Gedye v South

[2010] NZCA 207

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IN THE COURT OF APPEAL OF NEW ZEALAND

CA567/2009
[2010] NZCA 207

BETWEENNATHAN STANLEY GEDYE
Appellant

ANDCOLIN ROBERT SOUTH, DIANA LEE SOUTH AND RICHARD JAMES BURRELL (AS TRUSTEES OF THE SOUTH FAMILY TRUST)
Respondents

Hearing:17 March 2010

Court:Arnold, Panckhurst and Harrison JJ

Counsel:J A MacGillivray for Appellant
M H Benvie for Respondents

Judgment:20 May 2010 at 2.30 pm 

JUDGMENT OF THE COURT

AThe appeal against refusal of summary judgment is dismissed.

BThe appellant must pay the respondents costs for a standard appeal on a band A basis and usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Panckhurst J)

The context

[1]       Mr and Mrs Gedye owned a residential property in Auckland.  In 1997 they commissioned work on the property for which a permit or building consent was required.  In 2003 the Gedyes sold the property to the respondents who are the trustees of the South Family Trust.

[2]       By a standard clause in the agreement for sale and purchase (the agreement) the Gedyes warranted that any works undertaken on the property which required a permit or building consent were performed in full compliance with all obligations imposed under the Building Act 1991 (then in force).

[3]       In 2006 the trustees sold the property after making disclosure to the purchasers of defects and water ingress issues which affected the house.  In the result the trustees claim that the sale was for a figure $520,000 less than would have been the case had the house been in sound condition.

[4]       In August 2008 the trustees brought this proceeding in which they allege that the Gedyes were in breach of the warranty contained in the agreement because the building work undertaken in 1997 was not performed in compliance with the Building Act.  On account of the ten years which had elapsed since completion of the work the Gedyes applied for summary judgment against the plaintiff trustees in reliance on the longstop provision in s 91(2) of the Building Act. 

[5]       Associate Judge Sargisson declined the application for summary judgment.  Mr Gedye appeals against that decision.

Some further background

[6]       The above is a sufficient outline of the facts for the purposes of the s 91(2) argument.  However, a factual curiosity exists which should also be mentioned.  Through oversight, the Auckland City Council did not issue a code compliance certificate following completion of the works in 1997.  The omission was only discovered in 2003 when, following an inspection, a certificate was issued. 

[7]       Accordingly, the proceeding is against the Auckland City Council as first defendant and against Mr and Mrs Gedye as second defendants (albeit the present appeal was brought in Mr Gedye’s name alone).  The Council is likewise sued for the alleged $520,000 diminution in the sale price, together with general damages of $20,000 for distress and inconvenience.  The claim against the Council is based in negligence, it being said that the house inspection was inadequate with the result that a code compliance certificate was wrongly issued.

[8]       On account of the quirk that certification of the building was overlooked for six years, the Council cannot claim the benefit of the longstop provision in s 91(2).  Absent that oversight, the ten year period would have elapsed before the proceeding was issued.

The essential issue

[9]       Section 91 of the Building Act[1] relevantly provides:

[1]We refer to s 91 of the 1991 Act (as opposed to s 393 of the Building Act 2004) because the present proceeding is based on a warranty pertaining to the previous Act. We note that the longstop provision in s 393 is not materially different to s 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.

...

(Emphasis added.)

Subsections (4) and (4A) provide that where a civil proceeding arises out of the issue of an accreditation certificate, or an energy work certificate, respectively, the date at which the former is relied upon, or the latter is issued, is the relevant date for the purposes of ss (2).

[10]     The agreement was in a standard form agreement for sale and purchase, which included this general term:

6.2  The vendor warrants and undertakes that at the giving and taking of possession:

...

(5)     Where the vendor has done or caused or permitted to be done on the property any works for which a permit or building consent was required by law:

(a)The required permit or consent was obtained; and

(b)The works were completed in compliance with that permit or consent; and

(c)Where appropriate, a code compliance certificate was issued for those works; and

(d)All obligations imposed under the Building Act 1991 were fully complied with.

(Emphasis added.)

[11]     It is common ground that the claim against Mr and Mrs Gedye is within the normal six year limitation period for a cause of action in contract.  The proceeding was filed within five years of conclusion of the agreement.  Nonetheless, Mr Gedye maintains that the ten year longstop limitation period applies, with the result that this proceeding had to be issued no later than the end of 2007.  On this basis, the proceeding was filed eight months out of time.

