Supreme Court decides contribution claims are not governed by 10-year longstop
It is common in building defect litigation for defendants to make claims for contribution against third parties. This is on the basis the third party is liable in respect of the same damage as the defendant and should therefore contribute to the damages payable to the plaintiff.
The right of a defendant to bring a contribution claim is set out in s17(1)(c) of the Law Reform Act 1936. In accordance with s34 of the Limitation Act 2010 the claim must be brought within two years of the date the defendant’s liability is quantified.
A long-standing issue, on which High Court Judges have differed, is whether contribution claims are subject to the 10-year “longstop” limitation period in the Building Act, ie whether a contribution claim must be brought within 10 years of the act or omission by the third party. This is a significant issue.
It is common for plaintiffs to discover building defects many years after the construction and to sue the parties primarily responsible shortly before the 10-year period expires.
By the time the defendants identify they have a contribution claim against a third party it may be more than 10 years from the date of the act or omission by the third party.
If the 10-year longstop applies to contribution claims, defendants may therefore lose the opportunity to obtain contributions from other liable parties.
In Beca Carter v Wellington City Council the Supreme Court, in a 3-2 majority decision, has resolved this issue. The claim was brought by the owner of a building with alleged defective structural design against a council. The council made a contribution claim against the engineer. The engineer argued the contribution claim was brought outside the 10-year longstop period. The Supreme Court decided:
The fact the Building Act longstop does not expressly override the right of a defendant to seek a contribution weighs in favour of the interpretation the 10-year longstop does not apply to that situation.
If the 10-year longstop applied to contribution claims there could be significant unfairness to defendants in that the 10-years applying to the third party could expire before the 10-years applying to the defendant (based on different acts/omissions).
The legislative history and the purpose of the Building Act, including the objectives of certainty and accountability, do not support the interpretation that the longstop applies.
Contribution claims are therefore not subject to the 10-year longstop.
It follows that defendants will now have more opportunity to join third parties in building defect claims. Whether this assists in the resolution of building defect claims prior to trial remains to be seen.