Auckland law firm Adina Thorn Lawyers is inviting registrations of interest for a class action on behalf of building owners whose properties have been build in the past four years with steel reinforcing mesh that does not meet earthquake standards.
Firm Principal Adina Thorn says the current Ministry of Business, Innovation and Employment (MBIE) investigation may result in fines for the companies that have supplied the non-complying mesh, but this will not likely deliver any financial reinstatement for the owners of affected buildings.
"This is a problem because, in the advent of a natural disaster, the use of non-complying steel mesh could compromise insurance claims, pose a risk to life and cause widespread financial losses. Its existence could also affect the future and present market value of the buildings concerned," she says.
Ms Thorn says a number of companies in addition to Steel and Tube may be named in the proposed class action.
Harbour Litgation Funding Ltd in London is underwriting the action and has approached several international insurers.
"The initial view is that there could be an issue with home and contents insurance, because a term of most home and contents insurance is the buildings have to be legally compliant," Ms Thorn has told Radio New Zealand.
"These buildings are arguably not legally compliant because of the steel mesh ... [there] needs to be compensation because of that risk."
Most new homes have steel mesh in floors
Most of the 100,000 homes built in New Zealand since 2012 have concrete slab floors with steel mesh in them.
In March 2016 the Commerce Commission announced that it was investigating whether some steel mesh products complied with the Australia/New Zealand Standard (AS/NZ 1671:2001).
The Commission said two companies, Brilliance Steel Ltd and Euro Corporation Ltd, had agreed to stop selling some steel mesh products "until its concerns were resolved". One of the companies had challenged the Commission's test results.
Shortly afterwards the Ministry of Business, Innovation and Employment (MBIE) said it was not concerned that the product under investigation posed a safety risk for newly built houses and that it was confident they still complied with the Building Code. MBIE also released a set of questions and answers about the mesh. This said the product was not unsafe, but a product with higher ductility was "more desirable" to use in concrete slabs.
A month later, in early April, Steel and Tube announced it was removing its product from the market until the mesh had been through a dual testing regime and had test results that demonstrate compliance with the Standard.
Radio New Zealand reported on 24 May 2016 that mesh from three out of five companies had failed to meet requirements in tests, and that there were also problems with the testing process itself, with discrepancies between the testing laboratories.
Consultation on Building Code changes to strengthen requirements
On 19 August Building and Housing Minister Nick Smith announced the opening of consultation on proposed changes to the Building Code to strengthen steel reinforcing mesh testing requirements.
"The Government is tightening the requirements for verifying that steel mesh used in New Zealand matches up to our standards. We are increasing the number of tests required, clarifying exactly how the tests are done and requiring the tests to be undertaken by internationally accredited testing laboratories," Dr Smith said.
"There have been issues with the quality of a small amount of steel mesh, which the Commerce Commission is investigating. The updated Verification Standard and Acceptable Solution will apply to all steel mesh of Grade 500E being sold in New Zealand, whether made locally or imported. This will make it absolutely clear to the industry exactly what should be tested and the standard to which that must be done. It will help ensure the product meets our 10 percent ductility requirements for residential buildings – and gives certainty to the public that the mesh used in new houses is fit-for-purpose.
"The issue that has caused concern is ductility, or the capacity of mesh to retain its strength when stretched. The rules were toughened in response to the Christchurch Earthquakes so that all new homes had to have steel mesh of 10% ductility to increase the resilience of floor slabs after a quake."
Dr Smith said the Verification Method and Acceptable Solution changes are out for consultation until 8 September. The proposed changes come into effect on 7 October except for the requirement for accredited testing, which is effective from 1 January 2017.
Insurance Council says no undue concern about coverage
A statement from the Insurance Council of New Zealand on 1 September said people with home and contents insurance in houses built with steel slabs using sub-standard steel mesh in the last four years should not be unduly concerned about their insurance coverage.
"If homeowners do have concerns that they have substandard steel mesh used in their slabs they should contact their insurer," Council Chief Executive Tim Grafton says.
The Council says that in March 2016 MBIE advised Building Consent Authorities that, in its view, if a house has obtained a Code of Compliance Certificate from them there is no need to take any action because the house will still meet the structural (as well as the life safety) requirements of the Building Code.
It says insurers will typically be reliant on Code Compliance Certificates issued by councils to provide them with confidence around the structural integrity.