[12]     Whether s 91(2) applies in the circumstances of this case depends on how “the act or omission on which the proceedings are based” is defined.  Mr Gedye contends that the relevant act was the building work itself, so that time began to run in late 1997.  The respondent trustees argue that the Associate Judge was right in concluding that the act on which the proceedings are based was completion of the sale agreement, wherein the Gedyes warranted that previous building work was undertaken in compliance with the Building Act.

[13]     Hence, the appeal concerns a narrow but important point of statutory construction.  Each side was able to call in aid a High Court decision supportive of their point of view.  The trustees relied upon Hamilton City Council v Rogers,[2] a judgment of Robertson J.  The appellants relied upon the decision of Glazebrook J in Klinac v Lehmann.[3]  We shall discuss each in detail, dealing first with Rogers.

[2]      Hamilton City Council v Rogers HC Hamilton A92/97, 23 April 1998.

[3]      Klinac v Lehmann (2002) 4 NZ Conv C 193,547 (HC).

[14]     In 1986, the Rogers purchased a house which the Hamilton City Council had built in the mid-1950s.  Subsequently the house suffered subsidence, which resulted in the need to reposition it on new foundations.  The Rogers sued in contract for breach of an implied term as to the fitness of the house and in negligence for building on an unsuitable site.  The Council applied to strike out the proceeding on the basis it was out of time under both the Limitation Act 1950 and the Building Act.  Robertson J overturned a decision of the District Court by ordering that the proceeding be struck out.

[15]     The Rogers argued that in terms of s 91(2) “the act or omission on which [their] proceedings [were] based” was entry into the agreement for sale and purchase and that time in terms of both the Limitation Act and the Building Act commenced to run at that moment.  With reference to this argument Robertson J said:[4]

That is a traditional approach to addressing litigation.

But Parliament in s 91(2) has in my assessment of the matter, introduced a different measure.  As a matter of policy it has determined that where there are civil proceedings (and the present case is undoubtedly that) which relate to “building work” (and on the basis of the definitions in the Act that encompasses the present) there is to be a particular limitation regime which is to be rooted in the date of “the act or omission on which the proceedings are based”.  I read that formula as taking the parties back to the factual matter relating to the building work rather than to the legal concepts of when there was a breach of a civil duty.

[4]      At 6.

The Judge attributed this shift to Parliament’s intention to achieve certainty and finality in relation to defective building disputes.  He regarded the words of s 91(2) as effecting a clear policy shift by which the limitation period was taken back to the operative act or omission, rather than the commencement date of the legal relationship between the parties.

[16]     Klinac also concerned building work which was undertaken more than ten years before the relevant property was sold to Mr Lehmann.  He sued in reliance upon an oral representation as to fitness and a written warranty that previous building work complied with the requirements of the Building Act.  In the District Court the claim based on the warranty was found to be time-barred, but not the pre-contractual misrepresentation claim.  Mr Klinac appealed against the latter decision in reliance on the decision in Rogers. 

[17]     Glazebrook J agreed that the ten year longstop limitation in relation to a claim for negligent building work must run from the date of the breach, the negligent act or omission on which the proceeding was based being the work itself.[5]  This, despite the fact that time in terms of the Limitation Act did not commence to run until damage occurred or it became discoverable.  But with reference to a contractual claim she differed from the conclusion reached in Rogers that the relevant act or omission was the building work.  Glazebrook J said:[6]

... where the action is one based on breach of contract or misrepresentation, there is a further act much more closely connected to the cause of action – the entry into the contract and the breach of the contractual term and the making of the misrepresentation.  The making of the representation and the entry into the agreement containing the term it is alleged has been breached determines the relevance of other factors, including the preceding building work.  The faulty building work is relevant solely because it goes to prove that a representation was a misrepresentation, or that a term of the contract was breached.  It is not the act upon which the proceeding is based (unlike in actions for negligence).

[5]      At [35]–[36].

[6] At [50].

[18]     In the next paragraph the Judge noted that on this approach the cause of action accrued and the limitation period (under both the Limitation Act and the Building Act) commenced on the date of the breach.  She continued:[7]

There is nothing in s 91(2) or the legislative history to suggest that Parliament intended a change to this position for claims based in contract.  The legislative history suggests rather that the legislative intent related to negligence only.

[7] At [51].

The final observation has been said to indicate that s 91(2) relates only to negligence claims, not contractual ones, a point to which we will return shortly.

