In a split decision (3:2), the Supreme Court upheld the judgments of the High Court and Court of Appeal, holding that the two-year limitation period on contribution claims under the Limitation Act 2010 (Limitation Act) overrides the 10-year longstop limitation period in section 393(2) of the Building Act 2004 (Building Act). The longstop otherwise means that no civil proceeding relating to building work can be brought more than 10 years after the building work was completed.
For defendants to existing claims, this means that a contribution claim can be brought against a potentially liable third party even if the 10-year longstop limitation period against that party has expired and the claim would otherwise be time-barred. For potential third parties, this means that they no longer have certainty that, after more than 10 years passes since they completed building work on a project, they will be safe from being drawn into litigation.
A minority of the Supreme Court provided a dissenting opinion, holding that, in enacting the longstop, the intention of Parliament was to give finality in building-related claims and an exception for contribution claims should not be read into the wording of section 393 of the Building Act.
Background
The key background facts were:
- In November 2016, following the Kaikōura earthquake, a building owned by CentrePort Limited on Waterloo Quay in Wellington was declared irreparably damaged and subsequently deconstructed. Its tenant, BNZ, was unable to return to the building.
- In August 2019, BNZ commenced proceedings against the Wellington City Council (Council) for its role in, amongst other things, issuing code compliance for the building.
- In September 2019, the Council made a claim for contribution under section 17(1)(c) of the Law Reform Act 1936 and in equity, against Beca Carter Hollings & Ferner Limited (Beca), in relation to Beca’s involvement in the design and construction of the building.
- Beca applied to strike out the Council’s claim on the basis that the 10-year longstop in the Building Act applied and the claim filed against it in September 2019 was time-barred because the last of Beca’s building work was completed by 12 March 2008.
- The Council opposed the strike out application on the basis that its claim against Beca was a contribution claim as a joint tortfeasor under the Law Reform Act 1936 and that a further two-year limitation period would apply from the date the Council was found liable to BNZ (if that is what the Court held).
The tension arises because section 393(2) of the Building Act 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.”
In contrast, section 34 of the Limitation Act provides that a two-year limitation period applies to contribution claims against third parties, which only commences once the defendant in the original claim is found liable to the plaintiff.
The issue has come before the High Court and Court of Appeal in previous defective building cases, but this was the first time the Supreme Court has considered the issue.
The Supreme Court’s Decision
In considering whether one statute overrides the other, or whether the sections of the relevant Limitation Act and Building Act could be reconciled, the Supreme Court considered the text of the Acts as well as the wider statutory purpose and policy considerations.1
No express overriding provision in the Building Act
The majority in the Supreme Court (Ellen France, Williams, and Kós JJ) accepted that the term “civil proceedings relating to building work” in the 10-year longstop was sufficiently broad to include contribution claims. However, the majority placed weight on the fact that when the Building Act was enacted in 2004, it did not contain an express provision addressing or overriding the right to seek contribution.2
The majority noted that, prior to the enactment of the Building Act in 2004, the courts had held that a similarly worded longstop provision in the prior Act (the Building Act 1991) did not override limitation provisions relating to contribution claims under the prior Limitation Act (the Limitation Act 1950). The majority considered that, if the Building Act 2004 was intended to change that existing position, express words should have been used.3
Limitation period for a contribution claim cannot end before the expiry of the limitation period for the primary claim
The majority placed weight on the unfairness and incongruence that would arise under Beca’s approach in cases where the limitation period for a contribution claim expired prior to the limitation period for the primary claim.4 The majority considered that this could incentivise “gaming”, where one potential defendant (T1) settles a claim early on the proviso that the plaintiff will not sue other potential defendants until the longstop period in respect of T1’s building work has passed, defeating any potential contribution claims.5
Legislative history of contribution claims
The majority also endorsed the Court of Appeal’s conclusion that the legislative history indicates that the Building Act longstop was not intended to override the specific approach to limitation for contribution claims. It noted that, in the Law Commission’s reports on limitation defences, whilst not expressly dealing with the Building Act, there is support for a different, and bespoke, approach to contribution claims.6
Statutory purpose
The majority also considered that its approach would give effect to the purposes of both the Building Act and the bespoke contribution limitation regime in the Limitation Act.7 The purpose of the Building Act is to provide certainty for potential defendants, whereas the purpose of the contribution regime is to ensure that a defendant’s ability to seek a contribution is not defeated by a plaintiff’s choice of defendant. The majority considered its approach balanced those two goals and that the two-year limitation period for contribution claims would mean finality and certainty could still be achieved.
Dissenting opinion
Glazebrook and O’Regan JJ came to a different conclusion, holding that the meaning of section 393(2) of the Building Act is clear and that no unstated carve outs for contribution claims should be read into the language.
The minority applied the same logic as the majority but came to the opposite conclusion regarding the lack of specific overriding language in section 393(2) of the Building Act. The minority considered that the limitation regime for contribution claims was a general regime and therefore did not override the more specific longstop provision applying to building work.8
They also highlighted that the Building Act provides immunity to the Ministry responsible for the Building Act, and its chief executive and employees, from “civil proceedings”. Similar immunity from “civil proceedings” is given to building consent authorities in respect of certain acts. The minority highlighted the risk that, on the majority’s approach to the meaning of this term, this immunity would be put into doubt and those parties could potentially be drawn into proceedings by way of contribution.9
In terms of the statutory purpose of the Building Act, the minority noted that a key driver of the longstop was to prevent unlimited liability of local government entities in negligence, and that this purpose would not be achieved if the longstop did not apply to contributory negligence claims.10
Takeaways
The Supreme Court’s decision brings clarity and certainty to an issue that has arisen in a number of defective building claims.
For defendants, it means that they will not be arbitrarily disadvantaged by a plaintiff’s choices about when to bring a claim and which parties to include. They will have time to ensure all potentially liable parties are joined and are before the Court for the purposes of determining liability.
However, the trade-off is an increase in uncertainty, and potential exposure for parties, even after the 10-year longstop period has passed.
The trade-off is not straightforward, reflected by the Court’s closely split decision, and parties in the industry may find themselves in both positions over time (defendant or potential third party).
If you have any questions about the matters raised in this article, please get in touch with the contacts listed or your usual Bell Gully adviser.
[1] At [35].
[2] At [38].
[3] At [40].
[4] At [44] – [45].
[5] At [46].
[6] At [60] – [63].
[7] At [82].
[8] At [106].
[9] At [100].
[10] At [111].