Body Corporate 169791 v Auckland City Council HC Auckland CIV 2004-404-5225
[2010] NZHC 1448
•17 August 2010
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2004-404-5225
BETWEEN BODY CORPORATE 169791
First Plaintiff
ANDMAGDA FODERMAYER & ORS Second Plaintiffs
ANDAUCKLAND CITY COUNCIL First Defendant
ANDLINES DESIGNS LIMITED Second Defendant
AND STEVEN MITCHELL
Third Defendant (Claim Discontinued)
ANDSYMPHONY GROUP LIMITED, SYMPHONY PROJECTS LIMITED, WAIMARIE MANAGEMENT LIMITED AND GLANVILLE INVESTMENTS LIMITED
Fourth Defendants
AND ONYX GROUP LIMITED
First Third Party (Claim Discontinued)
ANDGENERAL MANUKAU ENTERPRISES LIMITED
Second Third Party
ANDALUMINIUM CITY (PENROSE) LIMITED
Third Third Party (Claim Discontinued)
ANDMR MATTHEW VESEY (T/A CLADRITE DEVELOPMENTS) Fourth Third Party
ANDFIRE ENGINEERING CONSULTANTS LIMITED
Fifth Third Party (Claim Discontinued)
BODY CORPORATE 169791 AND ANOR V AUCKLAND CITY COUNCIL AND ORS HC AK CIV-2004-
404-5225 17 August 2010
ANDMR GREG ANTHONY THOMPSON (T/A HITEX PLASTERING)
Sixth Third Party (Claim Discontinued)
AND RON WRIGHT & ASSOCIATES
Seventh Third Party (Claim Discontinued)
ANDVERO LIABILITY INSURANCE LIMITED
Eighth Third Party (Claim Discontinued)
Hearing: 13 August 2010
Appearances: Mr D Heaney SC and Ms L Douglas for first defendant
Mr A R Armstrong for second third party
Judgment: 17 August 2010 at 2.30 pm
JUDGMENT OF LANG J
[on application by second third party for orders striking out third party claims
by first defendant and/or for summary judgment against first defendant]
This judgment was delivered by me on 17 August 2010 at 2.30 pm, pursuant to Rule
11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors:
Heaney & Co, Auckland
Young Hunter, Christchurch
Introduction
[1] This is a “leaky building” claim brought by the body corporate and unit owners (the plaintiffs) of an apartment complex situated at 8 Farnham Street, Parnell and known as Farnham Terraces. The complex was originally a warehouse, but in or about 1995 it was developed into 41 individual residential units.
[2] The plaintiffs claim that the units are defective and leaking. They say that Farnham Terraces needs to be demolished and rebuilt. The damages claimed, being the cost of demolishing and rebuilding the complex coupled with consequential and associated losses, exceed $27 million.
[3] The plaintiffs seek to recover those losses from the defendants, including the first defendant, the Auckland City Council.
[4] On 13 October 2006 the Council issued third party proceedings against General Manukau Enterprises Limited. General Manukau was responsible for installing a waterproof membrane to various surfaces of the development. As part of their overall claim against the Council, the plaintiffs allege that the membrane has failed, and say that the Council should be liable in respect of the costs associated with rendering the surfaces watertight. The Council claims that it is entitled to contribution and/or indemnity from General Manukau by virtue of s 17(1)(c) of the Law Reform Act 936. The Council says that, if it is liable to the plaintiffs, General Manukau would also have been liable to the plaintiffs as a concurrent tortfeasor.
[5] General Manukau has applied for leave to obtain summary judgment against the Council on the basis that it has a complete defence to the Council’s claim. Alternatively, General Manukau has applied for leave to seek an order that the Council’s third party claim against it be struck out in its entirety. Leave is required for both applications because the setting down date has now passed.
[6] Both applications rely on the proposition that, when the Council commenced its claim against General Manukau, the claim related only to building work that General Manukau carried out between May and November 1995. General Manukau says that the Council was not entitled to bring that claim, because the work that
formed the subject of the claim had been completed more than ten years prior to the date upon which the Council issued its claim. It relies upon s 393(2) of the Building Act 2004 (formerly s 91(2) of the Building Act 1991), which provides that civil proceedings relating to building work may not be brought against a person after ten years or more from the date of the act or omission on which the proceedings are based.
[7] The Council rejects these arguments. It says that s 393(2) of the Building Act
2004 does not apply to a claim by a defendant for contribution against a third party under s 17(1)(c) of the Law Reform Act 1936. It also says that, properly construed, its claim has never related solely to work that General Manukau carried out between May and November 1995. Rather, it has related to all the work that General Manukau carried out on the Farnham Terraces project, and that this work continued through until November 1999. As a result, at least part of the work was carried out within the 10 year period prior to the date upon which the Council issued its claim against General Manukau.
The applications for leave
[8] In its written submissions the Council contended that General Manukau had filed the applications so late in the piece that the Court should deny it leave to bring them. During oral argument, however, counsel abandoned this point.
