Duty of care and contribution claims in civil proceedings relating to building work

A look into two recent Senior Court judgments where the Supreme Court tackled the complexities of contribution claims in civil proceedings relating to building work and the Court of Appeal expanded the scope of the duty of care: Beca Carter Hollings & Ferner Ltd v Wellington City Council and Cridge v Studorp.

 

Beca Carter Hollings & Ferner Limited v Wellington City Council [2024] NZSC 117

The Supreme Court case of Beca Carter Hollings & Ferner Limited v Wellington City Council examines the complexities surrounding interacting statutory limitation periods in civil claims related to building work, particularly focusing on the interaction between the Limitation Act 2010 and the Building Act 2004. The central issue was whether the longstop provision in section 393(2) of the Building Act barred Wellington City Council (Council) from pursuing a contribution claim against Beca, following a claim filed by BNZ against the Council for damages arising from structural failures.

Background

In August 2019, BNZ initiated legal proceedings against the Council, alleging negligence in issuing building consents and approvals for a building that sustained irreparable damage during the 2016 Kaikōura earthquake. The Council, in turn, sought a contribution from Beca, claiming that Beca had acted negligently by providing statements on which the Council relied when granting the relevant consents and approvals.

Beca attempted to strike out the Council's contribution claim, arguing that the Council was barred from making the claim by the longstop provision in section 393(2) of the Building Act. Section 393(2) states that relief cannot be granted in respect of civil proceedings related to building work if initiated ten years or more after the act or omission on which the proceedings are based. Beca contended that since the alleged negligent acts occurred more than ten years prior, the Council was out of time to pursue the claim.

Supreme Court decision

The question before the Supreme Court was whether the Court of Appeal correctly determined that section 393(2) of the Building Act did not apply to contribution claims.

The minority opinion, by Justices Glazebrook and O'Regan, argued that the longstop provision was specific to claims regarding building work and should take precedence over the more general provisions of the Limitation Act. They interpreted “civil proceedings relating to building work” in section 393(2) as covering contribution claims related to building work, considering that if contribution claims were to be excluded from section 393(2), this exclusion needed to be stated explicitly. The claim by the Council against Beca would accordingly be statute barred.

In contrast, the majority opinion, by Justices Ellen France, Williams, and Kós, found that section 34 of the Limitation Act applies, meaning the claim by the Council against Beca was not statute barred. The majority held that section 34 of the Limitation Act requires express wording to be overridden, and that such wording did not exist in the Building Act, nor was the ordinary meaning of "civil proceedings" sufficient to override section 34. While agreeing with the minority that the wording of section 393(2) — specifically, “civil proceedings relating to building work” — was broad enough to capture contribution claims, the majority held that if section 393(2) was intended to override the special regime for contribution claims in section 34, the Building Act needed to explicitly make that clear.

The Supreme Court rejected Beca's appeal, affirming the High Court decision and allowing the Council's contribution claim to proceed. This judgment is helpful for local authorities as it clarifies that contribution claims are not barred by the longstop provisions of the Building Act, providing a clearer legal framework for similar cases in the future.

 

Cridge v Studorp [2024] NZCA 483

The Court of Appeal's decision in Cridge v Studorp marks an interesting development in the law regarding duty of care in defective building claims. For the first time in a New Zealand appellate court, the Court of Appeal confirmed that manufacturers of cladding products owe a tortious duty of care to homeowners. This decision has expanded the scope of the established duty of care applicable to builders and local authorities in the context of defective building claims.

Background

The case originated from complaints by homeowners against James Hardie New Zealand Ltd (James Hardie) regarding its Harditex cladding system. The homeowners claimed that the cladding was defective and failed to prevent water ingress, leading to significant moisture-related damage to their homes. They filed proceedings in the High Court as a representative group, which included current and former owners of properties clad with Harditex.

In 2016, the High Court found that James Hardie did owe a duty of care to the homeowners reliant on the cladding for its weatherproofing qualities but ultimately rejected the homeowners’ claim.

The homeowners appealed the High Court's decision. As the second defendant, James Hardie supported the High Court judgment on grounds other than those on which the judgment was based – notably, James Hardie questioned whether the High Court was correct in finding that it owed a duty of care to the homeowners.

Court of Appeal decision

The Court of Appeal applied the well-established two-stage test to assess the existence of a novel duty of care. It considered whether the harm was foreseeable and whether there was sufficient proximity between the manufacturer and the homeowners. The Court of Appeal concluded that both criteria were satisfied in this case. Foreseeability of harm was clear, and there was sufficient proximity between the manufacturer and a homeowner, despite it being the builder’s role, not the manufacturer’s, to install the Harditex.

The Court of Appeal was satisfied that the High Court did not err in holding that James Hardie owed a duty of care in tort to the homeowners, indicating that this conclusion is a "natural extension" of the existing authority and in line with the Supreme Court's decision in Carter Holt Harvey v Minister of Education [2016] NZSC 95. The Court of Appeal formulated the duty of care as follows:

The manufacturer of a cladding product intended for use as a key component in the construction of a weathertight building owes a duty of care to an owner of the building to exercise reasonable care and skill in the design, manufacture, and supply of the product so as to prevent loss from damage to the building caused by water ingress.

Notably, this duty of care was not expressly limited to residential properties, suggesting broader implications for the construction industry. This aligns with the broader duties now owed by builders and building consent authorities as well.

Despite recognising the duty of care owed by James Hardie, the Court dismissed the homeowners' appeal regarding breach of the duty of care, agreeing with the High Court that the evidence did not support the claim that James Hardie failed to meet its duty.

The implications of this decision extend beyond cladding manufacturers. By establishing a duty of care for manufacturers of cladding products, the decision may pave the way for similar claims against other manufacturers involved in the supply of materials that are key components in buildings.