Know your limitations – Supreme Court confirms contribution claims not captured by the 10-year longstop

The Supreme Court has released its eagerly awaited decision confirming that contribution claims are not time-barred by the 10-year longstop provisions contained in the Building Act. This is an important decision for all participants in the building industry, as well as their insurers. This article sets out the legislative context and explains the Supreme Court's decision.

Legislative background

The last decade has seen the gradual phasing out of the Limitation Act 1950 in place of the Limitation Act 2010 (the Limitation Act), which is now almost exclusively the applicable legislation, and which is the focus of this article.

The Limitation Act (s11) provides that it is a defence to a 'money claim' if that claim is filed more than 6 years after the date of the act or omission on which the claim is based. However, time within which to bring a claim can be extended beyond 6 years where a claimant has late knowledge of the applicable act or omission. A claimant has 3 years from the date of that late knowledge to file the claim, but with an ultimate longstop of 15 years from the date of the act of omission.

However, the above-referred timeframes within which to bring money claims do not apply to contribution claims (i.e. claims made in reliance on s17(1)(c) Law Reform Act 1936). The Limitation Act deals with contribution claims separately; a defendant has two years to bring a contribution claim from the date on which their liability to a claimant is quantified by an agreement, award, or judgment. This means claims for contribution can be made many years after the applicable act or omission.

Separately, the 10-year longstop provision within the Building Act 1994 provides that any claim for 'building work' (which is defined very broadly) cannot be brought more than 10 years from the date of the act or omission on which the proceedings are based. The practical effect of this is that a claimant must still bring a claim for 'building work' within 6 years under the Limitation Act unless extended in the event of late knowledge. However, claims in respect of 'building work' can only be extended to a maximum of 10 years on account of the Building Act 10-year longstop, as opposed to the usual 15 years prescribed under the Limitation Act.

The contribution question

The question that the High Court has flip-flopped on for the last decade has been whether the Building Act 10-year longstop applies to contribution claims in respect of 'building work'. The issue comes up regularly, including for example in defective building claims where a proceeding is commenced just within the 10-year limitation period and the defendant parties (or sometimes just the applicable Council as sole defendant) want to make contribution claims against other potential co-defendant parties. If the Building Act longstop applies, then those parties who are already defendants may be time barred from bringing contribution claims against other potential defendants. If the Building Act longstop does not apply, then the defendant parties are free to bring contribution claims against others any time up until two years from the date on which their liability to a claimant is quantified by an agreement, award, or judgment.

A definitive answer (finally!)

In December 2022 we got an appellate decision on the issue with the Court of Appeal's judgment in Beca Carter Hollings & Ferner v Wellington City Council [2022] NZCA 624. A lot has been written of the facts of this case already, but very briefly:

• Between 2006 and 2011 CentrePort built an office building in Wellington for BNZ. CentrePort engaged Beca to design and monitor the construction of structural elements of the building.
• The building was irreparably damaged in the 2016 Kaikoura earthquake, and in August 2019 BNZ commenced a High Court proceeding against Wellington City Council (the Council) claiming over NZ$100 million. BNZ alleged the loss was caused by the Council having negligently issued the building consent, undertaken inspections and issued the Code Compliance Certificates (CCC) for the building.
• Several weeks later, in September 2019 the Council joined Beca as a third party to the proceedings, seeking contribution from Beca. Beca said it completed the relevant work in March 2008. On that basis, Beca asserted the Council's claim was brought more than 10 years after Beca had carried out the allegedly negligent engineering design and construction monitoring and was therefore time-barred by the 10-year longstop provisions contained in the Building Act.

The facts of the Beca case bring into focus what many see as a legislative dichotomy described above - is the Council's claim is for contribution within time in reliance on the Limitation Act, or is it out of time in reliance on the Building Act 10-year longstop? The Court of Appeal held that the Building Act 10-year longstop did not apply to contribution claims. In other words, the Council's contribution claim against Beca was not time-barred by the Building Act and was within time. The decision was appealed to the Supreme Court, and that decision has now been released.

The Supreme Court has held that the Building Act 10-year longstop provisions do not apply to contribution claims. The majority view of Ellen France, Williams and Kos JJ was that while the wording of s393(2) of the Building Act 2004 - "civil proceedings relating to building work" - was sufficiently broad to capture contribution claims, it was seen as significant that there was no express override in the Building Act 2004 of the right to seek contribution. The concerns for finality and certainty [under the Building Act] must also be considered in light of the objective of ensuring accountability. The majority considered the interpretation being put forward by Beca (i.e. that contribution claims were captured by the 10-year longstop) would result in greater unfairness than the alternative.

The majority made the point that the right to contribution was not an open-ended one and considered that their approach (i.e. that contribution claims are not captured by the 10-year longstop) gave effect to the purposes of both the Building Act and contribution regimes.

Interestingly, and reflective of how divisive this issue has been within the judiciary up until this point, there was a dissenting judgment of Glazebrook and O'Regan JJ. In other words, a 3-2 split. Glazebrook and O'Regan JJ would have allowed the appeal. Their view was that "civil proceedings relating to building work" in s 393(2) covers contribution claims relating to building work and if contribution claims were to be excluded, this needed to be stated explicitly. In terms of the policy objectives of the Building Act 2004 and Limitation Act 2010, the Judges determined these two distinct objectives could not be reconciled.

While this maintains the status quo as determine by the Court of Appeal before it, the Supreme Court decision leaves a long tail of risk for participants within the building industry and means those participants and their insurers will not always be able to rely on the 10-year longstop with certainty. It is however likely to be welcome news to Councils and anyone else who finds themselves listed as a defendant just within the 10-year longstop.

Please feel free to contact David Newport if you would like to know more about how this affects you and your business.