Limitation period for third party contribution

October 1, 2010

Written By: Chadleigh Danswan

Chadleigh Danswan of Auckland law firm Legal Vision examines the recent High Court decision concerning limitation periods applying to third party claims for contribution.

Overview
On September 24, 2004, a leaky building claim was brought by the Body Corporate and unit owners of an apartment complex located at 8 Farnham Street, Parnell, Auckland (Farnham Terraces) against the Auckland City Council (and other respondents).
On October 13, 2006, the council issued third party proceedings against General Manukau Enterprises Limited (GME), being the installer of a waterproof membrane to various surfaces of the development.
The council claimed that it was entitled to contribution and/or indemnity from GME under section 17(1)(c) of the Law Reform Act 1936 such that if the council was liable to the plaintiffs, GME would also have been liable to the plaintiffs as a concurrent tortfeasor.
GME, in its defence, argued that when the council commenced its claim, the claim only related to building work that GME carried out between May and November 1995.
GME therefore argued that the council was not entitled to bring the third party claim because that work had been completed more than 10 years prior to the date upon which the council issued its claim.
GME relied on section 393(2) of the Building Act 2004 (BA 2004) (often known as the “long stop” provision) which provides that civil proceedings relating to building work may not be brought against a person after 10 years or more from the date of the act or omission on which the proceedings are based.
The council’s primary argument was that section 393(2) did not apply to a claim by a defendant for contribution against a third party under section 17(1)(c) of the Law Reform Act 1936.
The court was therefore required to determine whether section 393(2) of the BA 2004 would prevent a claim seeking contribution in respect of work carried out more than 10 years before the third party claim was issued.

Decision
Justice Lang commented that a plaintiff has always had an unfettered right to select the parties that were to be the defendants in a claim for negligence, and that this led to hardship in many cases because a single defendant could be left liable to meet all of the plaintiff’s losses (despite the fact that several other parties were also responsible for causing those losses).
Justice Lang noted that Parliament had therefore enacted legislation to alleviate this hardship, such legislation being encapsulated in 17(1)(c) of the Law Reform Act 1936 which allows one tortfeasor to seek a contribution from other tortfeasors who would have also been liable to the plaintiff (had the plaintiff chosen to sue them).
The date upon which a cause of action based on a claim for that contribution accrues is determined by section 14 of the Limitation Act 1950 (which provides that the cause of action shall be deemed to have accrued at the first point in time when everything has happened which would have to be proved to enable judgment to be obtained for a sum of money in respect of the claim).
The effect of this was that if the limitation period prescribed by section 14 of the Limitation Act applied to the council’s claim for contribution against GME, the council’s claim would not be statute-barred because the plaintiffs were yet to establish their claims against the council.
As a result, the limitation period had not yet began to run. If, on the other hand, section 14 was subject to section 393(2) of the BA 2004, the council’s claim would be out of time.
After a good discussion of the authorities on point, Justice Lang concluded that section 393(2) of the BA 2004 overrode section 17(1)(c) of the Law Reform Act 1936 and section 14 of the Limitation Act 1950 (citing Dustin v Weathertight Homes Resolution Service (HC Auckland CIV/2006-404-276, 25/05/06) in support of this).
Accordingly, Justice Lang concluded that, given that the council’s claim for contribution related to “building work” in terms of section 393(2), the council was prevented from claiming contribution from GME as the building work carried out by GME had been carried out more than 10 years prior to the date upon which the council issued its claim.
The court rejected the council’s further argument that its claim against GME related to works up until November 1999, and also concluded that the council could not amend its claim in the manner proposed as that was considered a new claim and was now statute-barred.

Concluding comments
The High Court decision provides a timely reminder of just how significant the section 393(2) “long stop” provision is in the Building Act 2004.
As Justice Lang pointed out at paragraph 55, while the long stop provision will “inevitably result in some otherwise meritorious claims becoming statute-barred . . . that outcome is simply a fact of life that the council, in common with other defendants, will have to accept and live with. It does not mean that the clear words of s 393(2) are to be ignored”.