Carter Holt Harvey Limited v Genesis Power Limited HC Auckland CIV 2001-404-001974
[2008] NZHC 2545
•29 August 2008
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2001-404-001974
BETWEEN CARTER HOLT HARVEY LIMITED Plaintiff
ANDGENESIS POWER LIMITED First Defendant
ANDROLLS-ROYCE NEW ZEALAND LIMITED
Second Defendant
ANDROLLS-ROYCE POWER ENGINEERING PLC Third Party
ANDROLLS-ROYCE POWER ENGINEERING PLC Third Party
Counsel: B R Latimour, I M Gault & B M M McKinlay for Plaintiff
T C Weston QC & C L Bryant for First Defendant
G Christie & T Tomlinson for Second Defendant and Third Party
Judgment: 29 August 2008
RESERVED JUDGMENT (No 8) OF RANDERSON J
(On Application by Plaintiff for leave to File Sixth Amended Statement of
Claim)
This judgment was delivered by me on 29 August 2008 at 5 pm, pursuant to r 540(4) of the High Court Rules
Registrar/Deputy Registrar
Solicitors: Bell Gully, PO Box 4199, Auckland
Hesketh Henry, Private Bag 92093, Auckland
Simpson Grierson, Private Bag 92518, Wellesley Street, Auckland
Counsel: T C Weston QC, PO Box 3976, Christchurch
CARTER HOLT HARVEY LIMITED V GENESIS POWER LIMITED AND ORS HC AK CIV 2001-404-
001974 29 August 2008
Introduction
[1] In 1995 the first defendant Genesis contracted with the plaintiff Carter Holt to arrange the construction of a co-generation plant at Carter Holt’s Kinleith Mill (the Co-Generation Contract). In turn, Genesis contracted in the same year with the second defendant Rolls-Royce to design, manufacture, construct, install, test and commission the plant in accordance with detailed technical specifications (the Turnkey Contract).
[2] A key term of the Co-Generation Contract was that Genesis undertook to use its best endeavours to ensure that the plant was manufactured, constructed, installed, erected and commissioned in accordance with the Turnkey Contract.
[3] The plant was constructed and a Taking-Over certificate was issued by the engineer under the Turnkey Contract on 30 January 1998. A defects liability period of up to two years then followed ending at the latest on 19 January 2001. Carter Holt encountered difficulties with the performance of the plant and alleged a number of defects. On 31 March 1999, Carter Holt and Genesis entered into an Amendment Agreement under which Genesis agreed to use its best endeavours to procure Rolls- Royce to perform its obligations under the Turnkey Contract to remedy any defect or damage in the plant.
[4] Carter Holt says it has continued to encounter defects in the plant and, despite remedial work being carried out, it still does not perform in accordance with the contractual terms. It also says that Genesis is in breach of the Amendment Agreement. Carter Holt issued this proceeding against Genesis and Rolls-Royce in May 2001 for breach of contract and against Genesis for alleged pre-contractual misrepresentation. The pleadings have been much amended and, over time, the particulars of the defects alleged in the plant and the direct and consequential losses said to arise have been developed and refined. The amount now claimed is in excess of $170 million.
[5] Each of the parties has engaged a number of expert witnesses and the principal briefs of evidence have been exchanged. A four-month fixture was set to
proceed on 30 June 2008. Then, on 28 April 2008, Carter Holt lodged an application for leave to amend the statement of claim. The application was strongly opposed by the defendants particularly given the imminence of the fixture. For other reasons, it became necessary to adjourn the fixture which is now to commence on 20 April
2009.
[6] Although a new setting down date of 6 March 2009 has been fixed, the parties are nevertheless agreed that leave to amend is necessary under r 187 High Court Rules in terms of directions I gave prior to the adjournment of the fixture. That is appropriate since the defendants contend that the amendment sought amounts to an introduction of a fresh cause of action which is statute barred in terms of r
187(3) which provides:
(3) An amended pleading may introduce—
(a) A fresh cause of action which is not statute barred; or
(b) A fresh ground of defence,—
whether as an alternative or not.
