Better late than never?

In 2010 Parliament introduced a new Limitation Act to simplify a complicated area of law.? The outcome in the “defective building space” was to substitute a relatively settled group of common law principles for a different set of untested rules.?

The case of Rea v Auckland Council [2024] NZCA 313 provides appellate guidance on the “late notice” regime under s 14 of the Limitation Act 2010 (LA2010) together with an unfortunate outcome for the homeowner claimants.

Mr and Mrs Rea filed a building defect proceeding in September 2021.? The Auckland Council applied to strike out the claim on limitation grounds because:

• It had issued a CCC for the subject property in 2013
• Thus the primary limitation period of 6 years had expired in 2019

The Reas contended that, under s 14 of the LA2010, their claim had a late knowledge date of March 2019 when they received a report from Fraser Thomas Engineers.? This was less than 3 years before they filed proceedings.? If accepted, this would cure the Reas’ limitation problem.

The Reas’ plight

After purchasing in 2014 the Reas notified Master Build Services of some minor workmanship issues.? This led to a series of reports:

• report by Maynard Marks dated March 2016.? This report detailed 31 defects, many said to be potential breaches of the Building Code;
• report by ACH Consulting dated May 2016.? This report details structural and weathertightness defects;
• second report by Maynard Marks dated March 2017 with a scope of works covered by Master Build
• report by Fraser Thomas dated March 2019.? This identifies structural and non-structural defects and comments on Building Code compliance.

?In March 2019, the Reas applied for a Determination as to whether the Council should have issued the CCC.? MBIE eventually reversed the CCC due to evidence of non-compliance with the Building Code.

Late knowledge under the LA 2010

Section 14 provides a shopping list of facts which trigger a late knowledge date. ?To qualify, a claimant must establish they gained knowledge or ought reasonably to have gained knowledge of all of the following:

• the fact that the act or omission on which the claim is based had occurred (s 14(1)(a));
• the fact that the act or omission on which the claim is based was attributable (wholly or in part) to, or involved, the defendant (s 14(1)(b));
• if the defendant’s liability or alleged liability is dependent on the claimant suffering damage or loss, the fact that the claimant had suffered damage or loss (s 14(1)(c));
• if the defendant’s liability or alleged liability is dependent on the claimant not having consented to the act or omission on which the claim is based, the fact that the claimant did not consent to that act or omission (s 14(1)(d));
• if the defendant’s liability or alleged liability is dependent on the act or omission on which the claim is based having been induced by fraud or, as the case may be, by a mistaken belief, the fact that the act or omission on which the claim is based is one that was induced by fraud or, as the case may be, by a mistaken belief (s 14(1)(e)).

?The Reas’ case focused on the first 3 points above.

The appeal

From [22] of the judgment

• Mr Rainey argued that s 14(1) required Mr and Mrs Rea to know (actually or constructively) that there were breaches of the building code, that those breaches were matters the Council ought to have identified and that those breaches were causative of their loss. He argued that the reports, which pre-dated the Fraser Thomas report, did no more than identify errors by the builder as opposed to errors by the Council. Therefore, Mr and Mrs Rea neither knew, nor could reasonably have known, of the relevant facts until 19 March 2019 when they received the Fraser Thomas report

Outcome

The Reas lost.? The Court of Appeal was critical of the various glosses they sought to apply to s 14 (see further [56], [57], and [62]):

[63] We have concluded that in this case that the act or omission on which the claim is based for the purposes of s 14(1)(a) and (b) is the issuing of the CCC by the Council, without more. Damage for the purposes of s 14(1)(c) will exist if there are defects that are noticeable and not minor.

?The Court agreed with the Council that by March 2017 at the latest, the Reas had actual or constructive knowledge of all the relevant facts – it was “beyond argument that this information would have led a reasonable person to begin investigations, including taking legal advice” (at [69]).

Learnings

The learnings, faithful reader, are simple.? As soon as the spectre of building defect issues arise, it is important to get specialist advice – both building (what is wrong) and legal (do I have potential redress / is it too late?)

Check dates.? When was the relevant Building Consent and Code Compliance Certificate issued??

As the Court of Appeal stated, a claimant “cannot close their eyes to the obvious.? They cannot postpone taking action if a reasonable person in their circumstances would take action” (at [67]).?

And finally, a Determination from MBIE reversing a CCC might feel nice, but it wont get you compensation.