Limitation and the Building Act longstop

The BA preserves the application of the Limitation Act 2010, subject to the 10 year longstop under s 393(2) which provides that, “no relief may be granted in respect of civil proceedings relating to building work if those proceedings are brought against a person after 10 years or more from the date of the act or omission on which the proceedings are based.”

Plaintiffs have repeatedly argued in the High Court that the filing of proceedings is sufficient to stop time running in respect of subsequent amendments based on the same negligent acts or omissions.

This lengthy decision is the result of long-running litigation over a 40-storey apartment building formerly known as Harbour Oaks. It was brought by the past and present owners and their body corporate against Auckland Council and various parties involved in its construction. The Court had to decide whether the longstop barred seven alleged defects.

Auckland Council argued that the claimed defects which the plaintiffs added to the claim after expiry of the 10 years from the issue of the relevant code compliance certificates (CCC) were statute-barred. They maintained the reference in s 393(2) to “proceedings” should be read to include the particular cause of action and relief claimed.

The plaintiffs argued that the initiation of proceedings in 2014 was sufficient to take the longstop out of play. Further, subsequent amendments did not constitute new “proceedings” as they were based on the same negligent acts or omissions. They relied on the wording of s 393(2) which refers to “acts or missions” rather than causes of action. In the alternative, they claimed that the new defects were no more than further particulars and did not constitute new causes of action. They invited the Court to find that existing High Court decisions¹ to the contrary had been incorrectly decided and were inconsistent with the principles set out in earlier authorities.

After reviewing the existing authorities, the Court concluded that the reasoning employed in them is persuasive, particularly given the policy drivers for the longstop provision, which was clearly intended to provide a final limitation period not subservient to provisions allowing for extensions (which are favourable to plaintiffs).

The “proceeding” referred to in s 393 is therefore the statement of claim at the time the statute-bar was triggered. The question is then whether the new alleged defects become in substance a new proceeding or if they merely add detail to the earlier statement of claim.

The Court then went on to provide guidance on what constitutes a fresh cause of action in this context. It held that:

1. In order for an amendment to amount to a new cause of action there must be a change to the legal basis for the claim.
2. This could be the addition of new facts but they must be so fundamental that they change the essence of the case against the defendant.
3. For building defect cases, it is useful to ask whether the defects in question are physically distinct to those already alleged, if they require investigation of matters of a new or different nature, and if they lead to new areas/aspects of damage.

This decision was released immediately following publication of Harbour Oaks. It addresses the same argument in relation to s 393 in the context of an application to strike out.

The claim concerns a 15-storey apartment complex on Hobson Street. The plaintiffs sought to introduce, for the first time, a new defect in an amended statement of claim alleging seismic and structural integrity issues. Up until that point the claim had focused on weathertightness and fire safety issues.

The Court adopted a two-stage approach to dealing with the longstop:

1. First, the legal issue of whether s 393 applies to new causes of action.
2. Second, whether the new defect constitutes a fresh cause of action.

On the first question, it independently came to the same conclusion as the Court in Harbour Oaks. His Honour observed that limitation defences served an important purpose. They require plaintiffs to bring claims with reasonable diligence in order to protect defendants against claims where the evidence required to defend them might be difficult to obtain with the passage of time.

The second question was relatively straightforward as the new defect alleged was the first one to raise structural issues.  Additionally, the relevant work was done by different subcontractors, the relevant evidential expertise and investigation required was fundamentally different to that required for defects already pleaded, and the remediation work required would also be different.

His Honour also made helpful comments on the serious prejudice to defendants when the work occurred so long ago that it will be next to impossible to find those involved and consequently make the claim very difficult to defend.

These judgments are a timely reminder to carefully draft pleadings with sufficient particularity, and to ensure that the all relevant allegations are preserved from amendment to amendment, particularly in cases involving lengthy defect schedules.

The longstop issue has been well ventilated at the High Court with varying results. As Harbour Oaks has been appealed by both parties, it is hoped the Court of Appeal will provide parties and their insurers with clear guidelines and more certainty for longtail liability risks when insuring construction professionals.

1. Body Corporate 360683 v Auckland Council [2017] NZHC 1785; Body Corporate 355492 v Queenstown Lakes District Council [2022] NZHC 678; Body Corporate 355492 v Queenstown Lakes District Council [2022] NZHC 1492.

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