[19]     The analysis continued:

[52]      In addition there is no policy reason why a change to the position for the start of the limitation period for contractual claims would be warranted.  The act of making a representation or the entering into a contract is a positive voluntary act of the vendor.  It is easily verifiable as a matter of fact.  As there is no necessary connection between the parties sued and the building works themselves, it would seem more logical to set the limitation period running at the time that a defendant makes a representation or warranty as to the fitness of the building works.  This is the point at which a defendant adopts the works as being properly done.

[53]      If this were otherwise, it would be possible for a person, with impunity, to warrant that all the building work had been completed in accordance with a permit and to a high standard, provided the building work had been performed more than 10 years ago.  If the limitation period ran from the time the building work was done, then such a warranty would be worthless from the moment it was made.  The defendant could then escape the consequences of the voluntary act of giving the warranty or making the representation immediately upon making it.  There would thus effectively be no limitation period at all.  This was not the Parliamentary intention.

[20]     In the present case the Associate Judge held that the Klinac decision was directly on point because it concerned a warranty substantially similar to the warranty in this proceeding.  In addition, the Judge concluded that the reasoning of Glazebrook J was to be preferred to that of Robertson J in Rogers.

The contentions of counsel

The appellant’s arguments

[21]     Mr MacGillivray submitted that the phrase “act or omission on which the proceedings are based” applies to the subject-matter of the claim, rather than the cause of action asserted by the plaintiff.  Here, the subject-matter of the claim was building work which allegedly does not comply with the Building Act and which the Gedyes caused or permitted to be undertaken.  To construe entry into the contract as the relevant act on which the proceeding is based was criticised as representing a cause of action based approach, which frustrated the obvious purpose of s 91(2).  If this case was not time-barred in terms of s 91(2), it would result in the litigation of the issue whether the building work undertaken in 1997 complied with the Building Act or not – being the very mischief at which the provision was aimed.

[22]     This, counsel submitted, exposed the purpose and policy of the ten year longstop provision.  Section 91(2) was intended by Parliament as a comprehensive and absolute bar against proceedings of any sort relating to building work undertaken more than ten years ago.  The legislative purpose was to avoid potential injustice by preventing the litigation of stale and historic claims, albeit that the ten year limit may represent an arbitrary cut-off point.  Hence the time bar has different characteristics to a normal limitation period.  It is not concerned with accrual of the cause of action.  Indeed, the bar will only ever operate where there is a live cause of action, but ten years has elapsed since the building work was performed. 

[23]     Typically this will be where a negligence claim is brought within six years of damage being reasonably discoverable, or where (as here) a contractual warranty is given, after more than ten years from completion of the building work.  All of this was said to demonstrate that s 91(2) is not concerned with the accrual of causes of action, nor for that matter discoverability, or the various exceptions under the Limitation Act; but simply whether ten years has elapsed since completion of the building work.  Unless, therefore, the building work undertaken by the Gedyes in 1997 was construed as the effective basis of the claim, the purpose and policy of the longstop provision would fail.  And a Judge would be left to confront the difficulty of deciding whether building work performed in 1997 was compliant, or not. 

[24]     Mr MacGillivray also submitted that Glazebrook J was wrong in reasoning that s 91(2) applies to negligence claims and not contract claims.  The statutory test – the act or omission on which the proceedings are based – was cause of action neutral.  The scope of the provision should not be limited to negligence claims.  A potentially broad class of defendants, for example property owners who sold their homes using a standard form agreement, would be denied protection even though the relevant building work was performed many years earlier.  By contrast, a builder who contracted to perform the work in a workmanlike manner, but did so negligently, would enjoy protection after ten years in relation to both negligence and contractual claims.  This was anomalous.

[25]     Finally, the analysis at [52] and [53] of Klinac[8] was criticised as unduly refined and wrongly focused.  Counsel stressed that s 91(2) is an express and stand alone longstop provision.  Its focus, the subject-matter of the proceeding, must be something different to the elements of the relevant cause of action.  A practical, even pragmatic, approach is necessary in determining the act or omission on which the proceeding is based.  In addition, for a longstop provision to be of any utility, it must of necessity exclude claims which otherwise, in terms of the Limitation Act, are within time.

The respondents’ arguments

[8] See [19] above.

