Introduction

A recent decision of the Supreme Court, Beca Carter v Wellington City Council [2023] NZSC 117, addresses the application of the 10 year “longstop” limitation period for building defect claims in s 393(2) of the Building Act 2004 (“Longstop Provision”) to claims for contribution between liable parties.¹ In a split 3-2 decision, the Supreme Court held that contribution claims commenced outside the 10 year longstop period are not barred by the Longstop Provision. Rather the two year limitation period for contribution claims provided by s 34 of the Limitation Act 2010 prevails.²  This decision confirms that the applicable limitation period for contribution claims is two years starting from the date the primary defendant’s (in this case, Wellington City Council) liability is quantified by judgment or settlement, even where that is outside of the 10 year Longstop Provision.

The key issue on appeal was whether a claim by Wellington City Council (“WCC”) for contribution from Beca Carter Hollings & Ferner Ltd (“Beca”) was barred by the Longstop Provision.³ On the facts, if the Longstop Provision applied then WCC’s claim against Beca for contribution would have been time-barred. However, WCC’s claim against Beca was brought within the two year limitation period for contribution claims.

 

Facts

In November 2016, the Kaikōura earthquake caused irreparable damage to the BNZ building in Waterloo Quay, Wellington.⁴ The building was unecomonic to repair and demolished.⁵

In August 2019, BNZ filed proceedings against WCC for negligence in respect of its consenting and inspection functions.^{6 7} Shortly thereafter, on 26 September 2019, WCC filed a claim against Beca (and one other third party) for contribution under s 17(1)(c) of the Law Reform Act 1936, on the basis Beca was a joint tortfeasour liable in respect of the same damage.⁸  The statement of claim alleges that Beca was responsible for the provision of engineering design and construction of the building.⁹

Beca applied to strike out WCC’s claim as time barred by the 10-year Longstop Provision.¹⁰ Beca submitted that WCC’s claim is a “civil proceeding relating to building work” based on Beca’s allegedly negligent acts, the last of which occurred when Beca issued a final Producer Statement on 12 March 2008.¹¹  Therefore, WCC’s proceeding against Beca was outside the 10 year longstop period in the Building Act 2004.  

WCC argued that its claim against Beca was a contribution claim and therefore subject to the additional two year limitation period under s 34 of the Limitation Act 2010, which it submitted prevailed over the Building Act 2004. WCC argued that the limitation period did not begin until WCC’s liability to BNZ (if any) was quantified through judgment or settlement.¹²

The High Court and Court of Appeal found in favour of WCC and dismissed Beca’s applications for strike-out and summary judgment.¹³

Supreme Court Majority Decision

The majority judgment of the Supreme Court confirmed the earlier decisions of the High Court and Court of Appeal and held that the two year period for contribution claims in s 34 of the Limitation Act 2010 prevails over the 10 year longstop in the Building Act.

The issue before the Supreme Court required determination of two contradictory statutory provisions.  To determine which provision prevailed, the Supreme Court considered the legislative history and laguage used in each Act, the wider statutory purpose, and policy considerations. 

The majority judgment, delivered by France J, begins by noting that “civil proceedings relating to building work” in s 393(2) of the Building Act 2004 was sufficiently broad to encompass contribution claims.¹⁴ However,  the majority placed significance on the absence of any express override in the Building Act 2004 of the right to seek contribution.¹⁵ A similarly worded longstop provision in the predecessor legislation (Building Act 1991) had been held to not prevent contribution claims that were otherwise within the limitation period provided by the Limitation Act 1950.¹⁶ Clear statutory language in the Building Act 2004 and/or Limitation Act 2010 would have been expected if there was an intention to materially alter the position.

The majority also concluded that it would be “odd at best” to interpret “the act or omission on which the [contribution claim is] based” as a reference to the original tortious building work. Such an interpretation would dis-apply the key words of s 17(1)(c) of the Law Reform Act providing that a tortfeasor may recover contribution from another tortfeasor “who is, or would if sued in time have been, liable in respect of the same damage”.¹⁷ Those words necessarily contemplate a claim for contribution against a joint tortfeasor in circumstances where a primary claim is out of time.

