The Christchurch City Council has got the final knockback in its plan to double the minimum earthquake-strengthening standard for old buildings.
The council decided in the wake of the Canterbury quakes that old buildings being rebuilt would have to meet 67 percent of the code for new buildings, up from 34 percent.
But the Supreme Court has rejected that, saying 34 percent is the proper interpretation of what Parliament intended when it passed building legislation.
The ruling is being greeted with relief by the insurance industry, which feared massive costs if it had to restore old buildings at a higher code than budgeted for before the quakes happened.
The decision sends Christchurch City Council back to the drawing board and raises a questionmark over the recommendations of the Royal Commission that followed the quake, which called for higher thresholds.
It also leaves the University of Canterbury stranded as the meat in the sandwich.
The university took the case to the Supreme Court, arguing its earthquake prone buildings would leave it exposed under the new council-imposed codes and putting them right would cost $140 million.
The university would not not comment on the latest development.
Last week it got a $550 million settlement for quake damage, which is not affected by the latest development.
Insurance Council spokesperson Tim Grafton said the city council rules could have put huge costs on to insurers right across New Zealand, and could have affected the willingness of overseas companies to provide cover here.
The council was thrilled to have won its case, Mr Grafton said.
"It would have been a massive change if the court had gone the other way on this because that would have changed the understandings that insurers and reinsurers who provide the cover for New Zealand's commercial property as to what their requirements were."