Supreme Court Ruling on Building Act longstop: An own-goal for Councils?

In a decision of significant import for New Zealand's construction industry, the Supreme Court has ruled today that contribution claims relating to building work are not subject to the 10-year longstop limitation period under the Building Act 2004. This judgment, while ostensibly favourable to local authorities, may prove to be a profound miscalculation on their part.

Case Overview:

The Supreme Court's judgment in Beca Carter Hollings & Ferner Limited v Wellington City Council [2024] NZSC 117, delivered earlier today, centred on Wellington City Council's claim for contribution against Beca, an engineering firm, concerning alleged negligence in the design and construction of a building damaged in the 2016 Kaikōura earthquake.

The majority, in a 3-2 split decision, concluded that the longstop provision in s 393(2) of the Building Act does not apply to claims for contribution between tortfeasors. Instead, they held that such claims are governed by the specific limitation periods set out in the Limitation Act.

This interpretation allows contribution claims to be brought even after the expiry of the 10-year longstop period, provided they are within the limitation period for contribution claims (two years from the date of quantification of liability under the Limitation Act 2010, or six years under the Limitation Act 1950, as applicable).

Controversial Aspects:

The Court's interpretation raises pertinent questions about the balance between the right to seek contribution and the need for finality in building-related claims. Has the Court, in its attempt to preserve the former, inadvertently undermined the certainty that the Building Act sought to provide?

Critique of Legal Reasoning

The majority's interpretation hinges on the absence of an express override of contribution claims in the Building Act. However, this approach may not fully account for the clear legislative intent to provide finality in building-related claims. The dissenting opinion argues, with some force, that the majority's approach "substantially undermines" the certainty intended by Parliament.

An Alternative Perspective

The majority's interpretation opens the possibility of contribution claims being brought outside the 10-year longstop period. This raises the question of whether such an approach might lead to a series of claims, each effectively resetting the limitation clock. The potential for such "serial" contribution claims, theoretically extending liability indefinitely, presents a significant concern for the industry.

Contextual Criticism

In an era characterised by increasing construction costs and risk aversion, one might question whether this decision aligns with broader efforts to streamline and mitigate risk in the building process. The Court's interpretation may necessitate that industry participants maintain insurance and records for an indefinite period – a requirement that appears at odds with the Building Act's purpose.

Comparative Analysis

It is instructive to consider the approach taken in other jurisdictions. The Australian High Court in Unsworth v Commissioner for Railways (1958) favoured a more restrictive interpretation of similar provisions. One might ponder whether the New Zealand Supreme Court has missed an opportunity for trans-Tasman harmonisation in this area of law.

Practical Implications Critique

The decision places building industry participants in a position of uncertainty. The notion that they might "rest easy" after 10 years becomes questionable if the threat of a contribution claim persists. This ambiguity may lead to increased costs, more conservative practices, and potentially, a dampening effect on innovation in the sector.

Observations

The dissenting judges (Glazebrook and O'Regan JJ) make a salient point when they observed that they see nothing in the legislative history to support the view that "unfairness to plaintiffs was an acceptable price to pay for the certainty provided by the longstop provision, but unfairness to defendants (primary tortfeasors) was not."

Stakeholder Impact

While local authorities may find the decision favourable in the short term, they too may eventually face the consequences of extended liability. The construction industry, from architects to builders, now confronts a landscape of heightened risk. Ultimately, these increased costs and uncertainties may be transferred to homeowners and businesses.

Conclusion

The Supreme Court's decision in this case presents a nuanced dilemma. In its effort to address one form of potential injustice, has it inadvertently created another? By prioritising the right to seek contribution over the need for finality in building-related claims, the Court may have undermined the very foundations of certainty that the Building Act sought to establish.

We invite our readers to consider the implications of this landmark decision. How might it reshape New Zealand's construction landscape? What measures should industry participants consider to safeguard their interests in this new era of extended liability?

Disclaimer: This analysis is intended to stimulate thought and debate, and does not represent the official position of Richmond Chambers.