The majority also placed emphasis on perceived unfairness that would arise for defendants if contribution claims were subject to the Longstop Provision.¹⁸ For example, where a plaintiff chooses to sue only one of several potential defendants close to expiry of the 10 year longstop, the sued defendant would be left unable to pursue contribution from other liable parties.  On the facts, a contribution claim by WCC against Beca would have become time barred before expiry of the limitation period for a primary claim against WCC. That is because any contribution claim against Beca would have had to have been commenced prior to March 2018,¹⁹ whereas the longstop period for a claim against WCC did not expire until March 2019.²⁰

Lastly, the majority concluded that the legislative history supported the view that the specific limitation period for contribution claims ought to prevail.²¹ Contribution claims are statutory claims that derived from s 17 of the Law Reform Act.²² Before the enactment of the Law Reform Act, at common law, the plaintiff had the freedom to choose which of those liable to them in tort they would sue.²³ The selected defendants could be held liable for the full amount of the plaintiff’s loss, but left with no ability to seek contribution from other liable parties where the limitation period for a claim by the original plaintiff had expired.²⁴ Section 17 of the Law Reform Act was intended to remedy this perceived issue of unfairness, through insertion of the words “in time” after the word “sued”. The phrase “if sued in time” conveys that s 17 is not subject to limitation periods that apply to non-contribution proceedings.²⁵ The majority stated that there was no “textual reason” that the Longstop Provision ought to be excluded from the effect of that phrase.²⁶

The majority concluded that if the Longstop Provision in the Building Act 2004 had been intended to override the unique regime for contribution claims, the legislation would need to have made that clear.²⁷ Any other approach would effectively reprise the common law position that the amendments to the Law Reform Act were intended to fix.²⁸

The majority held that it is possible to give effect to the purposes of both limitation regimes.²⁹ The contribution regime is designed to rectify injustice where the defendant’s ability to seek contribution from a joint tortfeasor depends on who the plaintiff chooses as the defendant.³⁰  However, the right to seek contribution has bounds.³¹ In particular, the requirement for certainty and finality are provided by the two year limitation period that applies to contribution claims.³²

Conversely, the 10 year longstop generally starts when the negligent act or omission is claimed to have caused the damage.³³ Therefore, the longstop addresses the possibility of temporally indefinite liability for building owners.³⁴ The majority also noted that one stated purpose of the Building Act 2004 is to promote “the accountability” of specified groups who have “responsibilities for ensuring that building work complies with the building code”.³⁵ The specified groups are “owners, designers, builders, and building consent authorities”.³⁶ The interests of certainty and finality also need to be considered in light of the purpose of ensuring accountability.³⁷

Overall, the majority agreed with the Court of Appeal that the purpose of the Longstop Provision is not undermined by their approach to s 393 of the Building Act 2004.³⁸ Reading the competing provisions together, “the words of s 393(2) do not require s 17(1)(c) of the Law Reform Act to be disapplied when the dispute relates to a building, and their respective purposes are consistent with that conclusion.³⁹ It makes chronological sense to allow the two year timeframe for contribution claims to stand separate from the 10 year longstop for building claims. The 10 year Longstop Provision applies to the primary claim and, from the point in time that the defendant’s liability has been quantified, the sued defendant has two years to bring proceedings against other joint tortfeasors.