[9] In my view that concession was properly made. There is no rule requiring a defendant or third party to file a strike out application or an application for summary judgment within a specified time frame. If the plaintiffs’ claim is doomed to fail, it is obviously preferable that that fact be recognised as soon as possible. For that reason a defendant or third party should always seek to terminate the claim against it as soon as possible if it genuinely believes that the claim is entirely devoid of merit. Any delay in taking that step will penalise both itself and the opposing party, because they will both continue to incur costs during the period before the applications are filed and determined.
[10] Having said that, it would be wrong in principle to require a defendant or third party to proceed to trial when the claim against it has no prospect of success. That would simply lead to further wasted costs. It would also penalise other parties to the proceeding, because the trial will be needlessly prolonged by the continued existence of the meritless claim.
[11] For that reason I will determine the applications for leave in accordance with the outcome of the substantive applications.
[12] Before considering the issues that they raise, it is necessary to briefly refer to the principles applicable to the two applications.
Relevant principles
Strike out
[13] General Manukau brings its application for an order striking out the claim pursuant to r 15.1(1) (a) and (d) of the High Court Rules. These permit the Court to strike out the whole or part of a pleading where it discloses no reasonably arguable cause of action, or where it is otherwise an abuse of the process of the Court.
[14] In determining whether a pleading discloses an arguable cause of action, the Court proceeds on the basis that the claimant will be able to prove all of the material factual allegations contained in the pleading. The issue to be determined is whether, based on that factual framework, the claimant can demonstrate the existence of an arguable cause of action. The jurisdiction is to be exercised sparingly, and only in clear cases: Couch v Attorney-General [2008] NZSC 45 at [33].
[15] In the present case General Manukau contends that the Council’s claim against it cannot succeed because it is statute-barred by s 393(2) of the Building Act
2004. Before that argument can succeed, General Manukau will need to demonstrate that the Council’s claim is so clearly statute-barred that its claim can properly be regarded as frivolous, vexatious or an abuse of the Court’s process: Trustees Executors Limited v Murray & Others [2007 NZSC 27 at [33].
Summary judgment
[16] General Manukau brings its application for summary judgment pursuant to r
12.2(2) of the High Court Rules. This permits the court to enter summary judgment against a plaintiff if the defendant can satisfy the court that none of the causes of action in the plaintiff’s statement of claim can succeed. Rule 12.2 applies to a third party seeking summary judgment against a defendant by the combined operation of r
4.7 and the definition of “plaintiff” contained in r 1.3 of the High Court Rules.
[17] The Court of Appeal discussed the approach to be taken in this context in Westpac Banking Corporation v M M Kembla (NZ) Limited [2001] 2 NZLR 298 at [58] to [64]. It noted at [60] that where a claim is untenable on the pleadings as a matter of law, it will not usually be necessary for the defendant to have recourse to the summary judgment procedure because it can apply to strike out the claim. The difference between a strike out application and a summary judgment application is that the former is generally determined on the basis of the pleadings, whilst the latter requires evidence.
[18] In the present case, for reasons that will become clear, the issues that both applications raise can appropriately be determined on the basis of the pleadings. For that reason it is appropriate to deal with the application for strike out first.
The issues
[19] The strike out application raises two issues. They are:
(i)Does s 393(2) of the Building Act 2004 prevent the Council from seeking contribution from General Manukau in respect of work that General Manukau carried out more than 10 years before the Council issued its third party claim?
(ii)If it does, is the Council’s third party claim against General Manukau so clearly statute-barred that it should be struck out?
[20] I propose to deal with the issues in the order in which I have set them out above. If the Council’s argument in relation to the first issue is correct, there will be no need for me to go on to consider the second issue.
Does s 393(2) of the Building Act 2004 prevent the Council from seeking contribution from General Manukau in respect of work that General Manukau carried out more than 10 years before the Council issued its third party claim?
The issue
[21] Section 393(2) and its predecessor, s 91(2) of the 1991 Act, are commonly referred to as “long stop” provisions, because they impose a finite time limit within which claims relating to defects in the construction of buildings must be issued. They operate to prevent any claims being brought after ten years from the date of occurrence of the act or omission upon which the claim is based. A useful summary of the legislative history of s 91(2) is to be found in Klinac v Lehmann HC, Whangarei AP 15/01, 6 December 2001 at [13] to [25].
[22] Under the law as it stood before the introduction of s 91(2), a plaintiff suing in negligence in relation to latent defects in a building had six years from the date upon which the defect was reasonably discoverable to issue proceedings. As Glazebrook J pointed out in Klinac at [15], the temporally unlimited liability of those involved in the construction industry was seen as undesirable. Open-ended liability had significant ramifications for those parties, particularly in the field of obtaining and meeting the cost of appropriate insurance cover. Concerns about the liability of local authorities in negligence were also a driving force behind the legislation. These concerns led Parliament to require all civil proceedings relating to defective building work to be issued within 10 years of the occurrence of the act or omission forming the basis of the plaintiff’s claim. The selection of ten years as the time by which claims had to be issued was no doubt based on the premise that, in most cases, building defects would become apparent within ten years of the date of construction.
