Rea v 360 Degrees Limited
[2022] NZHC 916
•4 May 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-1764
[2022] NZHC 916
BETWEEN ANTHONY JAMES REA and JUDITH REA
Plaintiffs/Respondents
AND
360 DEGREES LIMITED
First Defendant
ANTHONY MARK CATHRO
Second DefendantTONY CATHRO CONSTRUCTION LIMITED
Third Defendant
AUCKLAND COUNCIL
Fourth DefendantMASTER BUILD SERVICES LIMITED
Fifth Defendant (Discontinued)
Hearing: 5 April 2022 Appearances:
N L K Stone/C Harnett for the Plaintiffs/respondents
T Weston QC /JRJ Knight for the Fouth Defendant/Applicant
Judgment:
4 May 2022
JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR
This judgment was delivered by me on 4 May 2022 at 4:00pm
pursuant to Rule 11.5 of the High Court Rules
Solicitors:
………………………….
Registrar/Deputy Registrar
Simpson Grierson (Jo-Anne Knight), Auckland, for the Fourth Defendant (Applicant) D A Cowan, Titirangi, Auckland, for the Plaintiffs (Respondents)
Counsel:
Thomas C Weston QC, Auckland, for the Fourth Defendant (Applicant)
REA and v 360 DEGREES LIMITED [2022] NZHC 916 [4 May 2022]
Introduction
[1] Mr Anthony Rea and Mrs Judith Rea, as trustees of the Waiatarua Trust, are the registered owners and occupiers of the residential property at 19A Te Atatū Road, Te Atatū, Auckland (the property). They allege the property suffers from serious building defects. They have brought a claim against four defendants involved in the development, construction and consenting of the property.
[2] The fourth defendant in the proceeding is Auckland Council (the Council). The plaintiffs claim the Council acted negligently in processing the building consent, undertaking inspections and issuing a Code Compliance Certificate (CCC) for the property.
[3] The Council seeks strike out of the plaintiffs’ claim against it. It says every alleged negligent act or omission occurred more than six years before the proceeding was filed, the proceeding is prima facie time-barred, and the proceeding does not plead or disclose any basis for extension or postponement of the primary limitation period.
[4] The parties disagree on the correct interpretation of the Limitation Act 2010, the Building Act 2004 and the case law that applies to the dispute.
Background
[5] On 12 December 2012, the Council issued a building consent for the property’s construction. Between January and August of the following year, it undertook inspections of the property. The Council issued a CCC for the property on 18 October 2013.
[6] The plaintiffs became owners of the property on 11 February 2014. In August of that year, they claimed under their Master Build insurance policy for minor aesthetic issues on the property.
[7] On 22 June 2015, after a site visit from Master Build Services Ltd, a letter was sent to the plaintiffs advising them that the builder, Tony Cathro Construction Ltd, would attend to the remediation. The remediation was later inspected and passed by Mr Grant Hayes of Master Build.
[8] On 14 September 2015, Tony Cathro Construction Ltd sent a letter to the developer, 360 Degrees Ltd, and copied the plaintiffs about further remedial items to which Mr Cathro would attend.
[9] On 3 February 2016, Maynard Marks, a building surveying firm, inspected the property at Master Build’s behest. On 10 March 2016, it issued a report to the plaintiffs and Master Build, identifying 31 internal, external, structural and other defects with the property.
[10] In March 2016, ACH Consulting Ltd, a civil and structural engineering firm, carried out a structural review of the property at Maynard Marks’ behest. In a report dated 24 May 2016, it identified five structural and weathertightness defects, recommending remedial works. This report was released to Maynard Marks and Master Build, with the latter forwarding it to the plaintiffs.
[11] On 23 March 2017, Maynard Marks issued a scope of remediation works to the plaintiffs and Master Build. It included remedial works recommended by ACH Consulting Ltd.
[12]On 30 January 2018, Maynard Marks produced a quantity surveyor’s report.
[13] The plaintiffs engaged a further building surveying firm, Fraser Thomas Ltd, on 19 October 2018. It produced a report dated 19 March 2019, recording structural defects and extensive workmanship issues with the property. Whether those defects were the same ones identified in Maynard Marks and ACH Consulting Ltd’s previous reports is a point of dispute between the parties.
[14] The plaintiffs then applied to the Ministry of Business, Innovation and Employment (MBIE) to determine whether the Council’s decision to grant the CCC should be confirmed, reversed or modified.