[7] Carter Holt accepts that if the amendment does amount to the introduction of a fresh cause of action in contract against Genesis it would be out of time under s 4(1)(a) Limitation Act 1950. Carter Holt does not accept that any new claim in negligence against Rolls-Royce is statute barred but Rolls-Royce submits to the contrary. Carter Holt’s principal contention however is that the amendment sought simply provides additional particulars of the existing causes of action and that limitation arguments do not apply accordingly.
[8] A further issue of significance is whether the long stop limitation provisions of the Building Act 2004 or its predecessor operate to preclude recovery under the proposed amendment.
The Nature of the Amendment
[9] One of the key elements of the plant is the boiler which produces steam for use in Carter Holt’s mill and is also used to generate electricity. The plant was
designed to burn woodwaste supplemented by gas. Key aspects of the breaches alleged in the present statement of claim are that the plant does not and cannot achieve 99.5 percent availability; does not and cannot achieve a design life of 25 years; and does not and cannot achieve 100 tonnes/hour of steam while burning woodwaste alone. Carter Holt further alleges (without limitation) that defects existed in the woodwaste handling systems, ash handling, boiler grate and turbine generator areas of the plant.
[10] Specifically in relation to the boiler itself (as distinct from the other systems and items of plant connected with it) para (c) of Appendix 1 of the last amended statement of claim alleges:
Boiler pressure parts – availability: The boiler pressure parts have not remained available, and are unable to remain available, for a minimum of
17,000 hours within a continuous 730 day period. Particular defects that the boiler pressure parts suffer from include:
(i) Weldments are poor and suffer from substandard design and detailing resulting in persistent and chronic failures in weldments.
(ii) Orifice plates intended to control circulation patterns and rates are either missing or defective due to poor construction and inadequate inspection.
(iii) Failures occur in the economiser due to erosion of tubes from flue side in turn due to inadequate control of local gas flow patterns.
(iv) Large parts of the generating banks are essentially inaccessible and therefore unrepairable by any reasonable means.
(v) Failure to provide adequate means to take up boiler expansion at the support piers without subjecting the working parts to excessive stresses.
[11] The amendment seeks to introduce a further item in the list of particulars contained in Appendix 1 of the statement of claim to allege a defect in relation to the boiler structure itself. In particular the central allegation of the amendment is:
The boiler structure did not comply with the design codes required under the Turnkey Contract, including the American Society of Mechanical Engineers Boiler & Pressure Vessel Design Code (ASME 1) (1995 Edition), NZS
4203:1992, and Ministry of Works and Development Seismic Design of
Petrochemical Plants (1981 Edition).
[12] Further particulars are included in the draft amended statement of claim filed with the application but, in essence, it is said that the failure to comply with the
relevant standards means there is “a real possibility” that some of the junctions within the boiler structure may fail during an earthquake of the maximum design magnitude. Carter Holt says that it did not become aware this was an issue until last year and that it immediately notified the defendants. It has since been taking steps to have the matter investigated by its expert advisers. Carter Holt accepts that the existence of the seismic issue would not have been apparent from the existing pleading and had not been drawn to the attention of the defendants or their advisers until it was discovered last year.
[13] The extent of any loss attributable to the seismic issue has not been particularised but is understood to be around $3 million.
The Background to the Discovery of the Seismic Issue and the Steps Taken by
Carter Holt in Consequence
[14] Mr Reid has sworn two affidavits in support of Carter Holt’s application in which he explains how the seismic issue came to light. In late 2006 or early 2007
Carter Holt wished to put a platform on the rear wall of the boiler and commissioned Dobbie Engineers Limited (Dobbie) to undertake some limited computer modelling of the boiler structure to assess the loads likely to result. In April/May 2007, Dobbie reported that there could be a problem not only with the immediate area where the platform was proposed but also in relation to the ability of a number of other areas of the boiler to withstand the loads. Around that time, Mr Reid contacted a representative of Genesis to inform him of the outcome of the preliminary work undertaken by Dobbie. He then instructed the engineers to prepare a full analysis which would include checking whether the boiler complied with the relevant design codes.