[23] There is now no doubt that, as between the owner of a building and those whom he or she chooses to sue for defects in the building, claims are absolutely
barred after ten years from the date upon which the building work was carried out. There are no exceptions to that rule, even in cases involving fraudulent concealment of wrongdoing. In Johnson v Watson CA 294/01 5 December 2002 the Court of Appeal emphatically rejected the proposition that s 28 of the Limitation Act 1950, which extends the time for filing a claim in cases involving concealment of wrongdoing by fraud, applied to cases relating to defective building work. The Court said:
[8] We cannot, however, accept Mr Kohler’s submission that if there was concealment by fraud, as is alleged, s28 operates so as to extend the ten year period prescribed by s91(2). Section 28 is concerned with when a cause of action accrues. If concealed by fraud, its accrual is postponed. Section
91(2) is by contrast concerned with the act or omission on which the proceedings are based. An act or omission occurs on a particular day. No
question of extension of time can logically arise when the starting point is measured from the day of the occurrence of an act or omission.
Furthermore, it is clear from the introductory words of s91(2) that the provisions of the Limitation Act do not apply to the subsection(2) time limit of ten years. Subsection (2) is in this respect a statutory bar which is self-contained, both as to the commencement of the period allowed and its duration. In short, s91(2) means exactly what is says. A plaintiff cannot in any circumstances sue more than ten years after the act or omission on which the proceedings are based, if the case involves, as this one clearly does, building work associated with the construction of a building.(Emphasis added)
[24] The proposition set out in the last sentence of this passage does not necessarily answer the issue in the present case, because the plaintiffs are not suing General Manukau. Rather, the Council seeks an order requiring General Manukau to contribute to any damages that the Council might be required to pay to the plaintiffs on the basis that General Manukau is a concurrent tortfeasor with the Council.
[25] A plaintiff has always had an unfettered right to select the parties that were to be the defendants in a claim for negligence. This led to hardship in many cases, because a single defendant could be left liable to meet all of the plaintiffs’ losses. This could occur despite the fact that several other parties were also responsible for causing those losses.
[26] In order to ameliorate this hardship, Parliament enacted legislation allowing which one tortfeasor to seek a contribution from other tortfeasors who would also have been liable to the plaintiff if the plaintiff had chosen to sue them. The right to
obtain contribution in this way is now contained in s 17 (1)(c) of the Law Reform
Act 1936, which provides:
17Proceedings against, and contribution between, joint and several tortfeasors
(1)Where damage is suffered by any person as a result of a tort (whether a crime or not)—
…
(c) Any tortfeasor liable in respect of that damage may recover contribution from any other tortfeasor who is, or would if sued [in time] have been, liable in respect of the same damage, whether as a joint tortfeasor or otherwise, so, however, that no person shall be entitled to recover contribution under this section from any person entitled to be indemnified by him in respect of the liability in respect of which the contribution is sought.
[27] The date upon which a cause of action based on a claim for contribution accrues is determined by s 14 of the Limitation Act 1950, which provides:
14 Accrual of cause of action on claim for contribution or indemnity
For the purposes of any claim for a sum of money by way of contribution or indemnity, however the right to contribution or indemnity arises, the cause of action in respect of the claim shall be deemed to have accrued at the first point of time when everything has happened which would have to be proved to enable judgment to be obtained for a sum of money in respect of the claim.
[28] Thus, s 14 may extend the time within which a claim for contribution may be made to a point well beyond the expiry of the six year limit applicable to the original claim between the plaintiff and the defendant. This was no doubt felt to be necessary because a plaintiff might not settle, or obtain judgment in respect of, a claim against a defendant until a point in time close to, or even after, the expiry of the limitation period in respect of the original claim. If that limitation period also applied to a claim for contribution, the effectiveness of the remedy could be compromised.
[29] If the limitation period prescribed by s 14 applies to the Council’s claim for contribution against General Manukau, the Council’s claim will not be statute- barred, because the plaintiffs have yet to establish their claims against the Council. As a result, the limitation period has not yet begun to run. If, on the other hand, s 14 is subject to s 393(2) of the Building Act 2004, the claim will be out of time to the
extent that it relates to building works carried out more than ten years prior to the date upon which the Council issued its third party claim against General Manukau.
The authorities
[30] This issue has been discussed in several cases in this Court, but it has never been considered by the Court of Appeal. Resolution of the issue is complicated, however, by the fact that the authorities go both ways. In the earliest case, Cromwell Plumbing and Drainage Services Limited v De Geest (1995) 9 PRNZ 218, John Hansen J held that the limitation period for a claim for contribution was not governed by s 91(2) of the 1991 Act. Rather, it was governed by s 14 of the Limitation Act 1950. As a result, the claim for contribution in that case was permitted to proceed notwithstanding the fact that the building work that led to the claim being made had occurred more than ten years prior to the date upon which the claim was issued.