[15] On 4 May 2021, MBIE issued a determination that the Council was correct to issue the CCC at the time it had, but that the Council’s decision should now be reversed in light of the property’s defects. On 2 June 2021, the Council accordingly reversed the CCC for the property.
[16] The plaintiffs issued the present proceeding on 9 September 2021. The Council filed its statement of defence on 17 November 2021. The plaintiffs then filed a reply to affirmative defences on 25 November 2021.
[17]The Council filed the present application for strike out on 6 December 2021.
Application for strike out
Application
[18]The Council applies for orders:1
(a)That the plaintiffs’ statement of claim, dated 9 September 2021 (the Claim), be struck out;
(b)That the plaintiffs’ reply to the statement of defence of the fourth defendant, dated 26 November 2021 (the Reply), be struck out; and
(c)For costs.
[19]The grounds on which the orders are sought are:2
(a)The Claim alleges that the Council acted negligently in processing the building consent, undertaking inspections and issuing a Code Compliance Certificate (CCC) for the property.
(b)The issue of the CCC is the last alleged act or omission of the Council. The claim alleges the CCC was issued on 18 December 2013 (it was in fact issued on 18 October 2013).
1 Interlocutory application by the fourth defendant for orders striking out the plaintiffs’ statement of claim and reply dated 6 December 2021 at [1].
2 At [2].
(c)This proceeding was filed by the plaintiffs on 9 September 2021, more than six years after the alleged and actual dates of issue of the CCC.
(d)Section 11 of the Limitation Act 2010 a defence to the Claim if it was filed more than six years after the alleged act or omission on which the Claim is based.
(e)The Claim is statute-barred on its face, and is therefore frivolous, vexatious, or otherwise an abuse of process.
(f)The Reply denies that:
(i)All alleged acts or omissions of the Council occurred on or before 18 October 2013; and
(ii)The date on which the Claim was filed was at least six years after the dates of each act or omission on which the claim against the Council is based.
(g)Neither the Claim nor Reply pleads any act or omission of the Council that occurred after the issue of the CCC (dated 18 October 2013).
(h)The applicant repeats paragraphs 2(a)–(c) above, and says that the denials by the plaintiffs in the Reply are contrary to the facts alleged by the plaintiffs in the Claim, and the Reply is therefore vexatious and an abuse of process.
Affidavit of Sarah Hann filed 6 December 2021
[20] Ms Sarah Hann, solicitor at the Council, has made an affidavit in support of the Council’s interlocutory application for strike out. She produces the CCC and confirms it was included in the plaintiffs’ initial disclosure.3
Notice of opposition to application for strike out
[21]The plaintiffs oppose the Council’s application:4
3.The plaintiffs refer to the grounds in the Strike Out Application and say:
(a)The plaintiffs agree with the grounds in paragraph 2 and subparagraphs 2(a), 2(b), 2(c), 2 (d) and 2(g) of the Strike Out Application.
(b)The grounds in subparagraph 2(e) are wrong in law;
3 Affidavit of Sarah Hann in support of interlocutory application to strike out plaintiffs’ statement of claim and reply filed 6 December 2021 at [3]–[4].
4 Notice of opposition to fourth defendant’s interlocutory application for orders striking out the plaintiffs’ statement of claim and reply dated 21 December 2021.
(c)The grounds in 2(h) are wrong in fact;
(d)The grounds in subparagraph 2(f) are wrong in fact and in law.
4.Making such arguments is vexatious, oppressive, unnecessary and an abuse of process and indemnity or increased costs should be awarded to the plaintiffs.
5.The plaintiffs’ further grounds of opposition are as follows:
(a)The plaintiffs’ reply dated 26 November 2021 was appropriately drafted having regard to:
(i)Rule 5.63(2) of the High Court Rules;
(ii)The limitation defence raised by the fourth defendant, which was itself inadequate as it inexplicably omitted reference to the other relevant limitation periods;
(iii)The stage of the proceedings as at 26 November 2021;
(iv)The plaintiffs’ statement of claim, reply and Fraser Thomas Limited report and MBIE decision provide the fourth defendant with an “air of reality” such that competent counsel would understand the nature of the case, including the applicability of the limitation periods inherent in all construction cases; and
(b)The Strike Out Application and the fourth defendant’s affirmative defence omit reference to all of the limitation periods relevant in a construction case as referred to in the Limitation Act 2010, the Building Act 2004 and in relevant case law, and the Strike Out Application should be dismissed on this basis alone.
