15/12/2022·3 mins to read
Landmark Court of Appeal decision could have big impact in construction sector
Beca Carter Hollings & Ferner Limited v Wellington City Council  NZCA 624 - “Last cab off the rank” no more.
Summary & Impact
Yesterday, the Court of Appeal upheld a decision in the High Court that the ‘10 year long stop provision’ (or maximum limitation period) in the Building Act 2004 does not apply to contribution claims against third parties.
It found that contribution claims are instead properly governed by s 34 of the Limitation Act 2010.
In this FYI we discuss the significance of the decision and its potential impact on businesses associated with New Zealand’s construction industry.
The decision means that contribution claims can now be filed between joint tortfeasors - parties that are responsible for the same damage - up to two years after a claim has been quantified by an agreement, award or judgment.
This case is a significant shift in the approach to long stop limitation provisions and how they apply to claims between joint tortfeasors, where torts were committed at different times (as in this case).
It will remove the “last cab off the rank” situation, ensuring that a greater number of responsible parties will be capable of being added to a claim. It also means that limitation provisions will respond differently depending on whether a claim against a party is brought by a claimant or another defendant.
The ability to join parties into contribution claims may also create concern in the building market as it will extend the period in which further parties (surveyors, builders, architects, engineers, developers, etc) can be pursued for a historical loss.
Given the importance of this decision, it may well be further tested in the Supreme Court.
The Kaikoura earthquake in November 2016 damaged the Bank of New Zealand’s (BNZ) building at CentrePort, Wellington, beyond repair. BNZ commenced proceedings against the Wellington City Council (Council) alleging that the Council was negligent in issuing building consent, undertaking inspections and issuing Code Compliance for the building, and had caused it loss in excess of $100 million.
The Council then filed third party proceedings against Beca Carter Hollings & Ferner Limited (Beca), alleging that Beca had been negligent in preparing its engineering design for the building, and so had caused BNZ’s loss.
Beca applied to strike out the Council’s claim on the basis that it was time-barred by s 393(2) of the Building Act 2004. Section 393(2) bars recovery in relation to acts or omissions that occurred more than 10 years before “civil proceedings relating to building work” are issued. Beca had provided its services around March 2008, while the claim against it was filed more than 10 years afterwards, in September 2019.
Finding - High Court
Justice Clark in the High Court found that the longstop period contained in s 393(2) did not apply to contribution claims, on the basis that contribution claims were not captured within the phrase “civil proceedings” as they were properly defined as “ancillary claims” as referred to in the Limitation Act 2010. The High Court declined to strike out the Council’s claim against Beca.
Finding - Court of Appeal
On appeal, the Court of Appeal upheld the finding of the High Court, but on slightly different grounds. It considered that contribution proceedings were captured within the phrase “civil proceedings” and that contribution proceedings were correctly categorised as original claims rather than ancillary claims. It also accepted that contribution proceedings fell within the definition of “proceedings relating to building work”.
It found that:
- the triggering event for limitation was not the fact that both Beca and the Council had committed torts against BNZ;
- instead, the triggering event for limitation was that Beca would be unfairly enriched by the Council’s liability to discharge more than its fair share of the losses suffered by BNZ; and,
- therefore, the correct time period for limitation to start running is when the claim was quantified against Beca under s 34 of the Limitation Act 2010 (which could not be done until a judgment was issued between BNZ and the Council).
Section 34 of the Limitation Act 2010 provides a right to contribution between joint tortfeasors liable to the same claimant, so long as such a contribution claim is filed within two years from when the liability to the claimant is quantified.
The Court of Appeal considered the legislative history and common law developments behind the various long stop provisions in current and previous Building and Limitation Acts. It found that the approach taken in the Limitation Act 2010 was one intended to avoid the very outcome that Beca argues for here: that is, a limitation defence available to it against the Council’s claim for contribution before the cause of action for that claim had arisen.
Update 28 April 2023
Beca has been granted leave to appeal to the Supreme Court on the question of whether the longstop in the Building Act (s393) applies to contribution claims or whether, as the Court of Appeal held, s34 of the Limitation Act 2014 applies (i.e. that a claim for contribution can be pursued two years after the liability has been quantified by an agreement, award or judgment).
If you would like to know more about the impact of this case on your business please get in touch with one of our contacts.
Special thanks to Ella Arbuckle Page and Claire Boniface for their assistance in writing this article.