Issues of limitation are a common feature in disputes relating to building defects. Often, by their very nature, defects are not obvious upon completion of the building and may only be so years – or even decades – later.
There is a balance to be struck between allowing building owners to recover losses arising from defects and having a finite period within which claims can be brought, to provide certainty to all parties involved. Parliament decided that an appropriate balance was to allow building owners to bring proceedings within 10 years of the undertaking of building work. This is what section 393 of the Building Act 2004 provides.
A building owner may consider that there are several parties who could be responsible for building defects. The relevant Council, the builder, the architect, the engineer, or another relevant specialist subtrade, are all common targets for an aggrieved building owner.
Often, however, the Council will be the last party available to pursue because it has undertaken the last step in the building process – issuing the Certificate of Code Compliance. It will also often have the deepest pockets so may be the best target for an aggrieved building owner. What happens if that certificate was issued 9 years and 11 months prior to the proceedings being filed? In this scenario, it is likely the designers - and possibly the builder - completed the relevant work more than 10 years ago and cannot be sued by the building owner. But can the Council sue the other parties involved?
If a building owner sues the Council, the Council may wish to also sue other parties who contributed to the loss. Section 17 of the Law Reform Act 1936 provides that where one party has been sued they can seek contribution from any other party who is also responsible for the same loss. Under the Limitation Act 2010 they have two years after their liability to the plaintiff is quantified (say, by a judgment).
What happens then if Party B gets sued for building defects by Party A but wants to seek contribution from Parties C, D, and E who undertook work more than 10 years ago? Previously the position seemed to be that Party B couldn't do so. The High Court had previously held that the 10-year longstop applied even to claims for contribution under the Law Reform Act 1936. 1
However, in a decision delivered on 12 May 2021 the High Court has now suggested otherwise. 2 BNZ bank sued Wellington City Council in relation to alleged building defects that BNZ said became apparent after the Kaikoura earthquakes – it is seeking over $100,000,000. The Council sought to add in Beca Carter Hollings & Ferner Limited (Beca) who provided structural engineering design services.
Beca sought to strike out the claim from Council on the basis
their work had occurred more than 10 years ago. The Court, however,
held that the 10-year longstop in the Building Act did not apply to
claims for contribution and that the Council could continue its
claim against Beca.
This is a very advantageous decision for building owners and for
any party who undertakes relevant building work late in the
construction process – particularly Councils. Where
previously those parties may have been left holding the baby (and
in some cases a very big baby) they can now seek contribution from
other liable parties, even if their actions were more than 10 years
ago.
1 Minister of Education v James Hardie New Zealand [2018] NZHC 22 and Body Corporate 378351 v Auckland Council [2020] NZHC 1701
2 BNZ Branch Properties Limited v Wellington City Council [2021] NZHC 1058
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