[15] Carter Holt also took steps to obtain a complete set of the design drawings for the building and any associated calculations from the statutory certifier M & I (now SGS NZ Limited). The consent of Rolls-Royce was required for this purpose since Rolls-Royce (or a subsidiary company) had provided the design drawings and calculations to the certifiers. Correspondence ensued between the solicitors for Carter Holt and Rolls-Royce during May and June 2007 but, according to Mr Reid’s
evidence, an impasse was reached and the consent was not forthcoming at that time. Rolls Royce provided a limited consent in November 2007. Carter Holt did not consider that the limited disclosure agreed to by Rolls-Royce would enable a proper analysis and, as I understand it, the full set of drawings and calculations have still not become available.
[16] The relevant certificate for seismic purposes was issued by M & I on 18 June
1996. It records that a Rolls-Royce subsidiary (John Thompson (NZ) Limited) submitted the designs for the boiler. The certificate stated, amongst other things, that the seismic analysis for the boiler was carried out by Jones Gray Partnership. It seems likely that this partnership (or its successors) may have some relevant drawings, calculations and correspondence.
[17] In the meantime, Dobbie pressed on with its investigations including sending one of its representatives to Sweden to obtain a review of the Dobbie computer modelling from an expert in the design of boiler pressure parts. Dobbie produced a report for Carter Holt in late January 2008 which was provided to Genesis a few days later. Carter Holt accepts that this report was incomplete since Dobbie had still not seen the complete design file.
[18] On 7 April 2008 I made the following directions with regard to the seismic issue:
(a) Carter Holt is to provide to the defendants, by Monday 14 April 2008, particulars by letter of :
(i) what precisely is the alleged non-compliance with the relevant conditions; and
(ii) any documents it relies on in respect of the ‘best endeavours’
obligations of Genesis.
(b) All parties are to forthwith endorse their consent to a letter prepared by Carter Holt’s solicitors to SGS requesting discovery of all relevant documents on this issue.
[19] The particulars were ordered on the understanding that if Carter Holt wished to include the seismic issue in an amended statement of claim, it would be necessary for leave of the Court to be sought. On 17 April 2008 I directed that Carter Holt was
to provide the particulars by 21 April 2008 and that, in default, Carter Holt would be debarred from raising the issue. Particulars were provided by that date on the basis of the information then available to Carter Holt.
[20] Further and more detailed particulars were provided on 23 June 2008 following receipt of further documents from the certifiers in May. Mr Christie for Rolls-Royce was critical of the particulars provided but I am satisfied that they are adequate, recognising that some further or amended particulars may be needed once the full set of design drawings and calculations are available. In that respect, I am left with the impression that Rolls-Royce may not have been as forthcoming as they might have been in relation to the disclosure of those drawings and calculations. Mr Reid’s affidavit as to what has occurred has not been denied by Rolls-Royce.
The New Zealand Authorities
[21] A useful summary of the principles long adopted in New Zealand in assessing whether the amended pleading would introduce a fresh cause of action is contained in the following passage from the decision of the Court of Appeal in Chilcott v Goss [1995] 1 NZLR 263, 273:
In essence, "cause of action" means the act on the part of the defendant which gives the plaintiff the cause of complaint (Smith v Wilkins and Davies Construction Co Ltd [1958] NZLR 958, 961). The test of whether an amended pleading raises a "fresh" cause of action for the purposes of the rules as to amendment is well settled. In Smith v Wilkins and Davies Construction Co Ltd at p 961 McCarthy J put the matter in this way:
"The issue is, I think, put as clearly as anywhere in the words of Lord Wright MR in Marshall v London Passenger Transport Board [1936] 3 All ER 83, as being whether the new pleading involves 'a new departure, a new head of claim, or a new cause of action' (ibid, 87). In other words, is it something essentially different from that which was pleaded earlier? Such a change in character may be brought about, in my view, by alterations in matters in law or of fact, or both. Alterations of fact could possibly be so vital and important as by themselves to set up a new head of claim. On the other hand, more often alterations of fact do not affect the essence of the case brought against the defendant . . . In each case it must, I consider, be a question of degree."