[26]     Mr Benvie accepted that the present proceeding does arise from building work undertaken by the Gedyes on the property, so that the requirements of s 91(1)(a) are met.  Hence, it was accepted that the issue is whether this is a civil proceeding based on an act or omission which occurred ten or more years before the date on which the proceeding was filed.  Counsel, in substance, supported the analysis contained in Klinac.

[27]     Various points were made in argument:

(a)The act upon which this proceeding is based is the giving of the contractual warranty in the sale and purchase agreement.  Proof of the non-compliant work (in 1997) was only relevant to establishing a breach of that warranty.

(b)The facts in Rogers were different to those in the present case, in that an implied promise in an option to purchase under a lease supplied the contractual basis of the claim, not an express vendor warranty in an agreement for sale and purchase.

(c)Unlike claims in negligence concerning building work alleged to be defective (where the issue of reasonable discoverability frequently arises), the present contractual claim suffers from no element of uncertainty.  The cause of action accrued at the moment the warranty was given (assuming the promise was false), and the parties knew that the term of the contract was enforceable throughout a six year period.  Hence, there was “temporal certainty” and no need to have recourse to a ten year longstop provision.

(d)The effect of the appellant’s argument in the present case was to curtail the normal six year limitation period in relation to the (assumed) breach of a contractual warranty, since if time runs from 1997 (when the work was undertaken) the longstop period expired in 2007, less than four years into the normal limitation period.

(e)There are sound policy reasons why parties to contractual promises should be held to them, and only a clear and unambiguous statutory direction to the contrary should deny a promisee the benefit of a contractual bargain.  Here, the Gedyes gave the warranty as to the fitness of the building work undertaken on their behalf, yet by resort to s 91(2) they sought to be absolved from complying with the warranty albeit the proceeding was filed within the normal limitation period.

(f)As the owners of the property the Gedyes were in a position to know what work had been undertaken, by whom and when; so that the implications of giving the warranty were apparent to them.  Their inability to recover from the builder was a separate and distinct matter, and in any event not particularly relevant given that their contractual liability sprang from the voluntary act of giving the warranty in the first place.

We note the quality of the submissions made in this case.

Evaluation: on what “act or omission” is this civil proceeding based?

[28]     We agree that this proceeding arises from building work associated with the “design, construction, alteration, demolition, or removal of any building” in terms of s 91(1).  Accordingly the provisions of the Limitation Act apply to the proceeding “except to the extent provided in subsection (2) of (s 91)”.  The determinative issue, therefore, is whether the act or omission on which the proceeding is based is characterised as the (allegedly defective) building work or the giving of the contractual warranty.

[29]     The words, “... the act or omission on which the proceedings are based”, are not of such precision as to provide an immediate and obvious answer to the problem.  The meaning of the subsection must be ascertained from its text and in light of its purpose.[9]  In determining purpose regard must be had to both the immediate and general legislative context.  Also, the objective of the section may be of significant relevance.[10]

What is the purpose of s 91(2)?

[9]Interpretation Act 1999, s 5(1).

[10]Commerce Commission v Fonterra Cooperative Group Ltd [2007] NZSC 36, [2007] 3 NZLR 767 at [22] and [24].

[30]     There is a helpful discussion of the background to the enactment of s 91(2) in Klinac.[11]  The relevant history is well documented and we need not repeat it.

[11]      At [13] - [25].

[31]     However, we shall mention some important milestones.  In July 1988 a Full Court of the Court of Appeal delivered the decision in Askin v Knox.[12]  The Court discussed the “unsatisfactory disharmony” between New Zealand and English law with regard  to when time commenced to run in relation to negligent building work.[13]  In the event a conclusion was reached that on the particular facts of the case a choice between the New Zealand reasonable discoverability approach, as opposed to the actual damage approach adopted by the House of Lords in Pirelli General Cable Works Ltd v Oscar Faber & Partners,[14] was not required. 

[12]      Askin v Knox [1989] 1 NZLR 248.

[13]      At 254.

[14]      Pirelli General Cable Works Ltd v Oscar Faber & Partners (1983) 2 AC 1.

[32]     For present purposes some concluding observations in Askin are most relevant:[15]

Pirelli produces results so obviously unjust that in England and Wales they have been remedied by the Latent Damage Act 1986.  It is quite an elaborate Act but apparently to substantially the same effect as [the New Zealand approach], with the important addition of a longstop period.  The Law Reform Committee, under the chairmanship of Lord Scarman, whose report led to the Act (Twenty-Fourth Report, Latent Damage, 1984, Cmnd 9390) saw the possibility of injustice to defendants and the element of uncertainty as warranting an absolute limit of 15 years from the date of the negligence.  Their report, para 4.13, makes it clear that necessarily that particular period is somewhat arbitrary and represents a compromise to strike “the right balance between justice for plaintiffs and certainty for defendants”.