(c)In the alternative, the plaintiffs should be permitted to amend their reply to incorporate affirmative defences with virtually identical wording as the fourth defendant’s statement of claim, referring to the six-, up to nine- and finally the ten-year limitation periods.
(i)That the plaintiffs’ pleadings are appropriately drafted, and comply with the High Court Rules, including Rule 5.63(2).
(ii)There is no basis to compel the plaintiffs to provide affirmative defences to affirmative defences, the High Court Rules militate against such drafting practices, and such convoluted pleadings are in any event not in the interests of justice;
(iii)That if the plaintiffs’ pleadings are flawed, then the defendants’ pro forma affirmative defences are equally flawed by not affirmatively denying that the other limitation periods apply;
(iv)That the fourth defendant will not be embarrassed or ambushed at trial concerning the nature of the applicable limitation periods.
(d)In the alternative, the Strike Out Application should be dismissed upon a proper interpretation of the law regarding limitation, in conjunction with the engineering report completed by Fraser Thomas Limited on 19 March 2019 annexed to the affidavit of Anthony James Rea filed in support of this application.
6.The fourth defendant’s strike out application amounts to a de facto “trial by ambush” as:
(a)Limitation is either one of, or the most significant matters in dispute in this case, based on the affirmative defences raised by the defendants;
(b)The plaintiffs must oppose the application before discovery;
(c)The fourth defendant has not provided proper evidence in support of the Strike Out Application, thereby imposing an inappropriate evidential burden on the plaintiffs to answer both misconceived grounds and inadequate evidence, particularly having regard to the present stage of the proceedings;
(d)The plaintiffs’ expert engineers are not due to complete their report concerning the house in question until 31 January 2022, and the plaintiffs’ other experts shortly thereafter, leaving the plaintiffs unable to answer causation issues as regards the defects that exist in December 2021.
7.The Strike Out Application should be adjourned until such time as the plaintiffs are in possession of the evidence referred to above, likely after 31 March 2022.
8.Indemnity or increased costs are appropriately awarded to the plaintiffs as the fourth defendant’s strike out application is vexatious, oppressive, unnecessary and an abuse of process.
Affidavit of Anthony James Rea sworn 21 December 2021
[22] Mr Rea has made two affidavits in support of the notice of opposition. In the first, sworn 21 December 2021, he deposes that on 19 March 2019, Fraser Thomas Ltd issued a report identifying defects present at the Te Atatū property. He annexes the report.5
5 Affidavit of Anthony James Rea in support of notice of opposition to interlocutory application for an order that the plaintiffs claim be struck out sworn 21 December 2021 at [1]–[4].
Affidavit of Anthony James Rea sworn 29 March 2022
[23]In his second affidavit, Mr Rea produces further documents:6
(a)the letter from Master Build Services Ltd to the Waiatarua Trust and carbon copied to the second defendant, Anthony Cathro, dated 22 June 2015;
(b)the letter from Anthony Cathro and the third defendant, Tony Cathro Construction Ltd, to the first defendant, 360 Degrees Ltd, dated 14 September 2015;
(c)the Maynard Marks Scope of Work Report dated 27 March 2017; and
(d)the Maynard Marks Estimate of Budget Costs Report dated 30 January 2018.
[24]Mr Rea also notes:7
(a)Maynard Marks Ltd was engaged by Master Build Services Ltd on or around 3 February 2016, not by Waiatarua Trust.
(b)ACH Consulting Ltd was engaged by Maynard Marks Ltd on behalf of Master Build Services Ltd in or around March 2016.
(c)Any reports by Maynard Marks Ltd and/or ACH Consulting Ltd were first sent to Master Build Services Ltd, who then forwarded these reports to the Waiatarua Trust.