That test was adopted by this Court in Gabites v Australasian T & G Mutual Life Assurance Society Ltd [1968] NZLR 1145, 1151 where North P also cited with approval the following passage from the judgment of Sholl J in Harris v Raggatt [1965] VR 779, 785:
"If we say that the law is that the plaintiff cannot be allowed, after the period of limitations has run, to set up a new cause of action, we use the term in a special sense as meaning a 'new case' varying so substantially from what has previously been set up that it would involve investigation of matters of fact or questions of law, or both, different from what have already been raised and of which no fair warning has been given, so that it would be unfair and unjust to the defendant to put him in peril of a judgment founded on the new matter. Certainly, if there is set up a 'new case' on the facts, upon which is based a new claim upon a new and different legal basis — a new cause of action in that sense — leave will ordinarily be refused."
It is then a matter of comparing the allegations in the new pleadings with what has previously been alleged, recognising that questions of degree are involved.
[22] The authorities emphasise that the term “a fresh cause of action” is used in a special sense. A comparison is to be made between the existing pleading and the proposed amendment to assess the extent of the departure from the existing pleading which would be effected by the new. The effect of the amendment must be such as to result in something essentially different from the earlier pleading. This involves questions of fact and degree as well as considerations of fairness and justice to the opposite party or parties. The underlying concern is to do justice to the parties to the litigation: Steens Bros. Ltd v Youth Hostels Association of New Zealand Incorporated CA3/86 17 April 1986 p 8.
[23] Mr Latimour for Carter Holt placed particular reliance on the Court of Appeal decision in Steens Bros. Ltd in which it was held in a contractual claim against the builder of a hostel that providing further particulars of the original causes of action alleging defective building did not constitute the addition of a fresh cause of action. Similarly in relation to a contractual claim by the owner against the architect. The Court of Appeal noted there was no change to the essential breach of duty alleged. The amendment sought only to add further respects in which it was said the building work was defective.
[24] Different considerations applied to the owner’s claim in tort against the architect because issues of fact needed to be determined relating to the discoverability of the damage or defects. That could require a fresh proceeding to be issued or an application for leave to add a cause of action on the basis that it had arisen since the issue of the writ.
The Case for the Defendants
[25] It was submitted on behalf of the defendants that the seismic issue was entirely new and would require extensive investigations of the background facts as well as advice from experts in the field. The defendants rely on English authorities which have taken a slightly different line than in New Zealand.
[26] It must first be noted that some care needs to be taken with the English cases since the combined effect of s 35 Limitation Act 1980 (UK) and r 17.4 Civil Procedure Rules is to permit amendments to pleadings in circumstances where a “new claim” would be introduced by the amendment provided “the new claim arises out of the same facts or substantially the same facts.” Nevertheless, the first step in the United Kingdom is to establish whether the amendment would introduce a “new claim”, which raises similar considerations to those under r 187 in New Zealand.
[27] Mr Weston QC for Genesis referred me to a number of the English authorities including: Darlington Building Society v O’Rourke [1999] PNLR 365; Savings & Investment Bank Ltd v Fincken [2001] EWCA Civ 1639; Steamship Mutual Underwriting Association Ltd v Trollope & Colls (City) Ltd (1986) 33 BLR
77; and Secretary of State for Transport v Pell Frischmann Consultants Ltd [2006] EWHC 2909.
[28] The last three of these cases related to building disputes. They demonstrate that the issue of whether a “new claim” would be introduced is a question of fact and degree in the same way that it is when assessing whether a fresh cause of action would be introduced under our r 187. The defendants however draw some support from the statement made by May LJ in the Steamship Mutual case at [98] to the effect that the mere fact that one is considering different defects in the same building does not necessarily mean they are constituents of one and the same cause of action. Similarly, the defendants may draw some support from the observations of Jackson J in Secretary of State for Transport v Pell Frischmann at [41] to the effect that if the claimant alleges breach of a previously pleaded duty causing damage to a different element in the building, that will generally amount to a new claim.