It is true that by declining to follow Pirelli this Court might be able to avert most of the injustice caused by that decision, but to introduce a longstop would not be within our power.  That could only be done by legislation.  There is ground for treating negligence in building and building control as a special subject with its own problems, and for enacting a longstop period, in the context of either an Act similar to the English one or a more general Limitation Act.

[15]      At 256.

[33]     The next milestone was publication of a Law Commission Report, which contained this:[16]

The Commission sees extension of limitation periods, particularly on the ground of non-discoverability, as enhancing fairness, although at some cost to the object of certainty and to the legitimate interests of the defendant.  Those interests can, however, be promoted by a “long stop” or ultimate limitation period – an overall limit measured from the date of the act or omission alleged against a defendant.

[16]      Law Commission Limitation Defences in Civil Proceedings (NZLC R6, 1988) at [280].

The recommended longstop period was 15 years. 

[34]     The third milestone was the passing of the Building Act 1991.  As Glazebrook J pointed out in Klinac, s 91 was not included in the first draft of the Bill.[17]  The section was introduced at the Select Committee stage, originally with a 15 year longstop period.  By the time of the Bill’s second reading this period had been reduced to ten years, primarily because insurance cover would not have been available for a 15 year longstop period.[18]

[17] At [14].

[18]      (20 November 1991) 520 NZPD 5490.

[35]     History shows that the impetus for a longstop provision in New Zealand was the problems engendered by a discoverability approach in the context of negligence claims pertaining to building work and building control.  Equally clearly, we think the purpose of s 91(2) was to restrict the litigation of faulty building claims to a maximum ten year period.  The question is, in a case such as this, whether the act or omission giving rise to commencement of the ten year period is the building work itself or a contractual warranty relating to that work.

The source of the act or omission formula

[36]     We think it is a fair bet that s 91(2) was drafted in light of the recommendations contained in the Law Commission Report.  Clause 4 of the draft legislation which formed part of the Report provided for a standard limitation defence.  A claim would be out of time if three years or more had passed between “the date of the act or omission on which the claim is based” and the date of service of the claim on the defendant.  Consistently cl 5 of the draft provided for a longstop defence if a defendant proved that the date of service of the claim was “15 years or more after the date of the act or omission on which the claim is based”.

[37]     The commentary to the Report explained why the act or omission formula was adopted:

168   Because there is inevitably uncertainty (and discretion) in any “date of knowledge” formula, we would depart from the Alberta proposals and provide for the defendant’s act or omission (on which a claim is based) to be the standard commencement date: it is relatively easily and objectively fixed, within the knowledge of the party who must plead it, and will apply in the vast majority of cases.  Absence of knowledge would be a basis for extension of the standard period – the onus being on the claimant who asserts matters obviously not likely to be within the defendant’s knowledge.  This is considered in detail in the next chapter.

169   In most cases the date of the “act or omission” will be clear.  It refers to that conduct of the defendant of which the claimant complains.  In relation to a contract, it will usually be the date of breach and thus correspond with the present rule as to the date of accrual.  In other cases, the act or omission may be an earlier date than accrual – in negligence, for example, where a delay in the occurrence of damage would relate to our proposed extension provisions rather than the date of accrual.  In some categories of cases, such as those where questions of status are involved, there may be no relevant act or omission and no limitation point will arise.  

(Emphasis added.)

[38]     Although the sentence we have highlighted provides a pointer to the correct interpretation of s 91(2), ultimately it is the meaning of the words used in the context of the section and the Act as a whole, with due regard paid to the purpose of the provision, which is necessarily determinative.

Evaluation

[39]     The most compelling argument in support of the appellant’s case is that this proceeding, if it goes to trial, will involve an inquiry into allegedly defective building work undertaken 13 or more years ago.  This, we accept, would appear to be at odds with a primary objective of s 91 – to avoid the litigation of stale factual disputes.

[40]     A further point is that the subsection is non-prescriptive as to whose act or omission is in question; the words used do not require that the act or omission be that of the defendant.  In this regard s 91(2), as drafted, does not mirror the observations in the Law Commission Report that the act or omission refers to the “conduct of the defendant of which the claimant complains”.[19]  But this is so only if s 91(2) is read in isolation.