[31] In Dustin v Weathertight Homes Resolution Service HC Auckland CIV 2006-
404-276, 25 May 2006, Courtney J reached the opposite conclusion. She found that the long stop provisions of the Building Act 1991 applied to a claim for contribution, and that the claim in that case was statute-barred because the building work in question had been carried out more than ten years before the claim for contribution was issued.
[32] Counsel have been unable to find any other cases in which the approach taken by John Hansen J in Cromwell has been followed or cited with approval. The approach taken by Courtney J in Dustin has, however, been adopted and followed in several subsequent cases: Carter Holt Harvey Limited v Genesis Power & Others (No 8) HC Auckland CIV 2008-404-1974, 29 August 2008, at [44]; Davidson v Banks HC Auckland CIV 2006-404-6150, 23 March 2009, at [18] and Lee v North Shore City Council HC Auckland CIV 2009-404-2091, 12 April 2010, Associate Judge Bell at [46].
[33] The Council points out that the comments that Courtney J made in Dustin
were obiter, and that none of the Judges in the other cases listed above undertook any
detailed analysis of the issue that now needs to be determined. For that reason it submits that Cromwell remains the only authority that is directly on point. It also contends that Cromwell was correctly decided, and that I should follow the approach taken by John Hansen J in that case rather than the approach that Courtney J took in Dustin.
[34] The reasons that John Hansen J gave in support of his conclusion can be summarised as follows:
(i)Section 17(1)(c) of the Law Reform Act 1936 and s 14 of the Limitation Act create a specific and self-contained code prescribing the time within which a claim may be made for contribution.
(ii)The existence of s 91(2) does not bring s 33 of the Limitation Act 1950 into play. Section 33 provides that the limitation periods prescribed by the Limitation Act 1950 do not apply to any action for which a limitation period is prescribed by another enactment. A claim for contribution is a statutory cause of action created by s 17(1) of the Law Reform Act 1936. It is not a claim based on building work. Section
91(2), on the other hand, applies to claims relating to building work. The two causes of action are therefore separate and distinct. For that reason s 91(2) does not apply to claims for contribution. The limitation periods prescribed by the Limitation Act 1950 continue to apply to claims for contribution.
(iii)If Parliament had intended the time limit imposed by s 91(2) to apply to claims for contribution, it would have made express statutory provision in s 17(1)(c) for that to occur. An example of Parliament taking this approach is to be found in s 36 of the Carriage by Air Act 1967, which limits the time for making a claim for contribution to two years after the accrual of the cause of action. The fact that Parliament has not amended the Law Reform Act in a similar way suggests that it did not intend to restrict the period of time within which claims for contribution could be brought pursuant to s 17(1)(c).
(iv)If s 91(2) was to override s 14, it would significantly truncate the statutory period presently allowed for the making of a claim for contribution. That outcome should only be permitted by express wording in the relevant statutes.
(v)If s 91(2) was to override s 14, it would render s 17(1)(c) effectively meaningless in all cases relating to buildings. Again, if that was Parliament’s intention, it would have said so expressly.
[35] In Dustin Courtney J carefully examined (at [15] to [35]) the reasoning that
John Hansen J had applied in Cromwell. Her conclusions were as follows:
(i)Whilst s 91(2) truncates the period within which claims relating to building work must be commenced, that is a proper reason for not applying the section to claims for contribution. An inevitable result of any long stop legislation is that it will preclude some claims that would otherwise be valid. Although that may cause injustice in some cases, it is one of the compromises inherent in a scheme designed to achieve a greater good. That greater good is the certainty and finality that long stop legislation can provide to all parties involved in the construction industry. That policy factor applies with as much force to claims for contribution as to primary claims between plaintiffs and defendants.
(ii) It overstates the position to say that s 91(2) will operate to render s
17(1)(c) meaningless. Although a defendant will now have less time within which to bring a claim for contribution than was previously the case, the ability to issue third party proceedings means that claims for contribution can be determined within the context of the proceeding in which the plaintiff seeks judgment against the defendant. That can occur even though the cause of action in relation to that third party has not yet accrued. Many claims for contribution will therefore not be affected by s 91(2).
(iii)The wording of s 91(2) is plain and unambiguous. The clarity of the language that Parliament has used is reflected in the comments made by the Court of Appeal in Johnson v Watson (cited above at [23]). There was therefore no need for Parliament to go further and amend s 17(1)(c) of the Law Reform Act 1936 to make it expressly subject to s 91(2).
