area, trade and consumer confidence and retail sales enhanced in late 2011, although from a low preliminary end.
Conclusion
So, at the end it has been concluded that evens though the earthquake has been regarded as the natural calamity which was not in the control of the architects but it has been a duty of the architects to construct an earthquake prone building. So, whether or not there has been an agreement or policy with regard to the insurance of the building and the people if the people were harmed by such acts then up to the indemnity value the architect would pay the damages then it would be generated by the insurance authorities. And as a result of such forces the government ahs made all the required laws and examinations of the buildings and the places and have decided to make or rebuild the residential areas in order to save them earthquake prone. Because it has been the duty of the architects and as a result of such acts they had to bear loss or money and on whole the people or the public at large were getting suffered.
Also, it could be stated that the customers could on the basis of the precedent case laws mentioned above could make claim for the loss by the architect and the designers as it was their duty to act with reasonable care under tort but they failed to do so. And under the law it has been specifically stated that the architect in his capacity could have foresee before constructing building that the place would be prone to natural calamities or not. So he must have told the clients before constructing the building and thereof he must be liable to pay for the loss.
References
Anns v Merton (1978) and Murphy v Brentwood (1991)  
Birse Construction Limited v St David Limited [1999] EWHC 253 (TCC)
Black v.  Vernooy Architects, 2010 WL 5019659
Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 [2014] HCA 36
Donoghue v Stevenson [1932] UKHL 100
George Hawkins v Chrysler (UK) Ltd and Burn Associates
Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465
Illidge v. Goodwin
Lynch v Beale
Sinclair Refining Co. v. Hamilton & Dotson
Storey v Charles Church Development Ltd [1995] 73 Con LR1
TJK (NZ) Limited v Mitsui Sumitomo Insurance Company Limited [2013] NZHC 298
Grant Bradley, ‘North Canterbury earthquake could dent economic confidence says ASB’ NZHerald (New Zealand, 14 November 2016)
Fre´de´ric Marquis, Jenna Jihyun Kim, Kenneth J. Elwood and Stephanie E. Chang, ‘Understanding post-earthquake decisions on multi-storey concrete buildings in Christchurch, New Zealand’, 29 April 2015, Springer Science+Business Media Dordrecht.
Labadie, ‘Auditing of post-disaster recovery and reconstruction activities’, Disaster Prevention and Management, 2008, Vol 17 Issue 5.
G Smith, ‘Lessons from the United States: Planning for post-disaster recovery and
Reconstruction’, The Australasian Journal of Disaster and Trauma Studies ISSN: 1174-4707 Volume : 2010-11, 2010.
W. Charleson, M. Taylor and J. Preston, ‘Envisioning Earthquake Architecture in New Zealand’ (
Andrew Charlesson, ‘Architectural Design for Earthquake’ (New Zealand Society for Earthquake Engineering) < https://www.nzsee.org.nz/db/PUBS/ADE2007.pdf>  accessed 3 March 2017
Auckland Insurance, ‘Architectural Designers’ (Auckland Insurance) < https://aucklandinsurance.co.nz/architectural-designers/>  accessed 3 March 2017
Biz Cover, ‘Professional Indemnity For Architects And Designers’ (Biz Cover) < https://www.bizcover.co.nz/insurance/profession/architects-designers/> accessed 3 March 2017
Building Performance, ‘Builder and designer rights and obligations’ (Building Performance, 15 March 2015) < https://www.building.govt.nz/getting-started/your-rights-and-obligations/builder-and-designer-rights-and-obligations/>  accessed 3 March 2017
Building Performance, ‘Improving collaboration in building design’ (Building Performace) < https://www.building.govt.nz/building-code-compliance/b-stability/b1-structure/practice-advisory-15/improving-collaboration-in-building-design/> accessed 3 March 2017
Chirs Murphy, ‘Sustainable Refurbishment: New Policy initiatives for New Zealand’s Leaking Buildings’ (Unitec Institute of Technology) < https://unitec.researchbank.ac.nz/bitstream/handle/10652/2714/CODE%20100_Text-with-Author-Details%20.pdf?sequence=1> accessed 3 March 2017
  Crombie Lockwood, ‘Professional indemnity insurance’ (Crombie Lockwood) < https://www.crombielockwood.co.nz/professional-indemnity-insurance> accessed 3 March 2017
Debra Dorrington, ‘Earthquakes, Insurance and Unit Titles’ (Alexander Dorrington, 20 September 2010) < https://www.alexanderdorrington.co.nz/earthquakes-insurance-and-unit-titles/> accessed 3 March 2017
New Zealand Society for Earthquake Engineering Inc.) < https://www.nzsee.org.nz/db/2001/papers/30101paper.pdf> accessed 3 March 2017
Parliament of New Zealand, ‘Economic effects of the Canterbury earthquakes’ (Parliament of New Zealand, December 2011) < https://www.parliament.nz/en/pb/research-papers/document/00PlibCIP051/economic-effects-of-the-canterbury-earthquakes > accessed 3 March 2017
Reuters, ‘New Zealand looks offshore for workers to rebuild after quake’ (Reuters, 24 November 2016) < https://www.reuters.com/article/us-newzealand-quake-idUSKBN13K047> accessed 3 March 2017
Richard Dalman, ‘Christchurch Earthquakes: The Architects’ Response’ ( Dalman Architectures, August 2014) < https://www.dalman.co.nz/download/646/chch-earthquakes-the-architects-response.pdf> accessed 3 March 2017
Richard Johnstone and Sarah Ulmer, ‘When is indemnity value payable?’ (Wynn Williams, 3 November 2013) < https://www.wynnwilliams.co.nz/Publications/Articles/When-is-indemnity-value-payable> accessed 3 March 2017
Subramanian Pillai, ‘Architects’ Duties And Liabilities – Recent Developments In Caselaw’, (Colin Ng & Partners LLP) < https://www.cnplaw.com/en/media/files/services/Architects%20Duties%20and%20Liabilities%20-%20Recent%20Developments%20in%20Caselaw.pdf >  accessed 3 March 2017
 Zurich, ‘Architects and Engineers PI Insurance’ (Zurich) < https://www.zurich.co.nz/content/zurich_nz/insurance/professional-liability/professional-indemnity-insurance/architects-and-engineers-pi-insurance.html> accessed 3 March 2017

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