6 Affidavit of Anthony James Rea sworn 29 March 2022 at [3].
7 At [4].
The Council’s submissions
[25] Mr Tom Weston QC, for the Council, submits that the Supreme Court, in Murray v Morel & Co Ltd, has set out the approach to be taken on applications to strike out a claim on the basis of a limitation defence. A defendant must show that the cause of action is so clearly time-barred as to render the claim frivolous, vexatious or an abuse of process.8
[26] Mr Weston submits that if a defendant demonstrates the plaintiff’s proceeding was commenced after the expiration of the limitation period, the defendant will be entitled to an order striking out the cause of action. That is so unless the plaintiff can demonstrate an arguable case for postponement or extension of time. The plaintiff bears the onus of establishing that there is a late knowledge date.9
[27] Turning to the statutory scheme, Mr Weston submits the Limitation Act 2010 applies to acts or omissions occurring after 1 January 2011. Here, the earliest pleaded act or omission was the Council’s issue of the building consent on 12 December 2012. He submits s 11(1) of the Limitation Act provides a six-year limitation period for money claims, subject to a late knowledge period under s 14. The Council’s submission is that the present proceeding was filed outside that late knowledge period. Further, the 10-year longstop period provided for in s 393 of the Building Act is not relevant to the proceeding.10
[28] Turning to examine the primary limitation in s 11 of the Limitation Act, Mr Weston submits that the plaintiffs accepted in their statement of claim (though denied in their reply) that all of the Council’s alleged negligent acts or omissions occurred on or before the date on which the Council issued the CCC — 18 October 2013. The claim was filed on 9 September 2021, outside the primary limitation period of six years. The claim is therefore prima facie time-barred, unless otherwise saved by the late knowledge provisions.11
8 Synopsis of argument of the fourth defendant for application striking out the plaintiff’s claim dated 22 March 2022 at [19], citing Murray v Morel & Co Ltd [2007] 3 NZLR 721 at [32]–[34].
9 At [20].
10 At [21]–[23].
11 At [24]–[27].
[29] Mr Weston submits the claim also falls outside the late knowledge period. The Limitation Act provides that a claimant may file a proceeding outside the primary period if it can prove, after the start date of the primary period, it did not have knowledge, nor ought reasonably to have gained knowledge, of the following:12
(a)that the act or omission on which the claim is based had occurred;
(b)that the act or omission on which the claim is based is attributable to the defendant; and
(c)if the defendant’s liability is dependent on the claimant suffering damage or loss, that the claimant has suffered damage or loss.
[30] Mr Weston says in those circumstances, the claimant has three years to file proceedings from the late knowledge date — the date when it did have, or ought reasonably to have gained, knowledge of the above facts. The onus then shifts to the defendant to show that the late knowledge date is three years or more before the date when the claimant filed the proceeding.13
[31] In ordinary building defects cases, Mr Weston submits, any cause of action that may exist accrues when the damage becomes manifest. In cases of latent defects, the cause of action accrues when the damage becomes so bad or the defects so obvious that any reasonable homeowner would call in an expert. He submits the existing case law confirms:14
(a)The previous law on “reasonable discoverability” is relevant to the assessment.
12 At [28], citing Limitation Act 2010, s 14(1).
13 At [29], citing Limitation Act, s 11(2)–(3)(a).
14 At [30]–[32], citing Pullar v R [2007] NZCA 389 at [13]–[14]; Invercargill City Council v Hamlin [1996] 1 NZLR 513 (PC) at 526; Broadly v Guy Clapham & Co [1994] 4 All ER 349 (CA); Coombe v Jenkison [2020] NZHC 3178 at [15]–[16]; Driver v Radio New Zealand Ltd [2019] NZHC 3275 at [30]–[32]; and Haward v Fawcetts [2006] UKHL 9.
(b)A plaintiff will have constructive late knowledge when they know enough that it would be reasonable for them to begin to investigate whether they have a claim against the defendant.
(c)To have constructive late knowledge, the plaintiff only needs to have enough confidence to justify embarking on the preliminaries of issuing proceedings.
(d)A plaintiff cannot postpone the start of a limitation period by shutting their eyes to the obvious.
[32] Mr Weston accepts it is arguable the plaintiffs had late knowledge of the claim, because they purchased the property after the start of the primary period. They are unlikely to have known then that the property was defective and that they had suffered loss when purchasing it. However, he says the latest date that could be the late knowledge date is 24 May 2016. By that date, the plaintiffs had:15
(a)received a comprehensive report from Maynard Marks detailing defects in the dwelling and the Council’s role in certifying the construction; and
(b)received a report from ACH Consulting Ltd engineers confirming structural issues with the dwelling.
