Contribution claims, Limitation and the Building Act 2004 – An ongoing debate

Contribution Claims Under s 17(1)(c)

Where a claimant makes a claim against a defendant for tort claims such as negligence that defendant may seek contribution from other persons that it thinks are, or would be, liable to the claimant for the same damage under s 17(1)(c) of the Law Reform Act 1936.  Those other persons are called “tortfeasors”.  However, for ease of reference we will call these persons third parties.

The BNZ Branch Properties case illustrates what is a relatively typical situation in a building claim.  BNZ and its operating company, BNZ Properties Limited (BNZPL), had entered into an agreement with the landowner to construct a building on leased land.  The building was constructed to BNZ’s specific requirements between 2006 and 2010.

In 2016, however, the building suffered irreparable damage as a result of the Kaikoura earthquake.  This led to BNZ/BNZPL issuing proceedings against the Wellington City Council alleging negligence in the performance of its statutory functions that is, in issuing building consents, inspections of building work and in issuing a code compliance certificate.  BNZ/BNZPL filed its claim against the Council in August 2019.  On 26 September 2019 Council, in turn, filed its own claims for contribution against the designers and peer reviewers of the building, Beca Carter Hollings & Ferner Limited (Beca) and a Professor Mander.

Limitation issues

Under the Building Act 2004 (BA 2004) there is a 10 year longstop provision relating to claims involving building work.  This means a claim cannot be pursued against a person involved in building work more than 10 years after the date of the act or omission upon which the claim is based.

Given the construction period, BNZ/BNZPL’s claims against the Council were, therefore, within time.  However, Beca applied for an order striking out the Council’s claim against it on the basis that the BA 2004 longstop prohibited that claim.  Beca said the last of its engineering and design monitoring services (being its acts of “building work”) had ended before 12 March 2008 and, therefore, it said the contribution claim filed against it on 26 September 2019 was out of time.

Uncertainty

For some time there has been uncertainty as to whether or not the BA 2004 longstop also applies to claims against third parties.  This is because there are High Court decisions going both ways.

In BNZ Branch Properties, Justice Clark acknowledged these conflicting authorities.  However, she dismissed Beca’s strike out application.  She set out a detailed justification for why she considered the BA 2004 longstop does not apply to contribution claims against third parties.  In summary, some of the key points of Justice Clark’s decision were:

• The Limitation Act 2010 was enacted after BA 2004 and the legislature must have been mindful of the BA 2004 longstop;
• The BA 2004 longstop applies to civil proceedings arising from building work or the performance of functions relating to building work;
• The BA 2004 does not define civil proceedings although the Limitation Act 2010 does;
• The Limitation Act 2010 also makes a distinction between “ancillary claims” and “money claims”. The definition of an ancillary claim, in turn, includes claims made against third parties.
• The limitation period for ancillary claims under the Limitation Act 2010 is two years from the date from when the third party’s liability to another is quantified.

Justice Clark found that through the Limitation Act 2010 parliament had enshrined a right to contribution by exempting those claims from the definition of money claims, setting the separate two year limitation period for ancillary claims and by specifying a different point in time from which time starts running from that of money claims.  By contrast, the statutory regime for money claims involves a primary period of limitation of six years from the date of the act of omission upon which the claim is based.  There is a further late knowledge period of three years which may apply and, finally, there is an overarching longstop period for money claims of 15 years.

Justice Clark, therefore, concluded that the Law Reform Act 1936 together with the Limitation Act 2010 created a code for contribution claims which is not affected by the BA 2004 longstop because the “civil proceedings” that the BA 2004 refers to are only “original claims” and not the “ancillary claims” now specifically referred to by the Limitation Act 2010.

It remains to be seen whether subsequent High Court decisions will adopt Justice Clark’s approach in favour of the previous High Court decisions which have applied the BA 2004 longstop to contribution claims.  Otherwise uncertainty will remain until an appeal court considers the issue.

Limitation issues are often a problematic feature of civil litigation.  It is therefore important to seek advice early in a disputed process to ensure that a claim does not become time barred by a limitation provision in any statute.

This article is current as at the date of publication and is only intended to provide general comments about the law. Harkness Henry accepts no responsibility for reliance by any person or organisation on the content of the article. Please contact the author of the article if you require specific advice about how the law applies to you.