10 years not always a limitation

By - , Build 121

Under the Building Act, claimants have 10 years to bring legal proceedings against third parties for an act or omission related to building work – the so-called limitation defence. But weathertight home proceedings may be different – they stop the clock for all parties.

In a recent decision of the Auckland High Court – Body Corporate 169791 and Anor v Auckland City Council and Ors – the Court again discussed the application of the 10-year long-stop under the Building Act 2004. The issue in this case was whether the 10-year long-stop applies to claims by a defendant for contribution against third parties. Frequently, additional parties are joined to building claims by existing defendants as ‘tortfeasors’ under the Law Reform Act 1936.

The Auckland City Council sought contribution from a company called General Manukau Enterprises Limited, which had installed a waterproofing membrane at the subject premises. General Manukau answered that it had a limitation defence – it carried out the work more than 10 years before the council issued its claim. Section 393 of the Building Act 2004 provides that civil proceedings relating to building work may not be brought against a person 10 years or more from the date of the act or omission on which the claim is based. General Manukau sought to strike out the claim against it.

Two sides to the argument

The Auckland High Court acknowledged that the existing High Court authorities fell on both sides of the debate. In the case of Cromwell Plumbing and Drainage Services Limited v De Groot (1995), the High Court held that the 10-year long-stop did not prevent claims for contribution for several reasons:

  • The 10-year long-stop applied to claims for building work that was separate and distinct from statutory causes of action under the Law Reform Act 1936.
  • If Parliament intended the long-stop to apply to claims for contribution under the Law Reform Act 1936, it would have said so (by amendment to the Law Reform Act 1936).
  • If the 10-year long-stop applied, it would significantly truncate the statutory period allowed for contribution.
  • If the long-stop applied, the provisions of the Law Reform Act 1936 would become effectively meaningless for building claims.

However, in Dustin v Weathertight Homes Resolution Service, the Court found the 10-year long-stop did apply to claims for contribution and stated the reasons:

  • The point of the 10-year long-stop was to provide certainty.
  • Cromwell overstated the position when it said the long-stop would render the provisions of the Law Reform Act 1936 meaningless.
  • Parliament’s intention in enacting the 10-year long-stop was quite clear.
  • In a claim for contribution, the defendant’s liability depends on whether work carried out by a third party was defective. In these circumstances, claims for contribution could properly be regarded as claims relating to building work as opposed to statutory causes of action.

10-year cut-off for all parties

In Body Corporate 169791, the High Court decided to follow Dustin. Justice Lang decided the plain and unambiguous wording of the Building Act was that its limitation applied to all civil proceedings relating to building work and was wide enough to capture claims against third parties. Parliament had made ‘a policy decision that was taken in the interests of achieving a higher goal, and its implementation has necessarily been at the expense of some claims that would otherwise have been valid’. The Court struck out the claim.

Therefore, the latest position is that all parties must be joined to Court proceedings within the 10-year long-stop.

Weathertight proceedings different

However, the position with weathertight homes proceedings may be different. In Kells v Auckland City Council, the Auckland High Court held that the provisions of the Weathertight Homes Resolution Services Act 2006 create a distinction. Under the Act, the making of an application to the Weathertight Homes Resolution Service has the effect of filing a proceeding in Court (that is, time stops running for limitation purposes).

Justice Asher found that making the application stops time running against all parties, including those who may be joined at a later date.

Important defence to understand

Why are these decisions important? Limitation defences can be a clear-cut answer to some parties who become involved in building claims. Because of the legal costs involved in defending building claims, where a limitation defence arises, defendants will seek to be struck out or removed from proceedings as soon as possible.

It is important for claimants and defendants to know when limitation defences may be available. Claimants may face paying costs if they pursue a party who has a clear defence. On the other hand, defendants need to know if they have these arguments available to them.

Download the PDF

More articles about these topics

Articles are correct at the time of publication but may have since become outdated.

Advertisement

Advertisement