[33] Mr Weston submits, contrary to the plaintiffs’ assertion, that the late knowledge date was not when the plaintiffs received the Fraser Thomas Ltd report on 19 March 2019. He says that while that report may have informed the plaintiffs of the “magnitude of the problems”, the relevant test under s 14 is whether the plaintiffs knew that loss had been suffered. In any event, he says, the earlier reports clearly identified relevant defects in the building.16
15 At [34]–[35].
16 At [36]–[37].
[34] On that basis, Mr Weston says the plaintiffs had more than enough knowledge of the existence of defects and loss by 24 May 2016 to prompt any reasonable person to investigate whether they had a case against the Council. The late knowledge period expired on 24 May 2019 — more than two years before the plaintiffs filed the proceeding.17
[35] Next, Mr Weston submits that the 10-year longstop period in s 393 of the Building Act is neither relevant nor applicable. He says s 393 provides that no relief may be granted in civil proceedings brought more than ten years from the act or omission upon which the claim is based. But s 393(1) expressly confirms the Limitation Act continues to apply in proceedings relating to building work, despite the 10-year longstop period. There is Court of Appeal authority rejecting the view that the ten-year longstop can be an alternative to the limitation period in s 11 of the Limitation Act.18
[36] In any event, Mr Weston submits, the appellate courts have routinely recognised that the 10-year longstop applies concurrently with, and not instead of, the Limitation Act. The defence under the Limitation Act has accrued, and the Council therefore does not need to (and does not) rely on the 10-year longstop.19
[37] For those reasons, Mr Weston submits, the plaintiffs’ claim is time-barred under the Limitation Act. The proceeding as against the Council should be struck out, with 2B costs to the Council.
Plaintiffs’ submissions
[38] Mr Nigel Stone, for the plaintiffs, submits the plaintiffs are within the late knowledge period of the Limitation Act, or, in the alternative, that the essential parts of the claim were made within six years of the primary period in s 11 of the Limitation Act.20
17 At [38].
18 At [40]–[43], citing Lee v Whangarei District Council [2016] NZCA 258 at [31]–[32].
19 At [44], citing Carter Holt Harvey Ltd v Minister of Education [2016] NZSC 95, [2017] 1 NZLR 78 at [96] and Pullar v R, above n 14, at [13]–[14].
20 Respondents’ synopsis of submissions dated 29 March 2022 at [2].
[39] Mr Stone says that for the purpose of the strike out applications the plaintiffs will accept that the Council’s last allegedly negligent act or omission was the issuing of the CCC in October 2013. He says the essential point of dispute is whether there is a dividing line, in terms of the plaintiffs’ knowledge of the substantive defects, between the Maynard Marks and ACH Consulting Ltd reports of 2016, and the Fraser Thomas Ltd report dated 19 March 2019.21
[40] Turning to the first basis of opposition, Mr Stone reiterates that the plaintiffs are within the “late knowledge period”, as defined in s 14 of the Limitation Act. He says the test for late knowledge can only be properly understood by reference to the case law that developed under the Limitation Act 1950. But, in Mr Stone’s submission, those cases were silent on the effect on limitation in building defect cases where plaintiffs have received negligent advice from relevant experts.22
[41] Mr Stone agrees with Mr Weston that a cause of action can be struck out on the basis of a limitation defence if the Court is satisfied it is so clearly statute-barred that the claim can be regarded as frivolous, vexatious or an abuse of process. But he says the Court will otherwise be reluctant to decide limitation points at a preliminary stage, without full consideration of the evidence. He submits the evidence in the present case as to the plaintiffs’ late knowledge is a sufficient basis to prevent the plaintiffs’ claim being regarded as frivolous, vexatious or an abuse of process.23
[42] Mr Stone says that over the history of the case, the respondents have had a total of seven relevant building and/or engineering reports completed about the nature of the defects at the property, with the final relevant report being Fraser Thomas Ltd’s report of 19 March 2019. He submits that there were a number of defects canvassed in that final report that did not appear in the previous six reports.24
[43] On the second basis of opposition, Mr Stone submits the essential parts of the claim were made within six years of the primary period set out in s 11(1) of the
21 At [5]–[7].
22 At [27]–[30], citing Invercargill City Council v Hamlin, above n 14.
23 At [37]–[39], citing Murray v Morel & Co Ltd, above n 8, at [33]; and Scott v ANZ Bank NZ Ltd
[2020] NZHC 906 at [190].
