The Court of Appeal upholds the High Court’s decision and says “no 10-year long stop” for contribution claims under s 17 Law Reform Act 1936

• The Court of Appeal has upheld the High Court’s decision dismissing Beca’s application for strike out or summary judgment.
• There is now appellate level authority that contribution claims against third parties in building defects litigation are not time-barred by the 10-year long stop period under the Building Act 2004.

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 assessed as being 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, in 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.

The third party proceedings were brought under s 34 Limitation Act (2010) and s 17 Law Reform Act 1936. Section 17 allows a defendant to bring a claim for contribution against joint tortfeasors. Section 34 provides that a cause of action accrues on the date of judgment against the defendant, and that the time for bringing a contribution claim runs for two years from that date.

Beca applied to strike out the third party proceedings. Its application was on two grounds:

1. The third party claim against it was time-barred by operation of the 10-year long stop in s 393 Building Act 2004.
2. There was no continuing duty (as the Council had argued) to identify its mistake in the time between when it issued a PS4 and when the building was completed.

Both the High Court and Court of Appeal found that there was insufficient evidence before them to decide the issue of continuing duty in the context of an interlocutory application, but went on to determine whether the 10-year long stop applied.¹

In the High Court, Justice Clark found that the 10-year long stop did not bar a claim for contribution and the application to strike out was dismissed. You can read about his decision in more depth in Kiri’s article here.

Beca appealed. Justices Miller, Clifford, and Katz dismissed the appeal, but disagreed with Justice Clark’s categorisation of the contribution claim as an “ancillary” claim for the purpose of the Limitation Act 2010.

The Court found that the 10-year long stop in the Building Act does not affect the operation of s 34 Limitation Act. In reaching their decision they cited the following factors:

• There is a strong legislative history which shows Parliament’s desire to protect a defendant’s right to claim for contribution from a joint tortfeasor. This cause of action has been said to accrue from the date on which that claim was quantified since the Law Reform Act was enacted in 1936, and any ambiguity on that point was removed by s 14 Limitation Act 1950 (equivalent to s 34 of the 2010 Act).
• This has been reinforced by a series of Law Commission reports.
• Given the strong legislative history in support of this approach, they did not consider that the plain wording of the long stop in the Building Act was sufficient to change that “longstanding, bespoke approach”.
• Section 34 Limitation Act 2010 was enacted after the Building Act. If Parliament had wanted the Building Act to override that long legislative history then they would have expressly done so.
• This view is supported by the principle of generalia specialibus non derogant (a later provision will not supersede an earlier specific one).

On the grounds outlined above they agreed with the High Court.

In the High Court Justice Clark had also found that the cause of action of a defendant against a joint tortfeasor for contribution is an “ancillary” one for the purposes of the Limitation Act. The Judge had used this argument to support a finding that a claim for compensation was not a “civil proceeding” for the purposes of the long stop under the Building Act.

Miller, Clifford and Katz JJ disagreed. They said that the concept of an ancillary claim under the Limitation Act arose from s 30, which deals with claims by way of set-off or counterclaim. The Court of Appeal considered it is more appropriate to characterise a claim for compensation as an “original” claim, and as such a separate and distinct cause of action.

It is not uncommon in large building defects cases for the defendant(s) to join a large number of third parties. Combine this with the numerous overlapping time periods during which contractors might be involved in building projects, and it is unsurprising that issues around limitation frequently arise.

Prior to the ruling of Justice Clark there was a chain of High Court authority which said that the plain wording of the 10-year long stop overrode the specific provisions of s 34 Limitation Act. As a result, it was not uncommon for defendants, with the long stop approaching, to join large numbers of third parties to ensure that claims against them were preserved.

The ruling of Justice Clark in the High Court was controversial and ran counter to this line of authority. The Court of Appeal judgment brings some welcome certainty. Now that the issue has been thoroughly scrutinised at an appellate level, defendants can confidently join third parties outside of the 10-year long stop without fear of the claim being struck out. Alternatively, third parties will face exposure to claims well in excess of 10-years from the events giving rise to the claim.

1. Another recent High Court decision grapples with the issue of whether there is a continuing duty in relation to a regional Council’s liability for the initial certification of a non-compliant pool and subsequent pool inspections which failed to identify the non-compliance. Palmer J found that a new cause of action arose in relation to each inspection so that the claim was based on the initial certification and thus not time-barred. Buchanan Marshall Family Trust v Tasman District Council [2023] NZHC 53.

This publication is intended as a general overview and discussion of the content dealt with. It should not be used in any specific situation, in which case you should seek specific legal advice.