A Matter of (Statutory) Construction

The Supreme Court has recently ruled in favour of Wellington City Council, rejecting Beca's attempt to strike out its contribution claim on the grounds of a Building Act 2004 longstop¹ limitation defence.

This was Beca's second appeal after the Court of Appeal upheld² the High Court's judgment³ declining Beca's strike-out application against the Council's contribution claim. The contribution claim arose from BNZ suing the Council for negligence in granting a building consent, inspecting building work, and issuing a code of compliance certificate for the old BNZ Harbour Quays. That building was irreparably damaged in the 2016 Kaikōura earthquake.

As a result of the judgment, the Council can now seek contribution from Beca for alleged negligence in preparing design documents and negligent misstatement in alleged misrepresentations of design documents.

 

The key issue: Interaction of two statutory limitation periods

The critical issue was the interaction between s 393(2) of the Building Act 10-year longstop (Building Longstop) and the limitation period in section 34 of the Limitation Act 2010 (Contribution Limitation).

The Building Longstop prohibits relief in civil proceedings relating to building work brought 10+ years after the relevant act or omission.

The Contribution Limitation applies to contribution claims under s 17 of the Law Reform Act 1936, which permits tortfeasors to recover contribution from other tortfeasors not sued by the plaintiff but who would have been liable if sued in time. The Contribution Limitation requires that contribution claims be filed within two years after the date on which a primary claim is quantified by agreement, award, or judgment.

Issues arise where, as in this case:

• a plaintiff sues a defendant in time;
• the plaintiff was out of time under the Building Longstop to sue another allegedly contributing tortfeasor; but
• the defendant then seeks contribution from the allegedly contributing tortfeasor.

 

Competing arguments: Building Longstop vs Contributions Limitation

Beca argued that the Building Longstop provides an industry specific regime for applying to all civil proceedings involving building work and therefore overrides the general regime in the Limitation Act. It argued that the plain meaning of the Building Longstop, which on its face applies to "civil proceedings" without qualification, should apply to prevent the Council's contribution claim. Therefore, the Council would be prevented from seeking contribution from Beca from 12 March 2018, being the date that was 10 years or more after Beca's actions.

The Council's position was that the Building Act did not apply as the contribution claim was based in the Law Reform Act rather than Beca's actions in the building work, and that section 34 of the Limitation Act provides a special regime applicable to all contribution claims.

 

The Supreme Court decision: Majority vs minority views

The reasons of the majority and minority reflect very different approaches to prioritising the different statutory regimes and reflect distinct conceptualisations of the Building and the Contributions Limitations and their place in the law:

• Majority view (Ellen France, Williams and Kós JJ): The majority's approach reflects that while the Building Longstop provides an industry specific limitation longstop, the Contribution Limitation is a special regime that takes priority and requires express wording to override it.
• Minority view (Glazebrook and O’Regan JJ): The minority considered the Contribution Limitation is part of the general regime in the Limitation Act, while the Building Act and the Building Longstop are the specific regimes.

These differences were critical and dictated the direction of each group's reasoning. The minority and majority agreed that "civil proceedings" in the Building Longstop was capable for including a contribution claim under the Law Reform Act.

However, the minority preferred to start with the plain meaning and then search for reason to depart from that plain meaning. It identified no such basis. Meanwhile, the majority applied its finding that the Contribution Limitation was a special regime which could only be overridden by express wording. That express wording did not exist in the Building Act, and the ordinary meaning of "civil proceedings" was insufficient to override the Contribution Limitation. On this basis, it justified restricting the application of the Building Longstop and, effectively, narrowing the meaning of "civil proceedings" in that context.

 

Implications for the building industry

The Court's decision will be good news for defendants in individual proceedings seeking contribution from a tortfeasor against whom a claim would otherwise have been out of time. However, as warned by the minority, some significant challenges may arise from the judgment:

• Increased uncertainty: the building industry's uncertainty over potential liability in negligence beyond the Building Longstop. While there will be practical limitations to such liability, this does significantly reduce the certainty with which those previously associated with building work previously operated. This may have knock on effects for insurance and costs of doing business.
• Building Act indemnities reduced: the consequences for the Building Act indemnities at sections 390 and 392. These sections respectively provide indemnities for the chief executive of the Ministry and other associated persons, and for certain civil proceedings against building consent authorities. These protections are reduced by the judgment.

It remains to be seen how these challenges will play out. However, it is worth considering how to address the risks now. It will also be important for the industry to review whether this decision affects their standard contractual limitation clauses purporting to limit the duration of liability.

If you would like to discuss how this ruling might impact your business or require advice on adjusting your legal or contractual frameworks, please contact our team.

 

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¹Beca Carter Hollings & Ferner Limited v Wellington City Council [2023] NZCA 624.
²Beca Carter Hollings & Ferner Limited v Wellington City Council [2023] NZCA 624.
³ BNZ Branch Properties Limited v Wellington City Council [2021] NZHC 1058.