24 At [41] and [53]–[55].
Limitation Act. That is because, in Mr Stone’s submission, the start date of the primary period was 19 March 2019 — the date of the Fraser Thomas Ltd report.25
[44] Mr Stone turns to consider authority on limitation in the United Kingdom. He relies on Oakes v Hopcroft,26 concerning a negligent medical diagnosis and prognosis, in which the English Court of Appeal found the start date for limitation purposes was when the plaintiff obtained a second medical report identifying serious errors in the first report. Mr Stone submits the reasoning of that case is relevant to the present “novel situation” where the plaintiffs have allegedly received negligent adjunct expert advice. He says the longstop provision in the Building Act prevents the opening of the floodgates in a way that would allow a claim in a building case 11 years after the triggering event.27
[45] Mr Stone relies also on Gravgaard v Alridge and Brownlee (A Firm). There, Lord Justice Arden stated that a claimant does not have constructive knowledge of facts simply because an expert could have obtained the knowledge or helped the claimant ascertain the relevant facts — a claimant who acts properly will not be penalised for his or her expert’s shortcomings.28 Mr Stone then canvasses several more English cases said to be of similar effect. He says the cases establish the basis upon which the plaintiffs may be said to have filed the proceeding within the primary period under the Limitation Act.29
[46] Summarising, Mr Stone submits the Council’s application must fail. The factual matrix establishes that the plaintiffs filed the proceeding within the “late knowledge period”. In the alternative, the proper interpretation of the Limitation Act, taking into account legislative intent and the relevant English authorities, establishes that the respondents filed within the primary period.30
25 At [56]–[57].
26 Oakes v Hopcroft [2000] EWCA Civ 237.
27 At [66]–[70], citing Oakes v Hopcroft, above n 26, at [33] and [44].
28 At [71]–[72], citing Gravgaard v Alridge and Brownlee (A Firm) [2004] EWCA Civ 1529.
29 At [72]–[75], citing Harris Springs Ltd v Howes [2007] EWHC 3271; Haward v Fawcetts, above n 14; and Eagle v Redlime Ltd [2011] EWHC 838 (QB).
30 At [79].
Legal principles
Strike out
[47]Rule 15.1 of the High Court Rules 2016 provides, relevantly:
15.1 Dismissing or staying all or part of proceeding
(1)The court may strike out all or part of a pleading if it—
(a)discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading[.]
[48]There are established criteria for strike out:31
(a)A strike out application proceeds on the assumption the pleaded facts are true, unless those pleaded facts are entirely speculative or without foundation.
(b)The cause of action or defence must be clearly untenable.
(c)The jurisdiction is to be exercised sparingly and only in clear cases.
(d)The jurisdiction is not excluded by the need to decide difficult questions of law.
(e)The Court should be slow to strike out a claim in any developing area of the law, perhaps particularly where a duty of care is alleged in a new situation.
[49]As to strike-out applications on the basis of limitation:32
… in order to succeed in striking out a cause of action as statute-barred, the defendant must satisfy the Court that the plaintiff’s cause of action is so clearly statute-barred that the plaintiff’s claim can properly be regarded as frivolous, vexatious or an abuse of process. If the defendant demonstrates that the plaintiff’s proceeding was commenced after the period allowed for the particular cause of action by the Limitation Act, the defendant will be entitled to an order striking out that cause of action unless the plaintiff shows that there
31 Attorney-General v Prince & Gardner [1998] 1 NZLR 262 (CA) at 267; and Couch v Attorney- General [2008] NZSC 45, [2008] 3 NZLR 725 at [33].
32 Murray v Morel & Co Ltd, above n 8, at [33].
is an arguable case for an extension or postponement which would bring the claim back in time.
Limitation Act
[50]Section 11 of the Limitation Act provides:
11 Defence to money claim filed after applicable period
(1)It is a defence to a money claim if the defendant proves that the date on which the claim is filed is at least 6 years after the date of the act or omission on which the claim is based (the claim’s primary period).
(2)However, subsection (3) applies to a money claim instead of subsection (1) (whether or not a defence to the claim has been raised or established under subsection (1)) if—
(a)the claimant has late knowledge of the claim, and so the claim has a late knowledge date (see section 14); and
(b)the claim is made after its primary period.
(3)It is a defence to a money claim to which this subsection applies if the defendant proves that the date on which the claim is filed is at least—
(a)3 years after the late knowledge date (the claim’s late knowledge period); or
(b)15 years after the date of the act or omission on which the claim is based (the claim’s longstop period).
