Not so long ago, in our Communique article “How long to keep records”  we said

“The warm fuzzies induced by the 10 year longstop on liability under the Building Act have been under threat from cases brought to Court.  So far, so good.  But it would be unwise to biff out everything related to a project as soon as the longstop is reached” 

Alas, in May 2021 the decision on the October 2020 hearing of BNZ Branch Properties Limited v Wellington City Council [2021] NZHC 1058  has made good on that threat.  There may be the possibility of an Appeal, but currently, the position is that if (for example) the owner makes a claim on the contractor at 9 years and 364 days, that contractor would have another two years to seek a contribution from you as a “third party”.

The case arises out of the BNZ building on the waterfront in Wellington, which was damaged in the 2016 Kaikoura earthquake and later demolished. 

In August 2019, BNZ sued the Wellington City Council for negligence in respect of granting the building consent, inspecting during construction, and issuing a CCC.  A month later, Council sued the engineers, Beca, as a negligent third party, seeking a contribution in accordance with s17 of the Law Reform Act.  Beca argued that it had provided its engineering services in March 2008, more than 10 years before Council filed its claim, and thus the claim was time-barred by s393(2) of the Building Act. 

The issue before the court was not whether or not Beca was negligent, but whether – in consideration of the limitation issues – they were liable.

The Building Act s393(2) states

“….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.”

In simplistic terms, the understanding has been that you are not liable for your actions (as a building designer) beyond 10 years from the date on which your actions may have given rise to the alleged problems. 

NZ case law has confirmed that in respect of primary claims between plaintiffs and defendants;  but the position has not been so clear in relation to third party claims.  This was a test case for that issue, with about $100 million at stake.

Beca argued that the use of the words “civil proceeding” in s393(2) of the Building Act was intended to include “every form of civil proceeding regardless of its source or makeup”.

The High Court, after a detailed consideration of the relationship between s393 of the Building Act, s17 of the Law Reform Act, and s34 of the Limitation Act 2010, held that the term “civil proceeding” in s393 of the Building Act refers only to a primary claim between a plaintiff and defendant, and does not include a claim for contribution.

Third party claims – such as the Council’s claim against Beca – must be initiated within a two-year period provided for in the Limitation Act 2010.  This judgement establishes that so long as a claim is made on a party within the Building Act 10 year longstop, that party would then have two years in which to make a claim against third parties.

NZACS has previously suggested that the WHRS timelines justify keeping your documents 12 years, not just 10:  such things may (almost) be in the past, but this new case reinstates that recommendation.  Those “warm fuzzies” are now facing the reality of winter.