BNZ Branch Properties Limited v Wellington City Council [2021] NZHC 1058

The High Court has recently ruled that a contribution claim by a defendant against third party engineers was not time-barred by the 10-year longstop period in the Building Act 2004.

Background

BNZ leased land at Waterloo Quay, Wellington from CentrePort in February 2011 to build an office block. As a result of the Kaikoura earthquake in November 2016, the building suffered irreparable damage and was demolished.

In August 2019, BNZ commenced proceedings against Wellington City Council, seeking damages in excess of $100 million. It alleged that the Council was negligent in its inspection of the building work, issuing a code compliance certificate and granting the building consent application for the building.

Third party contribution claim

In September 2019, the Council filed third party proceedings against the engineers, Beca, who were engaged by CentrePort to design the building, and another engineer who was engaged by Beca to peer review the design. The Council sought contribution in accordance with s 17 of the Law Reform Act, alleging that Beca had been negligent.

Beca applied to strike out the Council’s claim, or alternatively for summary judgment against the Council, on the basis that the Council’s proceedings were out of time. Beca argued that it had provided its engineering services in March 2008 so by the time the Council filed its third party claims in September 2019 the claim was time-barred.

Specifically, Beca argued that the Council was caught by the longstop period in s 393(2) of the Building Act 2004 which provides that relief may not be granted in civil proceedings relating to building work if those proceedings are brought more than 10 years from the date of the act or omission. The rationale is to avoid “temporally unlimited liability of those involved in the construction industry”.

High Court decision

The issue that the Court had to decide was whether the Building Act longstop provision applied to third party claims for contribution.

While there has been a line of authorities (including a 2020 High Court decision Body Corporate 378351 v Auckland Council [2020] NZHC 1701) holding that the longstop period applied to primary claims between plaintiffs and defendants, the position is not so clear in relation to contribution claims.

Beca argued that the use of the words “civil proceeding” in s 393(2) of the Building Act meant that this was intended to capture “every form of civil proceeding regardless of its source or makeup”.

The Court rejected this argument and concluded that the longstop period in s 393(2) did not apply to contribution claims so that the Council was not time-barred. The Court stated that it was unlikely without express words, that Parliament intended “by a sweeping general provision to alter a rule passed to regulate a specific situation that was carefully considered and formulated at the time”.

The Court reached this view after a detailed consideration of the history of the legislation providing rights to claim contribution, and the limitation statutes. In considering the relationship between s 393 of the Building Act, s 17 of the Law Reform Act and s 34 of the Limitation Act 2010, the Court held that the term “civil proceeding” in s 393 of the Building Act refers only to a primary claim between a plaintiff and defendant, and does not include a claim for contribution. Contribution claims therefore remain subject to the two-year period provided for in the Limitation Act 2010, regardless of whether the 10-year longstop in the Building Act has expired.

The Court therefore declined to strike out the Council’s claim against Beca.

Comment (Cecily Brick):

This decision opens up the potential for a much longer tail to litigation over building and construction defects, as parties may bring contribution claims at any point up to two years after the main litigation has concluded. This substantially reduces the finality intended to be provided by the 10-year longstop.

On the other hand, the decision will provide some comfort to parties sued just prior to the expiry of the longstop period, who will be able to bring contribution claims that previously may have been considered out of time.

The significance of this decision means the issue is likely to be considered by the Court of Appeal, either in this case or a future proceeding.