[29] The fact-dependent nature of the inquiry is illustrated by the Steamship Mutual case in which it was held that the addition of a claim for later discovered cracking and displacement of the walls of a building amounted to the introduction of a new claim in circumstances where the plaintiffs had confined themselves in the existing pleading to alleged defects in the air-conditioning pipes in the walls. That case may be compared with Idyll Ltd v Dinerman Davison & Hillman (1984-1985) 1
Const LJ 294 where the opposite conclusion was reached. The original pleading had alleged defects in the brick work of a building but it was held that very different types of defects in relation to the roof of the building raised in the proposed amendments were merely further particulars of the basic cause of action pleaded namely, breach of contract and negligence.
[30] I am not persuaded that any special rules should apply where amendments are sought to pleadings in construction cases or that there is any basis to depart from the principles long established in New Zealand.
This Case
[31] I have concluded that the amendment to the pleadings to raise the seismic issue in respect of the boiler does not amount to the introduction of a fresh cause of action. The amendment would not involve any change to the contractual and tortious duties already pleaded against the defendants. Rather, it would introduce a further particular of damage arising from breach of those duties and amounts only to a modest damages claim by comparison with the large sum already claimed by Carter Holt.
[32] I accept that it was not until 2007 that Carter Holt raised this issue and that it involves the consideration of new facts relating to alleged non-compliance with relevant standards in relation to the capacity of the boiler to withstand the loads anticipated under episodes of seismic stress. But I am not persuaded that these new facts are such as to render the claim essentially different from that already pleaded. While the seismic issue has not been raised previously in the pleadings, there are existing allegations of defects in relation to the boiler pressure parts and the overall functioning and capacity of the boiler has always been at issue.
[33] When the fixture for this proceeding was to begin on 30 June this year, the defendants properly raised the potential difficulty of responding in time to the new allegations. However, with the vacating of that fixture and the allocation of a new date on 20 April 2009, that is no longer a real issue. I have earlier directed that Carter Holt is to serve evidence in relation to the seismic issue by 29 August, prior to the planned shutdown of the plant in September 2008 when it is anticipated expert witnesses will further inspect the plant. The defendants would have until
12 December 2008 to serve their briefs in response on that issue.
Limitation Issues
[34] Mr Christie submitted that Carter Holt’s claims against Rolls-Royce were statute barred by the “long stop” defence under s 393(2) Building Act 2004. That section provides:
393 Limitation defences
(1) The provisions of the Limitation Act 1950 apply to civil proceedings against any person if those proceedings arise from—
(a)building work associated with the design, construction, alteration, demolition, or removal of any building; or
(b)the performance of a function under this Act or a previous enactment relating to the construction, alteration, demolition, or removal of the building.
(2) However, civil proceedings relating to building work may not be brought against a person after 10 years or more from the date of the act or omission on which the proceedings are based.
(3) For the purposes of subsection (2), the date of the act or omission is,— (a) in the case of civil proceedings that are brought against a
territorial authority, a building consent authority, a regional
authority, or the chief executive in relation to the issue of a building consent or a code compliance certificate under Part 2 or
a determination under Part 3, the date of issue of the consent,
certificate, or determination, as the case may be; and
(b)in the case of civil proceedings that are brought against a person in relation to the issue of an energy work certificate, the date of the issue of the certificate.
[35] The claim against Rolls-Royce under the Hedley Byrne principle relates essentially to alleged pre-contractual representations by Rolls-Royce to Carter Holt and the giving of advice in relation to the design, installation and construction of the plant. In particular, it is said that Rolls-Royce recommended its design solution to Carter Holt and that Carter Holt relied on that advice when entering the Co- Generation Contract.
[36] Mr Christie submitted that the limitation defence under the Building Act is applicable to design work associated with the construction of the plant and that, if the amendment were allowed, it would fall outside the 10 year limitation period prescribed by s 393(2).
