Body Corporate 355492 v Queenstown Lakes District Council [2022] NZHC 678 – Limitation Under the Building Act Longstop

In the August 2021 issue of Navigate, Kiri Harkess reviewed the High Court’s decision in BNZ v Wellington City Council which found that the 10-year Building Act longstop does not apply to claims against third parties for contribution. Their summary can be read here. While this area of law has been unsettled for some time, Justice Clark’s decision provided defendants in defective building litigation some hope that they may succeed in claims for contribution brought more than 10 years after the relevant building work. The High Court’s April decision in Body Corporate 355492 v Queenstown Lakes District Council¹ principally considered the application of the longstop to amended pleadings. However, it also disagreed with the Court’s conclusion in BNZ that the longstop did not apply to contribution claims.

In a strikeout application by the Queenstown Lakes District Council (Council), the High Court considered whether amendments to a statement of claim were time-barred by the longstop provision under the Building Act 2004 (Act).² This provision states, in respect of civil proceedings relating to building work, that “no relief may be granted” where those proceedings are brought more than 10 years from the act or omission on which they are based.

The litigation relates to the Oak Shores Complex, a managed apartment building in Queenstown. The plaintiffs issued proceedings on 16 April 2015 against multiple defendants, including the Council, following their discovery of weathertightness issues. Their claim included a catch all pleading – “Structural and/or fire and/or acoustic and/or other defects to be particularised”.

In their sixth and seventh amended statements of claim filed in February 2019 and December 2021, the plaintiffs added specific defects in relation to “bathroom pods”, which they claimed were both not watertight, and structurally deficient. The bathroom pods were constructed off site by De Geest Bathrooms Ltd (DG). The alleged defects in the pods increased the claim by some $8m.

The key question for the Court was whether the longstop applied to the pod claims so that they should be struck out, given that the Council’s final inspection and code compliance certificate was in September 2007, more than 10 years prior to the 2019 and 2021 amendments.

Following the amendments, the Council had brought a claim for contribution against DG. DG had applied to strike out this claim under the longstop. This was the secondary question for the Court.

Amendments

Associate Judge Lester granted the Council’s application for strikeout of the bathroom pod amendments.

His Honour found that the plaintiffs’ amendments raised a whole new area of factual enquiry, and as such, the essential nature of the claim had been changed. Associate Judge Lester considered that the catch-all pleading did not prevent this from being the case, nor did His Honour accept the plaintiffs’ argument that the amendments amounted to particulars rather than elements of a cause of action.

The Judge disagreed with the plaintiffs’ argument that the addition of a new cause of action did not matter for the purpose of s393 of the Act because that provision was not concerned with the accrual of causes of action but rather related to the initial bringing of the proceedings in 2015. He observed that:

The commencement of a broadly pleaded statement of claim against a local authority would, on the plaintiffs’ case, from that point take the longstop out of play. It cannot have been intended by parliament that the longstop, being an “overarching limit on liability”, could be sidestepped through judicious pleading.

His Honour recorded that s393(2) is a limitation provision and agreed with the Court of Appeal’s decision in ISP Consulting Engineers Ltd v Body Corporate 89408³ that each iteration of the statement of claim replaces the previous one. Associate Judge Lester found that the amended statements of claim in question were the “proceeding”, and it was the addition of the new claims for relief concerning the bathroom pods that was barred by the longstop. He commented that, “Were it otherwise, the policy behind the longstop would be undermined”.

Contribution Claim

DG’s application to strike out the Council’s third party claim for contribution succeeded as a matter of course due to the Court’s decision to strike out the bathroom pod claims. His Honour nonetheless expressed a view on what he would have decided about the application of the longstop to the Council’s claim for contribution against DG had he not granted the Council’s strike out. The question here was whether a claim for contribution against DG, a tortfeasor,⁴ brought more than 10 years after the construction and installation of the bathroom pods would have been barred by the longstop.

Associate Judge Lester stated that he would not have followed the BNZ decision. That is, he would have found that the longstop does bar a claim for contribution more than 10 years after the building work that the claim relates to. His Honour favoured earlier authority on the issue noting that “the longstop is not concerned with when a cause of action accrued…The longstop is a 10 year bar running from the act or omission in issue”. He observed that the BNZ decision, contrary to this approach, seemed to “treat the rules relating to the accrual of the right to seek contribution as being paramount when the longstop is not concerned with the accrual of rights”.

Limitation issues arise frequently in building defects cases. Associate Judge Lester’s decision highlights the need for plaintiffs to carefully plead their case and not rely on “catch all” pleadings, to be fleshed out later. This can be difficult for plaintiffs because it is often the case that some defects do not come to light until the commencement of remedial work which can be many years after the building work in question.

His Honour’s comments regarding the longstop and claims for contribution further muddy the waters in this area of the law. It seems that this issue may have to be decided in due course by the Court of Appeal, and then eventually the Supreme Court. In the meantime, the law remains unclear.

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