Legal disputes – particularly where the construction industry is concerned – often involve multiple defendants who may be alleged by the plaintiff or each other to have contributed to the loss. A recent string of cases have made it unclear how ‘contribution claims’ (which are those claims made by a defendant against third parties who the defendant considers would be liable alongside them, if the claim is proven) interact with the rules of limitation, which place time-limits on bringing proceedings. 

Historically, contribution claims (as any other claims) were seen as being subject to a 10-year long-stop under s 393(2) of the Building Act 2004, which provides that relief may not be granted in respect of ‘civil proceedings relating to building work’ if those proceedings are brought 10 years or more from the ‘date of the act or omission on which the proceedings are based’. This sometimes meant that defendants could not bring contribution claims against third parties within the necessary 10 years, even though the claim against that defendant might have been within the 10 year limit. The traditional wisdom was that the certainty of the 10-year limit was more important than any perceived unfairness to the small number of defendants who found themselves in this limitation Catch-22. 

Last year the High Court departed from this position in Beca Carter Hollings and Ferner Limited v Wellington City Council. The Council were the defendant in a claim by BNZ, and had brought Beca in as a contributor. Beca protested this on the basis that, irrespective of the position of the Council, their involvement in the matter had ceased over 10 years ago, and the contribution claim was therefore prevented by the s 393 long-stop. The Court departed from previous case law and held that contribution claims are not caught by s 393 of the Act. Contribution claims were said to be ‘ancillary claims’, whereas only ‘original claims’ can invoke the 10-year long-stop. Defendants, the Court said, had a fresh two years from the date on which they were found liable in which to make contribution claims against third parties. The High Court therefore ruled against Beca, despite the relevant act or omission occurring over 10 years ago. 

Beca appealed against the High Court decision. The Court of Appeal dismissed the appeal, although its reasoning differed from that of the High Court. The Court of Appeal disagreed that contribution claims were ‘ancillary’, or that such reasoning was determinative of the issue.

However, the Court of Appeal agreed with the High Court that s 393 of the Building Act 2004 does not apply to contribution claims, and instead such claims are governed by the Limitation Act 2010 alone. An analysis of legislative history, Parliamentary intentions, common law developments over the last half century, and Law Commission commentary guided the higher court to conclude that contribution claims are governed solely by s 34 of the Limitation Act 2010, which allows a defendant two years from the date on which its own liability is established to bring a contribution claim. 

The Court of Appeal considered that this approach balances the competing policy considerations of (on the one hand) finality between the original plaintiff and the defendant(s) they choose to sue, and (on the other), a fair opportunity for defendants who are successfully sued by the original plaintiff to seek contribution from other parties who in substance would be liable, were it not for the 10-year longstop. The Court considered that the limited two-year period provided by s 34 of the Limitation Act 2010 to bring the contribution claims was the balance that Parliament had set, and that the applicability of s 34 of the Limitation Act over s 393 of the Building Act gave effect to that legislative decision. 

This decision will have significant ramifications for those in the building industry, because it will make the 10-year long-stop far less reassuring or protective of would-be defendants. Industry parties may be liable for their actions in respect of a building many years after the long-stop has expired: where for instance a main defendant is found liable following multiple years of legal proceedings, 17 years after the building was completed, that defendant might bring further parties in for contribution claims within the following two years. Depending on the complexity of the main proceedings, it is possible to imagine legal proceedings in respect of a building continuing more than 20 years since it is opened. Those involved in construction would be wise to keep their records a little longer, and keep their ear to the ground, lest an old skeleton be found in the walls.

Our thanks to Will Richardson (Summer Clerk) for his assistance with this article.