[19]      At [169] and [280].

[41]     Subsections (3), (4) and (4A) of s 91 define the date of the act or omission on which a proceeding against an authority or certifier is based, as the date of the relevant consent, certificate or determination; or the date that an accreditation certificate was relied on.  Hence, it is not the building work itself which comprises the act or omission, but the approval of the work (or reliance on that approval) which sets time running for the purposes of the longstop provision.  These subsections, therefore, identify conduct of the defendant which comprises the relevant act or omission.  Most often this will not frustrate the statutory purpose.  The issue of a certificate (or the like) will typically occur at about the same time as the building work itself.  But there will be exceptions, as this case illustrates with reference to the claim against the City Council.

[42]     Here, the claimant points to the warranty that work previously undertaken was in full compliance with the Building Act as analogous to an act of certification.  It is a voluntary act, readily verifiable and known to both parties.  The warranty comprises a part of the bundle of rights and obligations assumed under the agreement for sale and purchase.  Such rights and obligations are ordinarily enforceable for up to six years from the date of the breach, whereas adoption of the building work as the relevant act or omission would restrict the limitation period to four years in the present case and, in other factual circumstances, would result in the warranty being ineffective from the moment it was given.  While we accept that the truncation of a normal limitation period is a necessary incident of a longstop provision, that is not so in this instance.

[43]     We are satisfied that the terms of the section are clear.  Read in context the act or omission referred to in s 91(2) is that of the defendant on which the proceeding is based.  This maintains consistency with the three subsections which follow.  In this instance the basis of the proceeding was the act of warranting that previous building work was compliant.  Entry into the sale and purchase agreement also gave rise to the contractual relationship between the parties.  In the event the limitation period, and the longstop period, commenced to run at the same point in time.

[44]     In general we are in agreement with the analysis of Glazebrook J in Klinac, including her discussion as to the implications of s 91.  As previously noted, its origins lie in the problems encountered from our adherence in negligence cases to a reasonable discovery approach to the occurrence of damage.  In contract, by contrast, the cause of action is complete upon breach – without the need for actual loss or damage.  It is not surprising, therefore, that in a case such as this one s 91 does not have a part to play.

[45]     This observation brings us back to Mr MacGillivray’s submission[20] that s 91(2) is cause of action neutral and that the application of the section is not limited to negligence cases.  The decision of this Court in Johnson v Watson[21] was cited in this context.  The case concerned a leaky home.  The original building work was performed more than ten years before the claim was filed.  There were three heads of claim.  The first related to the original work, the second to remedial work undertaken over several subsequent years and the third to representations concerning the quality of the remedial work.

[20] See [24] above.

[21]      Johnson v Watson [2003] 1 NZLR 626.

[46]     With reference to the cause of action founded on the original work counsel accepted that:

[7]       ... unless s 28 [of the Limitation Act 1950] applies, s 91(2) clearly bars this head of the Johnsons’ claim, whether that claim be framed in contract or in tort.

[8]       We cannot, however, accept [counsel’s] submission that if there was concealment by fraud, as is alleged, s 28 operates so as to extend the ten-year period prescribed by s 91(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 s 91(2) that the provisions of the Limitation Act do not apply to the subs (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, s 91(2) means exactly what it 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.

We agree with these observations.  But they must be read in context.

[47]     They were made in direct response to the argument that fraudulent concealment of the original faulty building work postponed the commencement of the ten year longstop period.    Tipping J rejected this submission in stating that the statutory bar meant what it said, was self-contained (a standalone provision) and was not subject to the Limitation Act.    But, the observations do not touch upon the issue with which we are concerned – whether in the circumstances of this case a contractual warranty comprises the relevant act or omission for the purposes of s 91(2).    In short, Johnson v Watson did not concern identification of the relevant act or omission, but rather whether the longstop period could be postponed by operation of s 28 of the Limitation Act.

[48]       That said, we accept that the expression of s 91(2) is cause of action neutral, but its practical application hinges on the effect of the act or omission formula.  As this case demonstrates, the formula does not always achieve the end at which the section is said to be aimed, but only if one is to focus upon the building work instead of the relevant contractual representation.

Result

[49]     The appeal against refusal of summary judgment is dismissed.  The appellant must pay the respondents costs for a standard appeal on a band A basis and usual disbursements.

Solicitors:

Thompkins Wake, Hamilton for Appellant
Lovegroves, Auckland for Respondents