[37] It is not in dispute that Carter Holt’s plant falls within the definition of “building” in s 8 Building Act but Carter Holt submitted that the definition of “building work” under the 2004 Act excludes design work. It was also submitted for Carter Holt that the relevant limitation defence is s 91 of the now repealed Building Act 1991 which provided:
91 Limitation defences
(1) Except to the extent provided in subsection (2) of this section, the provisions of the Limitation Act 1950 apply to civil proceedings against any person where those proceedings arise from—
(a)Any building work associated with the design, construction, alteration, demolition, or removal of any building; or
(b)The exercise of any function under this Act or any previous enactment relating to the construction, alteration, demolition, or removal of that building.
(2) 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) For the purposes of subsection (2) of this section if—
(a)Civil proceedings are brought against a territorial authority, a building certifier, or the Authority; and
(b)The proceedings arise out of the issue of a building consent, a building certificate, a code compliance certificate, or an Authority determination—
the date of the act or omission is the date of issue of the consent or certificate or determination.
(4) For the purposes of subsection (2) of this section, if civil proceedings are brought against the Authority and the proceedings arise out of the issue of an accreditation certificate, the date of the act or omission is the date at which the accreditation certificate was relied on.
(4A) For the purposes of subsection (2) of this section, if—
(a) Civil proceedings are brought against any person; and
(b) The proceedings arise out of the issue of an energy work certificate,—
the date of the act or omission is the date of the issue of the certificate.
(5) Notwithstanding section 93(1)(a) of this Act, subsection (2) of this section applies to any proceedings commenced after this Part of this Act comes into operation, except proceedings commenced before the 1st day of July 1993.
[38] In relation to Carter Holt’s claim against Genesis and Rolls-Royce, it is irrelevant in the context of the present case whether design work is or is not covered. That follows from my finding that the amendment would not introduce a fresh cause of action. For the purposes of s 393(2) (and its predecessor under the 1991 Act), the proceeding has been brought within the 10 year period after the date of the act or omission on which the proceedings are based. That act or omission is the breach of the duties alleged against the defendants. The addition of the seismic issue is no more than a further particular of the existing breaches of duty.
[39] But of greater significance is whether Rolls-Royce may be precluded by the long stop provisions from bringing proceedings for contribution or indemnity against potential third parties.
The Position of Third Parties
[40] Mr Christie informed the Court that if the amendment were granted, Rolls- Royce contemplated claiming contribution or indemnity in relation to the seismic design issue from the Jones Gray Partnership (which had undertaken the design calculations for the Rolls-Royce subsidiary) and also conceivably from SGS NZ Limited (as the successor of the provider of the design certificate of 18 June 1996). He submitted it would be wrong to allow the amendment to the statement of claim to introduce the seismic issue if, in the event of liability being established, Rolls-Royce
were unable to seek contribution or indemnity from those who had undertaken the relevant calculations and provided the certificate of compliance.
The position under the Limitation Act 1950
[41] Leaving aside the long stop provisions of the successive Building Acts, there is no question that any claim (whether in contract or tort) by Rolls-Royce against the third parties would be in time for the purposes of the Limitation Act 1950. This follows from s 14 Limitation Act 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.
[42] It has long been established by case law that time runs for claiming contribution or indemnity from the date on which the liability of the defendant making the claim has been ascertained, either by judgment or by settlement of the proceeding against that defendant: Todd The Law of Torts in New Zealand (4ed,
2005) at 1014; Moloney v Mullan [1963] NZLR 865; Steele v LF Grey Limited
[1972] NZLR 498; Wrightcel (NZ) Ltd v Felvin Suppliers & Distributors Ltd [1975]
1 NZLR 50; Mount Albert City Council v New Zealand Municipalities Co-operative Insurance Co Ltd [1981] 2 NZLR 708. It follows that time would not run under the Limitation Act until the date of any judgment against the defendants and the third party claims would not be precluded.