[51]As to late knowledge, s 14 provides:
14 Late knowledge date (when claimant has late knowledge) defined
(1)A claim’s late knowledge date is the date (after the close of the start date of the claim’s primary period) on which the claimant gained knowledge (or, if earlier, the date on which the claimant ought reasonably to have gained knowledge) of all of the following facts:
(a)the fact that the act or omission on which the claim is based had occurred:
(b)the fact that the act or omission on which the claim is based was attributable (wholly or in part) to, or involved, the defendant:
(c)if the defendant’s liability or alleged liability is dependent on the claimant suffering damage or loss, the fact that the claimant had suffered damage or loss:
(d)if the defendant’s liability or alleged liability is dependent on the claimant not having consented to the act or omission on which the claim is based, the fact that the claimant did not consent to that act or omission:
(e)if the defendant’s liability or alleged liability is dependent on the act or omission on which the claim is based having been induced by fraud or, as the case may be, by a mistaken belief, the fact that the act or omission on which the claim is based is one that was induced by fraud or, as the case may be, by a mistaken belief.
(2)A claimant does not have late knowledge of a claim unless the claimant proves that, at the close of the start date of the claim’s primary period, the claimant neither knew, nor ought reasonably to have known, all of the facts specified in subsection (1)(a) to (e).
(3)The fact that a claimant did not know (or had not gained knowledge), nor ought reasonably to have known (or to have gained knowledge), of a particular fact may be attributable to causes that are or include fraud or a mistake of fact or law (other than a mistake of law as to the effect of this Act).
[52]Section 40(2) of the Limitation Act provides:
40 Other enactments may displace or affect defences
(1)A defence under Part 2 or 3 does not apply to a claim if an enactment other than this Act—
(a)prescribes for the claim a limitation period or any other kind of limitation defence; or
(b)provides for the determination or fixing of the time before which, or period within which, the claim must be made.
(2)However, this section does not limit or affect the operation of enactments other than this Act that—
(a)do what is specified in subsection (1) but apply to a claim not instead of, but as well as, this Act; or
(b)alter, extend, limit, or prevent this Act’s application or operation.
Building Act
[53]Section 393 of the Building Act provides:
393 Limitation defences
(1)The Limitation Act 2010 applies 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, no relief may be granted in respect of civil proceedings relating to building work if those proceedings are 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.
Analysis
[54]The two issues which fall to be determined in this proceeding are:
(a)were the proceedings filed within the “primary period”, being within six years from the last alleged negligent act of the Council, pursuant to s 11(1) of the Limitation Act; and
(b)if not, were the proceedings filed within the “late knowledge period”, being within three years after the “late knowledge date”,33 pursuant to s 11(3) of the Act?
Were the proceedings filed within the primary period under the Act?
[55] There is no serious dispute that the last alleged act or omission of the Council relied upon by the plaintiffs is the issue of the CCC by the Council. This occurred on 18 October 2013. The claim was filed on 9 September 2021, which is prima facie outside the primary period.
33 The “late knowledge date” is defined in s 14(1) of the Limitation Act.
[56] Mr Stone’s submission on this point is that on the correct interpretation of the Act, having regard to the line of English authorities he relies on, the primary period should not have commenced until the plaintiffs received the Fraser Thomas Ltd report dated 19 March 2019. Summarising Mr Stone’s submission in this respect, his argument is that in the light of the United Kingdom cases, time for the primary period should not commence running until the plaintiffs had sufficient knowledge of the defects, which they did not have until receipt of the Fraser Thomas report Ltd.
[57] This issue is best dealt with by a point made by Mr Weston for the Council. As noted at [50] above, s 11(1) states:
(1) It is a defence to a money claim if the defendant proves that the date on which the claim is filed is at least 6 years after the date of the act or omission on which the claim is based (the claim’s primary period).
Section 11 does not involve any element of knowledge. It is simply a calculation of the period of six years after the date of the act or omission on which the claim is based. The act or omission of the Council relied upon by the plaintiff is the issue of the CCC, which was issued on 18 October 2013. The proceedings were filed on 9 September 2021. In my view, it is clear that the proceedings were filed outside the primary period.
Were the proceedings filed within the late knowledge period?
[58] The key issue to be decided is when the plaintiffs acquired the “late knowledge” for the purposes of ss 11(3) and 14 of the Act.
[59] Mr Weston submits, on behalf of the defendant, that this date at the latest is 24 May 2016. He points out that by that date the plaintiffs had:
(a)on 20 March 2016, received a comprehensive report from Maynard Marks detailing:
(i)defects in the dwelling; and
(ii)the Council’s role in certifying the construction; and
(b)on 24 May 2016 received a report from ACH Consulting Ltd confirming structural issues with the dwelling.
