Timing is everything

By - , Build 137

At what point is a property defined as built? Who can and who cannot use the 10-year limitation period as a defence? The courts have continued to refine the answers to these questions in several recent cases.

SECTION 393 of the Building Act 2004 creates a long-stop liability period for claims arising out of building work. But what is building work for this purpose?

A party seeking to rely on a limitation defence needs to establish that the claim against them alleges a contribution to the design or execution of the building work in issue and that their involvement in that work occurred more than 10 years before the claim was brought.

If section 393 does apply, a party will succeed in having the claim against them struck out.

What is building work?

The key inquiry is whether a claim is actually about involvement in building works. In 2010, the Court of Appeal found that the limitation defence did not apply in the case of Gedye v South because the claim was for a breach of a vendor warranty in a sale and purchase agreement and not about the defendant’s participation in any building works.

The building work that caused the defects to the property in question had taken place more than 10 years before the claim was commenced. However, the defendant had subsequently provided a contractual warranty that the previously carried out works complied with the Building Act. The action for the breach of that warranty was not statute barred.

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No 10-year period for employment argument

Two recent High Court cases have also considered the coverage of section 393. In Fussell v Wellington City Council, a Mr Tedder was joined to a claim as the applicator of an exterior texture coating and substrate to a property that is alleged to be a leaky home. He was joined to the proceeding just before the 10-year long-stop period expired.

Mr Tedder then brought a fourth party claim against two former partners of the business that he had worked for at the time, alleging he was entitled to be indemnified by them. The partners argued that his claim was barred by section 393, but the High Court disagreed.

As with the Gedye case, the Court classified Mr Tedder’s allegations as contractual claims. He was not relying on any allegation that the partners had been involved in the physical works raised in the case.

The allegation was only that, as a component of his employment contract, he was entitled to be indemnified by the partners in respect of works he carried out in the name of their business. Mr Tedder argued that time did not begin to run in respect of this claim until he made a claim for indemnification and the partners declined to meet it.

The fourth party claim was not struck out.

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And no 10 years for non-building work

In Deeming v EIG Ansvar Limited, the argument was whether a claim against Geotek, a firm engaged to carry out geotechnical reports, was statute barred. The engineering firm argued that the work it carried out was building work because the term ‘building work’ was broadly defined in the Building Act, and the geotechnical reports it produced were key to the construction of the foundations for a property.

The High Court disagreed that the services carried out by Geotek were connected with building work. Geotek provided reports for the purposes of assessing the suitability of the site for subdivision, generally, and not in relation to the construction of the particular property that was the subject of the claim.

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10 years from final building inspection

To be an eligible claim under the Weathertight Homes Resolution Services Act 2006 (WHRSA), the dwelling house must have been built within 10 years of a claim being brought.

Late last year, the Court of Appeal considered the limits imposed by these criteria. The appellants – there were two claims heard together – argued that, if a Code Compliance Certificate was issued within the 10-year period, this would be sufficient.

However, the Court of Appeal said the ordinary meaning of the word ‘built’ is constructed or erected. The Court also noted that Parliament had deliberately chosen different language in the WHRSA to the broader expression ‘building work’ used in the Building Act.

The Court of Appeal then decided that, for the purposes of the eligibility provisions in the WHRSA, a dwelling house is built when it is completed to the extent required by the building consent. In most cases, this will be when the house passes its final inspection. The result for one of the appellants was that their claim was ineligible. The other claim was eligible because it was 3 days within the limitation period.

However, as the unsuccessful appellants have been granted leave to appeal to the Supreme Court, there may yet be further discussion on the meaning of ‘built’.

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