[43] As to the long stop provisions, Mr Latimour submitted that the issue was governed by the 1991 Act. He referred me to ss 7, 17 and 18 Interpretation Act 1999 since, in his submission the relevant events arose during the time that Act was in force. However, at least for the purposes of the possible joinder of third parties by Rolls-Royce, any proceedings seeking contribution or indemnity would necessarily issue after the grant of leave to amend to introduce the seismic claim. In those circumstances, the long stop provisions of the 2004 Act would apply. There is no
element of retrospectivity in terms of s 7 Interpretation Act. The only element of looking back is for the purpose of determining when the “act or omission” occurred in terms of s 393(2). Despite that, I have considered the position under both the
1991 and 2004 Acts.
The Long Stop Provision under the Building Act 1991
[44] Despite a civil proceeding being brought within time under the Limitation Act, a civil proceeding 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. In that respect, I agree with the conclusions reached by Courtney J in Dustin v Weathertight Homes Resolution Service CIV 2006-404-000276 25 May 2006 and with her analysis at [15] to [35].
[45] The “act or omission on which the proceedings are based” in terms of s 91(2) is, in this case, the undertaking of the design calculations in the one case and the provision of the relevant certificate in the other. Those acts took place in 1996, more than 10 years ago. The question remains whether “design work” is captured by the long stop provision. This point does not appear to have been argued in the case before Courtney J which concerned the joinder of an architectural designer who undertook design work on a house in 1994.
[46] Section 91 of the 1991 Act did not initially refer to design work. As originally enacted, s 91(1) referred to proceedings arising from “the construction, alteration, demolition, or removal of any building”, and section 91(2) did not refer to “building work”. Rather, it simply referred to civil proceedings without limitation.
[47] In 1992, the present subs (4A) was added. This is not relevant for present purposes.
[48] In 1993 s 91(1) and (2) were both amended bringing them into the form cited above. Critically, the expression “building work associated with the design ... of any building” was introduced to s 91(1)(a). And s 91(2) was amended to refer to civil proceedings relating to “building work”.
[49] Given the definition of “building work” in s 91(2), there is some unsatisfactory circularity in the amended s 91(1)(a). Building work is defined by s 2 as meaning:
... work for or in connection with the construction, alteration, demolition, or removal of a building; and includes site work:
[50] The definition of “construct” or “construction” was defined as including “to build, erect, prefabricate, and relocate”.
[51] The legislative history of s 91(2) is related by Glazebrook J in Klinac v Lehmann (2002) 4 NZ ConvC 193,547 at [13] to [26]. It is clear from the Parliamentary materials referred to in this decision that the intention of the 1993 amendments was to ensure that building designers obtained the same protection as territorial authorities and other persons involved in the building process.
[52] Although the 1991 Act did not contain any reference to design work in the definition of “building work” or “construct” or “construction”, it is clear that building work associated with the design of any building is included under s 91(1) for the purposes of the Limitation Act. And, since s 91(1) is subject to subs (2), it is plain that when the expression “building work” is used in subs (2) it is intended to embrace design work in relation to any building. Subsections (1) and (2) could not be sensibly read together otherwise. The expressions “for or in connection with” in the definition of “building work” in s 2 and the expression “associated with” in s
91(1)(a) emphasise the broad scope Parliament intended s 91 to have. And, of course, the definition of “building work” in s 2 must be modified where the context so requires. It clearly requires modification in the context of s 91.
[53] The work carried out by the Jones Gray Partnership in relation to the seismic analysis for the boiler was directly related to its design, its ability to withstand seismic stress, and its compliance with the relevant design standards. I conclude that, if the 1991 Act applies, the work carried out by the that firm does amount to design work and that the partnership would be entitled to rely on s 91(2) as an absolute defence to preclude any civil proceedings by Rolls-Royce to seek contribution or indemnity from them as a third party. The position is not so clear cut
with the certification process undertaken by SGS NZ Limited but the application of the long stop defence in its case could not be ruled out.
The 2004 Building Act
[54] Assuming that the 2004 Act applies, the position is more straightforward. Section 393(1)(a) clearly refers to building work associated with the design of any building and the expression “building work” in subs (2) must be read consistently with that. Clearly, subsections (1) and (2) are meant to be read together.