(iv) It is not useful to compare s 91(2) with s 36 of the Carriage by Air Act
1967, because that section did no more than prescribe a different limitation period to that prescribed by the Limitation Act 1950. Section
33 of the latter Act therefore gave the limitation period prescribed by s
36 primacy over that prescribed by the Limitation Act 1950.
(v)By implication John Hansen J treated the plaintiff’s claim against the defendant as being a civil proceeding, but not the claim for contribution. This was clearly wrong, because a claim for contribution is a civil proceeding in the same way that the plaintiff’s claim against the defendant is a civil proceeding. It does not matter whether the cause of action was created by statute rather than by the common law or the law of contract.
(vi)The defendant’s own liability turned on whether the building work that the third party had carried out was defective. When viewed objectively, the claim for contribution in respect of that work could therefore properly be regarded as a claim relating to building work as that term was defined in s 2 of the 1991 Act. Section 2 defines such work as being “work for or in connection with the construction, alteration, demolition, or removal of a building; and includes site works”.
Should I follow Cromwell or Dustin?
[36] In my respectful view the analysis that Courtney undertook in Dustin provides a convincing response to most of the reasoning that underpins John Hansen J’s ultimate conclusion in Cromwell.
[37] I would also add that, in my view, s 33 does come into play in relation to a claim for contribution when the claim relates to allegedly defective building work. Section 393 is headed “Limitation defences”, so it clearly relates to limitation periods within which claims may be commenced. Section 393(2) prohibits civil proceedings relating to building work being commenced against any person after ten years or more from the date of the act or omission on which the proceeding is based. I consider that this prohibition effectively imposes a separate limitation period in respect of all civil proceedings relating to building work. That limitation period must, by virtue of s 33 of the Limitation Act 1950, override the general limitation provisions contained in that Act.
[38] I do not consider that the fact that Courtney J’s comments were obiter diminishes the weight that they should be given. Dustin came before Courtney J as an application for judicial review of a decision of an adjudicator appointed under the Weathertight Homes Resolution Service Act 2002. Mr Dustin was joined as a respondent to an existing proceeding under the Act at the instigation of another party, the Auckland City Council. He had, however, carried out the work that was the subject of the Council’s claim against him more than ten years before he was joined to the proceeding. For that reason he relied upon s 91(2) of the 1991 Act in applying for an order that the claim against him be struck out. In declining Mr Dustin’s application, the adjudicator had applied the reasoning used by John Hansen J in Cromwell. Mr Dustin sought judicial review of that decision.
[39] Not surprisingly, Courtney J held that the adjudicator was bound by the decision in Cromwell. For that reason it could not be said that he committed an error of law when he applied Cromwell to dismiss Mr Dustin’s application. The Judge did not, however, leave matters there. She recognised that the same issue was likely to arise again in the future, and that adjudicators would continue to be bound by the reasoning in Cromwell until the issue came squarely before this Court again. It was against that background that the Judge elected to carefully examine the reasoning in Cromwell in order to determine whether it was correct. Her reasoning and conclusions were obviously designed to provide adjudicators with an alternative path to follow when determining whether s 91(2) overrode s 17(1)(c).
[40] The principal concern that I have about the reasoning in Cromwell is that it concentrates almost exclusively on the right of a defendant to seek a contribution from a concurrent tortfeasor, and the impact that application of s 91(2) would have on that right. It does not place any weight at all upon the plain and unambiguous wording used in s 91(2).
[41] I consider that Parliament has worded s 91(2) and s 393(2) carefully. In using the phrase “civil proceedings”, it has endeavoured to capture every form of civil proceeding regardless of its source or makeup. Similarly, in using the words “relating to building work” Parliament has attempted to capture every civil proceeding that arises out of building work as that term is defined in s 2 of the Act. If Parliament had intended s 91(2) or s 393(2) to apply only to claims between a plaintiff and a defendant, it would have used wording that would have made that fact clear.
[42] That conclusion is supported by powerful policy considerations. The enactment of s 91(2) and s 393(2) signalled that Parliament intended that civil proceedings relating to building work were to be subject to a 10 year long stop period. That policy decision was taken in the interests of achieving a higher goal, and its implementation has necessarily been at the expense of some claims that would otherwise have been valid. I see no justification for distinguishing in this context between a primary claim by a plaintiff against a defendant and a claim for contribution by a defendant against a concurrent tortfeasor.
[43] The greater good that Parliament has sought to achieve will not be met if there is one rule for plaintiffs and defendants and another rule for defendants and third parties. If that occurs, there will be no finality for a party in the position of General Manukau, because it will remain at risk of being sued by other parties for a period of six years after those parties have either settled a claim or been found liable in respect of it. Although that may be an acceptable outcome in the general run of cases, it would not be acceptable in the context of claims relating to building work.
[44] The Council’s claim for contribution against General Manukau is clearly a civil proceeding notwithstanding the fact that it is a creature of statute. For that
reason it is potentially caught by s 393(2). The only issue to be determined is whether the Council’s claim relates to building work in terms of s 393(2).
