Last month, the Supreme Court released the Beca Carter Hollings & Ferner Limited v Wellington City Council decision,[1] settling the long-running dispute over whether contribution claims for negligence can be made in relation to the now-demolished BNZ building in Wellington.
In a split (3:2) decision, the Supreme Court ruled that the 10-year longstop limitation in the Building Act 2004 does not apply to contribution claims.
Beca v Wellington City Council was partially decided on the basis of fairness. However, many in the construction industry may instead find that the ruling simply limits finality in litigation.
Background
In November 2016, much of the country was jolted awake by the 7.1 Kaikoura earthquake. The earthquake damaged the BNZ building in central Wellington, prompting BNZ to pursue legal action against both the Wellington City Council (WCC) and Beca, a construction consultancy. BNZ was successful at the High Court.
Following BNZ’s victory, the WCC initiated a claim against Beca for contributing to the negligence, alleging that the builders were primarily responsible for the negligence that led to the damage.
Beca responded by arguing that the WCC was barred from pursuing the claim. This came down to a reading of the statutory time limit for claims. Under the Building Act 2004 (BA 2004), Beca argued, claims for contribution must be made within 10 years of the act of negligence.
The competing rules
The central issue in the case revolved around two strongly worded provisions in different pieces of legislation.
Civil proceedings relating to building work
Beca’s argument revolved around the interpretation of section 393(2) of the BA 2004. This reads as follows (our emphasis):
393 Limitation defences
(1) The Limitation Act 2010 applies to civil proceedings against any person if those proceedings arise from —
(a) building work associated with the design, construction, alteration, demolition, or removal of any building or the manufacture of a modular component manufactured by a registered MCM who is certified to manufacture it; or
(b) the performance of a function under this Act or a previous enactment relating to the construction, alteration, demolition, or removal of the building or the modular component.
(2) However, no relief may be granted in respect of civil proceedings relating to building work if those proceedings are brought against a person after 10 years or more from the date of the act or omission on which the proceedings are based.
Beca advocated a clear reading of the provision, emphasising the prevention of relief granted in relation to civil proceedings relating to building work. With such a seemingly clear instruction, how could the WCC claim for contribution negligence 11 years after the works?
The WCC argued that as they were pursuing a contribution claim, the longstop provision in the Building Act 2004 did not apply. Contribution claims were subject to their own regime under the Limitation Act 2010 (LA 2010) and its predecessor, the Limitation Act 1950 (LA 1950).
The Court of Appeal agreed with the WCC’s argument.
Supreme Court: contribution claims are not impacted by the 10-year longstop provisions
The conflict between section 232(2) of the BA 2004 and sections 34 and 50 of the LA 2010 was similarly the central issue for the Supreme Court.
The majority held that when it passed section 393(2) of the BA 2004, Parliament had not intended to undermine the exceptions for contribution claims.
The Court reached this view following an assessment of the legislative history of contribution claims. Section 17(1)(c) of the Law Reform Act 1936 (LRA 1936) had created a bespoke approach to contribution claims. Subsequent reports by the Law Commission had discussed the issue with this assumption in mind, without any contemplation that the Building Act 2004 may have limited the regime.
The majority also made several key findings on the following matters:
1. Certainty and finality: Beca was correct to say that the longstop provision was intended to promote certainty and finality. The longstop provisions were designed in the context of the leaky homes phenomenon, particularly for building certifiers.
However, certainty and finality had been addressed by the provision of the two-year limitation period for claims governed under the LA 2010 or the six-year period under the LA 1950.
2. Ancillary claims: The longstop does not override the discretion permitted under section 50 of the LA 2010 to allow ancillary claims to be made outside of the limitation period. The majority did not see the sense in having an arbitrary distinction between ancillary claims and contribution claims.
3. Contribution claims are foundational: The ability to seek compensation from co-tortfeasors was deeply ingrained in common law and equity.
For example, in Body Corporate 330324 “City Gardens Apartments” v Auckland City Council,[2] the Court adopted the view that persons who are under co-ordinate liabilities to make good the one loss (eg sureties liable to make good a failure to pay the one debt) must share the burden pro rata. This judgment also highlighted how this view had been adopted in equity.
Finality in building-related claims: Glazebrook and O’Regan JJ give greater weight to Building Act 2004
The minority agreed with Beca’s arguments around section 393(2) of the BA 2004. The wording was clear, and there was nothing substantial to suggest that contribution claims were excluded from the longstop provision.
The minority also contemplated specific issues that may arise as a result of the decision:
- Reduced immunity for consent authorities: Section 392 of the Building Act 2004 provides protection for consent authorities. As it stands, the provision grants immunity to building consent authorities from civil proceedings where the building consent authority has (in good faith) acted in reliance of specific documents.In the minority’s view, the successful adoption of the WCC’s argument would substantially undermine the immunity provided under the section. This would also likely occur for other parties, including those named at section 390.
- Finality: Acceptance of the majority’s view would undermine Parliament’s intention to afford the parties a certain level of certainty.
- Unfairness: It was true that the application of the longstop to contribution claims could allow for unfair situations. However, unfairness in some cases was a price Parliament was prepared to pay to bring about certainty through the use of the longstop.
Conclusion
The Supreme Court’s decision will likely have a considerable impact on the future of negligence claims. While the ability to claim contributory negligence may distribute responsibility fairly, it involves a natural reduction in a level of certainty for parties. Beca v Wellington City Council is a finding with which all parties to construction matters will have to come to grips.
