11.10.2024

Close call on contribution: Beca decision confirms 10-year longstop does not bar contribution claims

In a 3-2 split decision, the Supreme Court in Beca Carter Hollings & Ferner Ltd v Wellington City Council [2024] NZSC 117 confirmed that contribution claims are not barred by the Building Act 2004 10-year “longstop” limitation period that bars other proceedings related to building work.  Rather, a claim for contribution can be brought up to two years after the date on which the claim against a defendant is quantified, even if that date falls outside the end of the 10-year longstop period.

Factual Background

Between 2006 and 2010, the Bank of New Zealand (BNZ) had a purpose-built headquarters constructed in Wellington. The building was designed by Beca Carter Hollings & Ferner Ltd (Beca), which issued producer statements for the substructure and superstructure. Wellington City Council (Council) was the relevant building consent authority.

In 2016, the Kaikōura earthquake caused significant structural damage to the building.  As remediation was uneconomical, the building was eventually demolished.  In 2019, just under 10 years after the Council issued its last code compliance certificate on the building, BNZ filed proceedings against the Council in negligence and negligent misstatement, seeking over $100 million in damages.  Council then sought to bring a contribution claim against Beca on the basis that Beca was a joint tortfeasor who, if sued in time, would have been liable in respect of the same damage.

Beca applied to strike out the Council’s contribution claim on the basis that it was out of time. Beca’s last involvement with the building had arguably been in 2008 – some 11 years prior to the Council’s attempted claim against it.  Beca argued that this meant the Council’s contribution claim ran afoul of s 393(2) of the Building Act, which imposes a 10-year time limit on bringing “civil proceedings relating to building work”.

The Council counterargued that contribution claims were not caught by the 10-year longstop.  Instead, contribution claims were subject to a specific two-year time limit under s 34 of the Limitation Act 2010, which began running when BNZ’s original claim against the Council was quantified.  On this reasoning, the time for a contribution claim had not started running.

Both the High Court and the Court of Appeal went against the established line of authority and found for the Council (which we have written about before: Limitations on Contribution Claims).  Beca appealed once more to the Supreme Court.

Key findings

The Supreme Court confirmed the lower courts’ findings that the 10-year longstop in the Building Act did not apply to a claim for contribution. Instead, it held that the timeframe for bringing contribution claims was governed by s 34 of the Limitation Act, which sets a two-year period starting from the date the Council’s liability to BNZ was quantified (either by settlement or by judgment).

The Supreme Court made the following key points:

  • The primary conflict was reconciling two “strongly worded, subject-specific statutory exceptions” – one said to encapsulate a “comprehensive, industry-specific approach” to claims, the other representing a “long-established and bespoke” approach to a certain kind of claim. There were policy reasons for applying both.
  • The plain language of the 10-year longstop was broad enough to capture contribution claims, but the Building Act did not otherwise expressly override the right to bring contribution claims. The legislative and common law development of limitation law supported the premise that if Parliament had intended the 10-year longstop to override contribution, the legislation would have made that clear.
  • Allowing the separate contribution claim timeframe to stand is chronologically consistent:
  • Contribution claims do not accrue until the party who is not sued by the plaintiff becomes “unjustly enriched” when the first tortfeasor is found liable for something they are both liable for, i.e. the party who has not been sued essentially escapes liability.
  • Applying the 10-year longstop to contribution claims could create situations in which the first tortfeasor loses its right to bring a contribution claim against a joint tortfeasor, before the original claim is brought against that defendant.
  • The applicability of the two-year limitation period brought sufficient finality and certainty to all claims when combined with the 10-year longstop.

The minority judgment provided a comprehensive alternative analysis.  In their view, allowing the two-year contribution period to fall outside the longstop undermined the longstop, and created uncertainty and potential indefinite periods for liability.  The minority considered this had practical implications on industry players in respect of record-keeping and insurance cover.

Our comments

The Supreme Court decision now solidifies the approach to contribution claims and the Building Act longstop, providing important guidance on the interaction between the Building Act and the Limitation Act.  

The decision reinforces the distinct legal treatment of contribution claims, ensuring that defendants have a fair opportunity to seek redress from joint tortfeasors if plaintiffs join them right on the crux of a limitation period expiring. However, we consider there are legitimate concerns regarding certainty, and it will require parties to be conscious of the fact that their liability may extend out much longer than the 10 years they may be used to. 

It is worth noting that the decision does not change the existing position in respect of claims which are not related to building work, but rather treats the Building Act longstop period the same as the general longstop period for claims. Most other money claims not relating to building work are subject to a 15-year longstop period, however the Limitation Act is clear that contribution claims fall outside the definition of “money claim” for the purposes of this 15-year longstop period.

The application of this approach to the building space is an area where there is likely a need for statutory intervention.  One way to potentially reduce the uncertainty for potential joint tortfeasors could be to amend the two-year period for the contribution claim to require a defendant to bring a contribution claim within two years of the claim being made (or proceedings being issued) against it, rather than two years from when liability is quantified.  While there is a potential costs exposure for the party bringing the contribution claim, it is arguable that when balanced against the need for certainty, certainty should prevail. 

Finally, we note that contribution claims are still complex and, by their nature, face more barriers than just limitation.  Even if a contribution claim is no longer limited by the 10-year longstop, it still requires the plaintiff’s original claim to succeed before contribution can be established.  However, it may be prudent for parties to check with their insurers about the potential consequences of this decision on cover for building defects.

If you have any questions about the 10-year longstop or claims for contribution, please get in touch with our Construction Team, Insurance Team or your usual contact at Hesketh Henry.

Disclaimer:  The information contained in this article is current at the date of publishing and is of a general nature.  It should be used as a guide only and not as a substitute for obtaining legal advice.  Specific legal advice should be sought where required.

 

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Kerry
Media contact - Kerry Browne
Please contact Kerry with any media enquiries and with any questions related to marketing or sponsorships on +64 9 375 8747 or via email.

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