[45] In my view the answer is obvious. General Manukau would only be liable to contribute to any amount that the Council is required to pay to the plaintiffs if the work that General Manukau carried out in relation to the installation of the waterproofing membrane is found to be defective. The Council’s claim for contribution is based on that very premise. If the Council cannot show that the work that General Manukau carried out was defective and that it contributed to the plaintiffs’ loss, it will not be entitled to claim any contribution from General Manukau. The building work that General Manukau carried out therefore lies at the very heart of the claim for contribution. Viewed in this light, I consider that the Council’s claim for contribution must relate to the building work that General Manukau carried out. It is therefore a civil proceeding to which s 393(2) applies.
[46] Like Courtney J, I also reject the proposition that the interpretation for which General Manukau contends will render s 17(1)(c) of the Law Reform Act 1936 meaningless or of little utility. The present case provides a helpful illustration of why that should not be the case, although I accept that defendants will generally need to move expeditiously in order to prevent claims against third parties from being statute-barred. The plaintiffs issued the present proceeding on 24 September
2004 against the Council and three other defendants. Given the fact that General Manukau appears to have carried out the initial installation of the waterproofing membrane between May and November 1995, the Council had approximately 14 months within which to identify General Manukau as a potential third party and to issue a claim for contribution against it. It is not General Manukau’s fault that the Council did not issue third party proceedings against it until 13 October 2006.
[47] My conclusion on this point is not altered by several other factors that the Council relies upon in the present case. The first of these is that Cromwell appears to have remained good law for approximately 11 years until it was brought into question by Dustin. The Council points out that Parliament must be taken to have been aware of the existence and effect of Cromwell when it enacted s 393(2) of the
2004 Act. In enacting s 393(2) in substantially the same form as s 91(2), Parliament
must be taken to have endorsed the manner in which John Hansen J interpreted s
91(2) in Cromwell.
[48] Courtney J rejected a similar argument in Dustin at [33] and [34]. She said that there “was no basis on which to assume that the legislature was aware of the decision in Cromwell”. She also said that, even if Parliament had been aware of Cromwell, the very clear words that the Court of Appeal used in Johnson v Watson (cited earlier at [23]) would have reassured Parliament that the courts would interpret the Act in such a manner that the wording of the new section did not need to be changed.
[49] I take a similar view. There is nothing to suggest that Cromwell attracted any significant attention either at the time that it was decided or subsequently. It was not reported and does not appear to have been the subject of any judicial comment until Dustin. It does not appear to have been the subject of academic attention either. The reality may be, as counsel for General Manukau suggests, that the issue that arose in Cromwell did not assume any real significance until after leaky building cases began to become a phenomenon in the mid-2000’s. I would therefore not be at all surprised if the legislature had no knowledge of Cromwell when it enacted the 2004 Act.
[50] Secondly, the Council points to the fact that there is now a line of cases in which the courts have been prepared to find that liability should attach to a defendant even after 10 years in circumstances where defective building works lie at the heart of the plaintiff’s claim. These comprise Klinac v Lehmann (supra), Gedye v South Family Trust [2010] NZCA 207 (CA); [2010] NZSC 97 (SC) and Lee v North Shore City Council & Others (supra). The Council contends that these cases are analogous to the present, and that they demonstrate that the long stop provisions do not apply universally to all civil proceedings.
[51] All of these cases, however, involved either an alleged misrepresentation or breach of contractual warranty by the vendor of a property. The manner in which the property had been built formed the subject matter of the warranty or representation. In each case, the court held that the misrepresentation or warranty was actionable
notwithstanding the fact that the building work in question had been completed more than 10 years before the proceeding was issued.
[52] I do not consider that this line of authority is of any assistance in the present context, because the cause of action in each did not relate to the building work. Rather, it was based on the alleged misrepresentation or breach of a warranty. As Glazebrook J pointed out in Klinac at [50], in such a case the defective work is only relevant because it assists the plaintiff to prove that a representation was false or that a term of the contract was breached. Similarly, when the Supreme Court dismissed an application by Mr and Mrs Gedye for leave to appeal it said:
[2] Mr and Mrs Gedye applied for summary judgment relying on s 91(2)
of the Building Act:
Civil proceedings relating to any building work may not be brought against any person 10 years or more after the date of the act or omission on which the proceedings are based.
[3] The High Court and the Court of Appeal have refused summary judgment, holding that the act or omission on which the proceedings are based is not the carrying out of the building works but the breach of warranty in 2003 (and thus within the six year limitation period in the Limitation Act 1950 which applies by virtue of s 91(2)).
[4] We consider that this view is undoubtedly correct. The act or omission is the breach of contract. The claim against the Gedyes, as framed, could not succeed simply and only if the building works were non-compliant and the contractual warranty had not been given. It was in respect of the latter event that the claim arose. Furthermore, on the argument proposed for the applicant, if the warranty had been given on a sale more than 10 years after the building works were done, it would never be enforceable by proceedings. That cannot be the position.
