Does the 10-year longstop period in the Building Act 2010 apply to claims for contribution against third parties?

• Contribution claims against third parties in building defects litigation are not time-barred by the 10-year longstop period under the Building Act 2004, where the claim for contribution is brought within two years of the main litigation.
• The High Court considered that this approach struck the appropriate balance between the rights of building owner plaintiffs to recover losses suffered as a result of building defects, and the interests of defendants in avoiding stale claims.

BNZ entered into an agreement with CentrePort Ltd to construct a building on land owned by CentrePort at Waterloo Quay, Wellington.   Beca was the structural designer.  BNZ leased the building from CentrePort from February 2011.  Following the Kaikoura Earthquake in November 2016 the building was uneconomic to repair and was demolished.

BNZ commenced proceedings against Wellington City Council seeking damages of over $100 million, including the cost of rebuilding.  BNZ alleged the Council was negligent in granting the building consent application, its inspection of the building work, and issuing a code compliance certificate.  The Council brought third party proceedings seeking contribution from Beca and Professor John Barrie Mander who had peer-reviewed Beca’s structural design.

Beca applied to strike out the Council’s third party claim on the grounds that the 10-year longstop period under s393(2) Building Act 2004 (BA) applies to contribution claims under s17 Law Reform Act 1936 (LRA), relying on a line of existing authority.  The Council said these authorities were wrong because s34 Limitation Act 2010 (LA) prevails over s393 BA and the previous decisions had not considered the legislative history leading to the enactment of s17 LRA.

Justice Clark agreed with the Council, for the following reasons:

• The LA followed the BA and Parliament was “evidently mindful” of the BA and of s393 in particular, which was amended by the LA.
• The LA treats contribution claims differently than primary claims by plaintiffs against defendants, as it defines them as “ancillary claims” rather than “original claims” and exempts them from the definition of “money claims” and the 15-year longstop.
• Together, s17 LRA and the operative provisions of the LA create a code for the bringing of contribution claims, with a 2-year longstop period under s34 LA.
• Section 393 BA provides that the LA applies to civil proceedings against any person if those proceedings arise from building work as defined in s4 BA. While “civil proceeding” is not defined in the BA, it is defined in the LA.   Justice Clark interpreted “civil proceedings” in s393 BA as limited to original claims and excluding ancillary claims.
• As a general provision, s393 does not derogate from the specific two-year limitation period for contribution claims provided under s34 LA.
• Express words in s393 would be necessary to alter the longstanding principle that a defendant may bring a contribution claim against a tortfeasor who “would, if sued in time” [by the plaintiff] have been liable for the same damage as the defendant.
• This approach was consistent with Parliament’s concern to avoid “temporally unlimited liability for those involved in the construction industry” because if plaintiff building owners do not bring their claim against a defendant within the 10-year longstop, third parties cannot be exposed to contribution claims.

Justice Clark considered that his approach balanced the interests of building owners to recover losses suffered as a result of defective building work, and the need to provide certainty to all parties involved by imposing a finite period within which claims can be brought, avoiding stale claims.

Justice Clark dismissed Beca’s application for strike out, and its alternative claim for summary judgment.

Issues around limitation arise frequently in building defects cases as there are multiple parties involved who could be held liable, each having undertaken work at different stages in the build process.  The application of s393 to third party claims is of particular importance to local authorities as they complete the last step in the construction process, issuing the code compliance certificate.  They are frequently required to defend proceedings where most or all other defendant claims are time-barred under s393.

The decision serves to further muddy the waters in what has always been an unsettled area of the law.  It goes against a long and consistent line of authorities that said the 10-year long stop does apply to all proceedings and causes of action involving Building Work, including defendants’ claims against third party tortfeasors liable for the same damage as the defendants.

Justice Clark’s decision engendered a heated debate within McElroys between those who consider that s393 BA is cause of action neutral and applies to all civil proceedings (whether original or ancillary) involving Building Work, and those who consider that the plain wording of s17 and s34 (and their predecessors) is that a defendant’s right to bring a contribution claim against parties, who would have been liable to the plaintiff if sued in time, is not subject to the BA longstop.

Given Justice Clark’s thorough and comprehensive examination of the relevant legislation we think that defendants looking to join third parties outside the 10-year period can now do so with more confidence than previously.

The decision will be appealed.  Appellate authority will most certainly be welcomed to provide certainty for all parties on the courts’ approach to this issue for future claims and to settle the debate at McElroys.

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