Mr Weston submits that while the Fraser Thomas Ltd report received on 19 March 2019 may have informed the plaintiffs of the “magnitude of the problems”, this is not the relevant test for showing the date of late knowledge. Section 14 only requires that loss has been suffered and does not require knowledge of the extent of that loss.
[60] Mr Weston submits that in any event the earlier reports received by the plaintiffs during 2016 clearly identified relevant defects in the property. He submits that Schedule 1 attached to his synopsis of submissions tracking the defects ultimately listed in the Fraser Thomas Ltd report across all three reports, shows that virtually all defects had been identified by 24 May 2016. Mr Weston submits that the plaintiffs had more than enough knowledge of the existence of the defects and loss by 24 May 2016 to prompt any reasonable person to investigate whether or not they had a case against the Council. Therefore, the late knowledge period expired on 24 May 2019, more than two years before this proceeding was filed.
[61] Mr Stone, on behalf of the plaintiffs, submits that until the plaintiffs had the Fraser Thomas Ltd report they did not fully appreciate the magnitude of the defects in the property and therefore the late knowledge period did not commence running until that report was received. He relies on a line of English cases, as discussed at [44] and [45], which indicate that where the plaintiff has received negligent advice, then the plaintiff should not be penalised by inadequacy of advice received, and should not be attributed late knowledge until they have received proper advice.
[62]Mr Stone relies on Lord Justice Woolf CJ in Oakes:34
What I have found tips the balance in her favour is the fact that once you have acted on advice the passage of time means that advice recedes to the background of your mind, so it is less readily open to question. The result is that until someone or some incident directly challenges the advice you continue reasonably to assume it was correct. The fact that Mrs Oakes knew her condition was not improving as she had hoped it would, and the fact that she was aware her condition was at least in part permanent did not mean she was not reasonable in continuing to rely on the advice she received. It would
34 Oakes v Hopcroft, above n 26, at [33].
involve placing an excessive burden upon her to expect her to question the advice her counsel and solicitors had given her to settle based on Mr Hopcroft’s report.
In the same decision, Lord Justice Waller stated:35
The position in reality was that she simply did not know of any misdiagnosis,
i.e. the essence of her complaint against Mr Hopcroft, until she received the report of Professor O’Connor.
[63] Mr Stone in his submissions refers to the extrapolated table in Schedule 1 as prepared by the plaintiffs. This provides commentary on the various defects throughout the reports. His argument is that until these defects were fully exposed in the Fraser Thomas Ltd report the plaintiffs did not have late knowledge, in a similar way that Mrs Oakes did not have knowledge until she received proper advice.
[64] However, as Mr Weston has pointed out, even on the analysis of the extrapolated version of Schedule 1 prepared by the plaintiffs, out of the 19 defects listed, it is acknowledged by the plaintiffs that 12 have been identified in the earlier reports the plaintiffs received before the Fraser Thomas Ltd report.
[65] There is a further and significant difficulty with Mr Stone’s submission, which relies on the line of United Kingdom authorities that indicate that where the plaintiff has received negligent advice, late knowledge should not be attributed to the plaintiff until they have received proper advice. The difficulty is that a fundamental assumption underlying this argument is that the advice received by the plaintiffs up to the Fraser Thomas Ltd report was negligently prepared. This would mean that the Maynard Marks report of 10 March 2016 and the ACH Consulting Ltd report dated 24 May 2016 were negligently prepared. There is no evidence of this before the Court and therefore in my view the United Kingdom authorities relied on by Mr Stone do not assist in identifying the point at which the plaintiffs acquired late knowledge.
[66] In conclusion, in my view it is clear that upon receipt of the ACH Consulting Ltd report in May 2016, the respondents had sufficient knowledge of the defects and economic loss resulting from them (arising in the reduction in value of the house due
35 At [44].
to the defects) to have acquired late knowledge for the purpose of s 14 of the Act. Consequently, the claim against the defendant was filed after the late knowledge period of three years had expired and the Council have a defence to the claim under s 11 of the Limitation Act.
Result
[67] The Council’s application to strike out the proceedings pursuant to r 15.1 of the High Court Rules 2016 against the Council is granted.
[68]Costs are awarded to the Council on a 2B basis.
…………………………….. Associate Judge Taylor
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