[53] Next, the Council argued that the interpretation for which General Manukau contends will deprive the words “if sued in time” in s 17(1)(c) of the Law Reform Act 1936 of any real meaning. I do not accept this submission. As Associate Judge Bell pointed out in Lee at [49], these words mean that a concurrent tortfeasor who is the subject of a claim for contribution under s 17(1)(c) cannot raise as a defence the fact that the tort for which he is alleged to be liable is now statute-barred. Without those words the concurrent tortfeasor could have defended a claim for contribution on the basis that the limitation period for the wrongdoing in respect of which he or she was being sued had already expired. The words “in time” remove that defence.
The words will continue to have effect in many cases, and will not be diminished in any way by the interpretation that I propose to give to s 393(2).
[54] Finally, the Council submitted that it would not be fair or equitable for it to be solely liable to meet a claim for damages in respect of building defects that General Manukau was responsible for creating. It contended that the interests of justice require General Manukau to contribute to any damages that the Council might be required to pay to the plaintiffs.
[55] The answer to this submission has already been given. The long stop provisions will inevitably result in some otherwise meritorious claims becoming statute-barred. In some cases that will work in the Council’s favour. In others it will not. That outcome is simply a fact of life that the Council, in common with other defendants, will have to accept and live with. It does not mean that the clear words of s 393(2) are to be ignored.
Conclusion
[56] For the reasons that I have given, I reach the same conclusion as Courtney J in Dustin. I consider that s 393(2) of the Building Act 2004 overrides s 17(1)(c) of the Law Reform Act 1936 and s 14 of the Limitation Act 1950. It prevents the Council from claiming contribution from General Manukau in respect of building work that General Manukau carried out more than ten years prior to the date upon which the Council issued its claim.
Is the Council’s claim against General Manukau so clearly statute-barred that it should be struck out?
[57] The Council issued its third party proceeding against General Manukau on 13
October 2006. This means that it is prevented by s 393(2) from seeking any contribution from General Manukau in respect of building work that it carried out prior to 13 October 1996.
[58] This presents an immediate problem for the Council, because its original statement of claim against General Manukau was worded as follows:
9. The property was developed and constructed from 1994 onwards.
…
14.The second third party, General Manukau Enterprises Limited (General Manukau) carried out waterproofing works during construction of the property:
(a) In or about May 1995, General Manukau agreed with the fourth defendants to carry out waterproofing works to the property.
(b) From mid May 1995 to November 1995, General Manukau carried out waterproofing works to the property.
…
19.General Manukau owed the plaintiffs a duty of care to exercise reasonable skill and care in ensuring that the waterproofing works were carried out in a proper and workmanlike manner.
…
21. In breach of the abovementioned duty:
(a) The waterproofing works carried out by General Manukau were defective.
(b)The waterproofing works carried out by General Manukau were not completed in a proper and workmanlike manner.
Particulars
(i) General Manukau installed waterproofing membrane to the common walkways and patio areas of the property between May 1995 to November 1995.
(ii) The waterproofing membrane has failed to common walkways and patio areas, as more particularly described by the plaintiffs in their second amended statement of claim.
(iii) In particular, General Manukau did not adequately join the waterproofing membrane at changes in height along the line of and under the walls separating the patios from the common walkways.
(iv) The waterproofing membrane has failed at the corners of the upstands and sheet joints, such that water has entered at those corners.
(v) General Manukau did not provide a separate gusset to deal properly with angles created by the columns at the front of each unit.
(vi) Generally, the waterproofing membrane was installed poorly.
By way of example, parts of the waterproofing membrane were installed over debris such as nails and wood.
[59] The Council contends that, taken as a whole, the original claim against General Manukau related to all work that General Manukau carried out during the construction of the property. It does not accept that its original claim was restricted to the work that General Manukau carried out between May and November 1995.
[60] I do not accept this submission. The statement of claim alleges in both para
14 and in the particulars provided in support of para 21 that the Council is seeking contribution in respect of the waterproofing work that General Manukau carried out between May and November 1995. It does not refer to any work that General Manukau is alleged to have carried out after November 1995. For that reason the entire claim as particularised in the statement of claim filed on 13 October 2006 is clearly statute-barred by virtue of s 393(2) of the 2004 Act.
[61] The Council attempted to rectify the position by filing an amended statement of claim on 14 June 2010. The significance of this document lies in alterations that the Council has made to the paragraphs that now appear in substitution for paras 14 and 21 of the original statement of claim. They are paras 13 and 20, which read as follows:
13.The second third party, General Manukau Enterprises Limited (General Manukau) carried out waterproofing works during construction of the property:
(a) In or about May 1995, General Manukau agreed with the fourth defendants to carry out waterproofing works to the property
(b) From mid May 1995, General Manukau carried out waterproofing works to the property.
