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Are consultants open to liability beyond the 10-year limitation period?
On 1 October 2020 the High Court, in BNZ Branch Properties, departed from precedent and held that the 10-year limitation period in the Building Act 2004 does not apply to contribution claims. It opened up consultants to liability beyond the 10 year period. Recently, the High Court has again upset the balance with a judgment in Body Corporate 378351 v Auckland Council which criticised the BNZ Branch Properties decision and held that the 10-year longstop does prevent contribution claims being brought more than 10 years from the act or omission on which the claim is based. We caught up with Madison Dobie and Rusi Jagose of Dentons Kensington Swan to discuss the implications of this uncertainty in the law.
What happened in BNZ Branch Properties v Wellington City Council  NZHC 1058?
In BNZ Branch Properties, BNZ brought negligence proceedings against the Council in relation to a building damaged in the Kaikoura earthquake. As is common in disputes in our industry, the Council sought to bring a contribution claim against Beca (the structural engineer on the project). This would allow the Council to recover against Beca should the Court find the Council had been negligent on the basis that, in such a circumstance, Beca contributed to the Council’s loss.
This decision opened the door to claims beyond the ten year period provided they were brought against the third party within two years of the primary judgment quantifying the loss (as required by the Limitation Act 2010). This creates more expansive liability for practitioners which, in turn, has the potential to impact the level of insurance that is required by contract across the industry.
What about in Body Corporate 378351 v Auckland Council  NZHC 2412?
Eleven months later, a contradictory decision came out in the High Court. The Court in Body Corporate 378351 v Auckland Council found that Parliament intended for the ten-year longstop period to apply to all claims made against people involved in the construction industry.
Associate Judge Bell was critical of the BNZ Branch Properties decision and instead agreed with previous case law regarding the matter on the basis that the purpose of s 393 was to allow building professionals to obtain insurance cover for pre-determined periods of time and drawing any distinction between original claims and contribution claims were justified.
So, what now?
We now have two conflicting decisions on whether contribution claims can be time-barred by the ten-year longstop. This adds to a history of conflicting decisions on this issue (although most have decided that the 10 year-long stop applies to contribution claims). This creates uncertainty within the construction industry and leaves building practitioners in an unclear position in terms of periods of liability.
The issue is set to come before the Court of Appeal in 2022 which will provide more clarity on the issue. Until then, you should proceed on the assumption that you may be liable beyond the ten-year longstop period. While you may be able to argue in a dispute that Body Corporate 378351 v Auckland Council applies and protects you from liability if the ten-year period has expired, proceeding on the basis that BNZ Branch Properties applies in your day-to-day risk management is the more conservative and safe approach.
There are steps you can take to manage the risk presented if contribution claims are not limited by the longstop period. We provided some useful guidance earlier in the year on steps you can take to manage the present risk presented by BNZ Branch Properties in our previous article on the issue. These steps include ensuring that your record-keeping is comprehensive and that file files are maintained for at least 10 years after the CCC is issued, keeping abreast of claims in relation to your projects even if you are not a party, and ensuring sufficient indemnity.
As in all things concerning liability, expect the best, prepare for the worst.
This article is not intended or designed to provide legal or other advice and you should not take, or refrain from taking, action based on its content. Dentons Kensington Swan does not accept liability other than to its clients, and then only in relation to specific requests of advice.