Labour’s Kieran McAnulty wants guarantee Masterton ratepayers aren’t helping plug Health NZ’s deficit

The council and Health NZ have been in debate about Wairarapa Hospital's building on Te Ore Ore Rd, Masterton. Photo / NZME

Labour MP Kieran McAnulty wants a guarantee from the Government that Masterton ratepayers are not indirectly helping to plug Health NZ’s gaping $1.4 billion deficit after the council and the health agency settled a $90 million lawsuit out of court for an undisclosed sum.

Last week, Health Minister Simeon Brown was unable to give an assurance to the Herald that all or even most of the settlement banked by Health NZ would be spent on the hospital, suggesting a portion - and potentially a large portion - of the settlement will be spent throughout the country.

About $1.6 million has been allocated to be spent on the hospital since 2020, according to answers to written Parliamentary questions. The council had previously claimed bringing the hospital up to standard could be achieved for $4m.

McAnulty said the amount of money received by Health NZ the could be vastly in excess of the $1.6m spent on the hospital and wants to make sure that money is going to be spent locally.

“I don’t for a second believe that Health NZ would seek $90m and then settle for $1.6m or even $4m. There is a massive gulf [between $4m and Health NZ’s claim of $90m],” McAnulty said. He added that sources he had spoken to said the claim would be “substantial”.

“The minister is refusing to even answer simple questions that seek an assurance that none of that money would be spent elsewhere or even most of the money would be spent in Wairarapa Hospital. The more they dodge the question, the more I’m certain in my mind that they’ve flogged our money and used it for something else, and all the while our hospital remains deficient and undersize,” McAnulty said.

The claim related to alleged defects in the construction and consenting process for Wairarapa Hospital between 2004 and 2007 and questions about a code of compliance certificate. The council denied liability and defended the claim, arguing the hospital could be remedied for $4m. Health NZ, which inherited the claim from the Wairarapa DHB, argued a whole new hospital needed to be built.

The settlement is confidential and cannot be revealed. While Masterton District Council paid the settlement, it subsequently drove up the council’s insurance premiums, which are ultimately passed on to ratepayers.

Answers to written parliamentary questions filed by Labour’s Tracey McLellan show that just $1.6m has been allocated on capital improvements to the hospital. Local Democracy Reporting found that $330,000 had been spent on the hospital to bring it to 34% of the New Building Standard, a measure of a building’s compliance with seismic resilience.

Brown reiterated that matters relating to the settlement were confidential.

Regarding spending the settlement on the hospital itself, Brown said, “I am told that Wairarapa Hospital has already been strengthened so that it is no longer earthquake-prone and meets minimum building standards, meaning it is also at a standard equivalent to other hospitals in Health New Zealand’s portfolio”.

“I am working with officials to develop a national long-term health infrastructure pipeline to ensure that all regions, including the Wairarapa, have the critical health infrastructure they need. Further work at Wairarapa Hospital is being considered as part of this work,” Brown said.

McAnulty said he wanted the money to stay in the Wairarapa and said that the “very small amount of work” that had already been completed on the hospital was not enough.

“That very small amount of work was to bring it to the absolute bare minimum. There’s no way in hell that Health NZ when they were seeking $90m would settle to bring the hospital up to bare minimum which is dozens of percentage points below the maximum,” he said.

“The settlement is quite clearly for the specific purpose of fixing the hospital. For the Government to then take that and use it for something else, even if they are keeping it in health - let’s not forget they’re trying to save $1.4b - but that [settlement] was for our hospital,” he said.

Pidgeon Judd director, Joanna Pidgeon, who specialised in property law told the Herald that it appeared the design of the Wairarapa Hospital would have been “on the cusp of the implementation of the new legislative and building standard changes” in the mid-2000s

“It would be expected that a new building should meet the NBS (New Building Standard). The expectation would have been that the consented plans met the new building standards at the time they were consented.

“A code compliance certificate (CCC) is issued by a council once all building work under a building consent has been completed. The CCC confirms that the building complies with the Building Code, meaning all required inspections have been passed and the work matches the approved building consent documents and a CCC should only be issued when the building project is considered fully finished and compliant with regulations and legislation.

“If a building is found to be below 100% NBS this does not mean that the whole building is below the NBS standard – it may only be parts of the building which are below 100% NBS, however, the entire building rating will be that of the lowest rated part of the building,” she said.

Pidgeon stressed she did not know the details of the case, however, often in cases like these “there will be many parties sued as having potential liability, as well as council, there might be the developer if any, engineers, contractors and other parties”.

“Often, particularly if litigation is many years later many of the parties may no longer be around, and councils can often be the last party standing, carrying all liability as liability is joint and several,” she said.

“Typically in these cases it will be the insurance company on behalf of the council making the call around settlement. While the initial claim may have been for the cost of a replacement hospital, interest costs and damages a defence might be that a claim should be limited to the costs of bringing the building up to code, and that ordering compensation for a new hospital would include betterment, especially now the hospital is around 18 years old.

“Any court action has risk, and construction cases like this tend to be expensive with teams of lawyers involved, as well as expert witnesses. The losing party would need to make a costs scale contribution to the winning party’s costs, which on a case like this would be significant. Settling a case gives power back to the parties to make their own decision, at where they feel comfortable when they assess their risk and potential liability,” she said.

When asked about the insurance costs now being passed on to ratepayers, Masterton District Council’s general manager, finance, David Paris told the Herald that “insurers, particularly those based in London, now have a perception of greatly elevated risks associated with New Zealand local government with respect to litigious claims related to councils as building control authorities (BCAs).

“As a result they have withdrawn from offering that cover and the insurance that councils can obtain is limited and expensive,” Paris said.

An agenda item taken to the council last year noted litigation against councils of this kind had seen premiums rise dramatically from $179,250 in 2023/24 to $516,731 in 2024/25, while the limit of indemnity in aggregate has reduced from a $300m limit in 2023/24, to a $15m limit of cover.

A spokesperson for Health NZ said the claim was settled “satisfactorily” between both parties.

“Wairarapa Hospital has been strengthened so that it is no longer earthquake prone. This means the hospital building has been remediated to achieve a minimum of 34 percent New Building Standard at IL4 (Importance Level), with peripheral structures including the walkways, cafeteria and ambulance bay structurally strengthened to 34 percent New Building Standard (IL3). This work was completed prior to the case being taken by the former DHB,” they said.

Thomas Coughlan is deputy political editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the Press Gallery since 2018.