…
20. In breach of the abovementioned duty:
(a) The waterproofing works carried out by General Manukau were defective.
(b) The waterproofing works carried out by General Manukau were not completed in a proper and workmanlike manner.
Particulars
(i) General Manukau installed waterproofing membrane to the common walkways and patio areas of the property on or after May 1995.
(ii) The waterproofing membrane has failed to common walkways and patio areas, as more particularly described by the plaintiffs in their fourth amended statement of claim.
(iii) In particular, the plaintiffs claim that the walkways and private patios contain the following defects:
(1)Failure of waterproof membranes to common walkway and patio areas and inadequate joining of membranes at change in height of membrane relative to these two areas;
(2)Inadequate detailing in the design and location of surface water drainage making it impossible to inspect and clean;
(3)Inadequate waterproof membrane detailing at rainwater drainpipe penetrations through the walkways;
(4)Inadequate waterproofing due to discontinuous waterproof membranes at walls between units;
(5)Inadequate waterproofing at fixings through membranes to support boundary walls;
(6)A higher external level than internal level has resulted in insufficient clearance between the interior and exterior levels of the doorways to the units from the patio and walkways;
(7) Poor threshold detailing at stairway down to garage;
(8)Areas of main external wall cladding and party fence wall cladding has been buried below paved surfaces and is installed contrary to manufacturers recommendations;
(9)Lack of support to membranes where floorboards missing;
(10)Poor detailing at the junction of the roof over the stair access to the garage level to the walkway.
[62] The Council contends that the amended statement of claim makes it clear that its claim does not relate solely to the work that General Manukau carried out between May and November 1995. Instead, it relates to all work that General Manukau carried out during the period that the development was being built. The
Council says, in fact, that General Manukau did not complete the work in 1995, and that it was recalled to the site constantly to remedy defects between the end of 1995 and November 1999.
[63] The Council may only amend its claim against General Manukau provided it does not introduce a new cause of action that itself is statute-barred: r 7.72(a) of the High Court Rules. In my view any claim by the Council that relates to work carried out after November 1995 must be a new claim, because it did not form part of the original claim that it filed on 13 October 2006.
[64] The effect of s 393(2) of the 2004 Act means that any claim in respect of work carried out before 14 June 2000 (being ten years prior to the filing of the amended statement of claim) is now statute-barred.
[65] Strictly speaking, it is necessary to go beyond the pleadings and to have regard to the evidence in order to determine when General Manukau ceased work on the project. Had it been necessary to do so, I could therefore have determined this aspect of the argument using the summary judgment procedure. I took counsel for the Council to accept during the hearing, however, that General Manukau finally finished working at the project at some stage during 1999. This means that it had completed all work on the project more than ten years prior to the date upon which the Council issued its amended statement of claim. As a result, the new claim is also statute-barred, and the Council is therefore prevented by r 7.72(a) from amending its claim so as to seek contribution from General Manukau in respect of it.
[66] For these reasons I have concluded that both the original claim in 2006 and the amended claim in 2010 are so clearly statute-barred by virtue of s 393(2) of the Building Act 2004 that it would be an abuse of process to permit them to continue.
Result
[67] Leave to apply to strike out the Council’s claim is granted. Leave is also granted to apply for summary judgment.
[68] The application to strike out the claim in its entirety is also granted.
[69] In case I have no jurisdiction based on the pleadings alone to strike out that part of the amended claim that relates to work carried out after November 1995, I record that I would have entered summary judgment against the Council in respect of that aspect of its claim had it been necessary to do so.
[70] The proceeding having been struck out in its entirety, there is no need to consider the application for summary judgment further.
Costs
[71] Ordinarily costs would follow the event in the usual way. In the present case, however, there is a complicating factor.
[72] There can be no doubt that General Manukau has been guilty of inordinate delay in bringing the present applications. It must have known for some considerable time that it had good grounds for applying for strike out and/or summary judgment, but it has elected not to file and serve the present applications until just a few months out from trial. As I have already indicated at [10], that fact would not justify the applications being dismissed, but it could well be relevant to the issue of costs in relation to the proceeding as a whole.
[73] I do not, however, accept the Council’s submission that it should be awarded full costs in relation to all steps taken in the proceeding up to the present point in time. General Manukau did not ask or volunteer to be joined to the proceeding. It only became involved because the Council elected to issue third party proceedings against it. If the Council had no right to do that, then the Council cannot expect to receive costs from General Manukau.
[74] It seems to me that an appropriate solution would be for General Manukau to be required to forego any award of costs in respect of the proceeding for the period during which it elected not to file its applications when it ought to have appreciated that it was in a position to do so.
[75] I would be grateful if counsel could give thought to that issue and provide their responses in memoranda (no longer than seven pages in length) to be filed on behalf of General Manukau within 21 days and on behalf of the Council within
14 days after that. Any reply by General Manukau is to be filed and served within seven days of receiving the Councils memorandum.
Lang J
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