Supreme Court Minority Decision

Notably, the Supreme Court issued a split 3:2 decision, with a comprehensive dissenting judgment by Glazebrook and O’Regan JJ.⁴⁰ The minority considered that there was no reason to interpret “civil proceedings relating to building work” in s 393(2) other than in accordance with their plain meaning, and if contribution claims relating to building work were to be excluded from the longstop regime, this needed to be expressly stated.⁴¹ Additionally, after examining the policy objectives of the Building Act 2004 and Limitation Act 2010, the minority concluded that the acts had two distinct purposes that were irreconcilable.⁴²

The minority’s view was that a crucial driving force behind the Longstop Provision was to prevent unlimited liability of local government entities in negligence.⁴³ This purpose would not be achieved if contributory negligence claims were exempt from the longstop.⁴⁴ Allowing contribution claims to fall outside the longstop, with the limitation period triggered only by quantification of the claim against the joint tortfeasor, created uncertainty for those associated with building work (e.g. architects, builders, sub-contractors, etc) by introducing potentially indefinite periods for liability beyond the 10 year longstop.

Comment

The Supreme Court’s decision provides important clarity regarding the scope of liability for building industry participants. The decision confirms the ongoing application of the distinct regime for contribution claims that had existed under predecessor legislation.  

For defendants, the majority’s decision will be welcomed as providing surety that they will not be disadvantaged by the plaintiff’s whim of choosing when to bring a claim and which responsible tortfeasors to include. Defendants retain a fair opportunity to seek contribution from other tortfeasors even where the primary claim is commenced close to the 10 year longstop. This will be particularly welcomed by local authorities, who are often a primary target by claimants in building defect claims.

However, the concerns raised by the minority regarding certainty and finality are legitimate. The purpose of the limitation regime, and the 10 year longstop in particular, is to provide certainty to those involved in the building industry regarding the duration they are exposed to liability for historic building work. All limitation periods inherently strike a balance between unfairness to potential plaintiffs and certainty for potential defendants. The legislature has drawn that line at 10 years for building defect claims. However, the broader impact of this decision is that participants in the building industry (such as engineers, builders, architects, and their professional indemnity insurers) do not have certainty that their exposure to liability for contribution is limited to 10 years. Industry participants will need to consider the impact this has on pricing, risk assessments, and liability insurance. Industry participants should consider whether their existing liability insurance will protect against liability beyond the 10 year longstop, or otherwise consider whether some form of run off cover is appropriate.

While this is an authoritative judgment from New Zealand’s highest appellate Court it may not be the final word on this issue. The strength of the minority decision is such that this may be an area where further judicial scrutiny and/or legislative intervention is warranted. For example, noting the complexity and length of time that can be involved in building defect claims, a compelling case could be made for amending the Limitation Act 2010 so that any contribution claim must be brought within two years of the primary claim being made, as opposed to two years from judgment or settlement of the primary claim.

Endnotes

¹ Beca Carter v Wellington City Council [2023] NZSC 117 at [1]; and Building Act 2004, s 393(2).

² At [85]; and Limitation Act 2010, s 34.

³ At [2].

⁴ At [4].

⁵ At [4].

⁶ At [5].

⁷ At [3].

⁸ At [7]; and Law Reform Act 1936, s 17(1)(c) 

⁹ At [6].

¹⁰ At [8].

¹¹ At [8]. 

¹² At [14].

¹³ At [9].

¹⁴ At [37].

¹⁵ At [38].

¹⁶ At [39] – [42]; Building Act 1991; and Limitation Act 1950

¹⁷ At [43].

¹⁸ At [44].

¹⁹ Being 10 years following Beca issuing a final Producer Statement in March 2008.

²⁰ At [45].

²¹ At [47].

²² At [49].

²³ At [50]. Section 17 was amended by s 14 the Limitation Act 1950.

²⁴ At [50].

²⁵ At [56].

²⁶ At [56].

²⁷ At [78].

²⁸ At [78].

²⁹ At [83].

³⁰ At [83].

³¹ At [83].

³² At [83].

³³ At [84].

³⁴ At [84].

³⁵ At [84]; and Building Act 2004, s 3(b).

³⁶ At [84]; and Building Act 2004, s 3(b) and see s 4(2)(q).

³⁷ At [84].

³⁸ At [85]; and s 393.

³⁹ At [85].

⁴⁰ At [90].

⁴¹ At [129].

⁴² At [92].

⁴³ At [110].

⁴⁴ At [110].