[55] Mr Latimour relied particularly on the definition of “building work” in s 7. Prior to an amendment in 2005, the definition read:
building work –
(a) means work –
(i)for, or in connection with, the construction, alteration, demolition or removal of a building; and
(ii) on an allotment that is likely to affect the extent to which an existing building on that allotment complies with the building code; and
(b) includes -
(i) sitework; and
(ii) building design
[emphasis added]
[56] The reference to building design in s 7(b)(ii) was deleted by the 2005 amendment and the definition now reads:
building work — (a) means work—
(i)for, or in connection with, the construction, alteration, demolition, or removal of a building; and
(ii) on an allotment that is likely to affect the extent to which an existing building on that allotment complies with the building code; and
(b) includes sitework; and
(c) includes design work (relating to building work) that is design work of a kind declared by the Governor-General by Order in Council to be restricted building work for the purposes of this Act; and
(c) in Part 4, and the definition in this section of “supervise”, also includes design work (relating to building work) of a kind declared by the Governor-General by Order in Council to be building work for the purposes of Part 4.
[57] Mr Latimour submitted that the 2005 amendment clearly indicated a statutory intention to reduce the scope of design work within the definition of building work and to limit it to the specific situations identified in s 7(c) and (d). It is accepted that neither aspects of design work defined in the provisions is relevant for present purposes.
[58] The difficulty with Mr Latimour’s submission is that, from the beginning, the
2004 Act has defined the term “construct” as meaning:
... in relation to a building, includes to design, build, erect, prefabricate and relocate the building.
[emphasis added]
[59] It follows that design work on buildings is incorporated in the definition of building work by its inclusion in the element of construction. On that basis, building work includes general design work in connection with buildings as well as the two specific types of design work identified in s 7(c) and (d).
[60] I conclude that the long stop provision in s 393(2) would preclude claims by Rolls-Royce against third parties in respect of design work in relation to the seismic issue. The work undertaken by the Jones Gray Partnership would fall within that category as noted above while the position is less clear in relation to the SGS NZ Limited certificate.
Conclusions
[61] But for the long stop provisions of the Building Act, I would have granted leave to Carter Holt to amend the pleadings by introducing the seismic issue.
However, in the overall exercise of discretion, I have concluded it would not be just to grant leave. If I were to do so, Rolls-Royce would face the possibility of being found liable for substantial damages in relation to the seismic issue but would not have the opportunity to seek contribution or indemnity from the proposed third parties (or at least the Jones Gray Partnership who I assume would be the principal target since they carried out the relevant calculations).
[62] I have considered whether leave should be granted so that Carter Holt could add the seismic claim against Genesis alone. But I have concluded that this too would not be just or appropriate. Genesis has a cross-claim against Rolls-Royce for contribution or indemnity and also an indirect claim against Rolls-Royce which Genesis is effectively bringing on behalf of Carter Holt under the contractual arrangements. It would not be right for the cross-claim or the indirect claim to be brought against Rolls-Royce if the latter could not effectively seek contribution or indemnity by reason of the limitation provisions. It would not therefore be appropriate to allow the seismic issue to be brought against Genesis in circumstances where Genesis could not seek contribution or indemnity from Rolls-Royce.
Result
[63] For the reasons given, the application by the plaintiff for leave to file and serve a sixth amended statement of claim is dismissed.
Other Issues
[64] I record:
a) Carter Holt has applied for further discovery from Rolls-Royce and return of privileged documents. This application has only recently been filed. I directed at the hearing of the application for leave to amend the pleadings that Rolls-Royce is to respond to this application in the form of a letter within 14 days of the date of the hearing.
b) Rolls-Royce has also brought an application for particular discovery.
Leave is granted to bring this application on for hearing if required.
c) Leave is granted to any party to apply further with regard to amended timetable or otherwise.
d) The costs of this application are reserved.
A P Randerson, J Chief High Court Judge
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