Limitation and building failure claims: defeating the 10 year Building
Act 2004 longstop – but to no avail?
Hannah Elizabeth Gillies
Submitted for the Society of Construction Law Essay Prize 2015
I.
INTRODUCTION
Limitation issues play a major part in construction litigation, because the nature of
construction is such that latent building defects often do not manifest for years after
the construction took place.
To balance the competing interests of property owners and builders, the Building Act
2004 (BA04) provides a ten year longstop period as a statutory bar against negligence
claims ten years after the work was completed. Because the BA04 is intended to
regulate the practices of builders and designers, the longstop period only applies to
actions that constitute “building work”.
The question of what constitutes “building work” is a factual inquiry, and it is not
always clear where the line will be drawn. For example, the manufacture and supply
of defective building materials may not constitute “building work” if the proceeding
relates more to the quality of the materials, rather than to the installation of the
material during the construction process.
The paper will analyse what type of work constitutes “building work” under the BA04
for the purpose of the ten year longstop provision. For works related to construction
which do not meet the definition of “building work”, such as the generic manufacture
or supply of building materials, a fundamental issue arises as to the applicable
limitation period and whether the doctrine of “reasonable discoverability” is
applicable.
This paper will argue that “reasonable discoverability” is the exception, not the rule.
Cases related to construction where the work complained of does not constitute
1
“building work” should not be characterised as latent building defects cases of the
kind envisaged by the Privy Council in Invercargill City Council v Hamlin, and
therefore “reasonable discoverability” should not apply. 1 Instead, the normal six-year
period of limitation should apply, with the cause of action accruing from the date the
plaintiff received something less than they bargained for.
Accordingly, a plaintiff who seeks to avoid the application of the longstop by arguing
that the work complained of does not fit within the definition of “building works”,
may find himself/herself unable to utilise the principles of “reasonable
discoverability”, to that party’s own detriment.
II.
THE LONGSTOP PROVISION AND THE SCOPE OF “BUILDING
WORK”
It is important to consider the scope of “building work” covered by the BA04 for
limitation purposes, because if work is not “building work”, it follows that the work is
not subject to the BA04 provisions, including the longstop period.
This section will explore the rationale and operation of the longstop period, and then
consider what type of work is (and is not) likely to be covered by the definition of
“building work” and therefore the longstop provision.
It is worth noting that the Longstop does not supersede the six year limitation period
from accrual imposed by section 4 of the Limitation Act 1950 (LA50) – instead, it
imposes an absolute bar of 10 years from accrual.2 This is discussed below.
A. The Longstop
1. Building Act provision
Section 393 of the BA04 is the longstop provision (Longstop), which, in short,
provides a statutory bar against claims of negligent building work ten years after the
1
Invercargill City Council v Hamlin [1996] 1 NZLR 513 (PC).
The Limitation Act 2010 applies to acts or omissions occurring after 1 January 2011. This essay is based on the LA50 which
remains relevant until December 2025.
2
2
work was completed. The pre-requisites for the Longstop to apply are usefully
summarised by Justice Asher in the Minister of Education v Carter Holt Harvey
(CHH)3, namely, there must be:
a) Civil proceedings;
b) Relating to building work; and
c) Ten years or more elapsing from the act or omission on which the proceedings
are based.
It is the second requirement that proceedings relate to building work, which is the
focus of this essay.
2. Legislative intent of the Longstop
When considering the scope of the definition of “building work” for the purposes of
the Longstop, it is useful to understand the legislative intent behind the provision. The
legislative history of the Longstop was canvassed by Justice Glazebrook in Klinac v
Lehmann.4 The Longstop was the result of a careful balance of two competing policy
considerations, namely, the differing interests of building owners and builders:
a) The nature of building defects is such that often, latent defects do not manifest
for many years after the construction took place. Therefore, a limitation period
that is too short would deprive property owners of the right to sue at a time
when they are unaware of the defects.5 In support of the ten year period in
particular, the parliamentary debates highlighted a discussion paper of the
Attorney-General of New South Wales which calculated that 98% of building
faults become apparent within the first 10 years of the life of a building;6 and
b) Builders and those who are involved in “building work” are entitled to some
certainty, and are able to “rest easy” after ten years in the knowledge that they
will not be exposed to litigation for unjustifiably long periods after the original
construction of the building.7 This concern was made clear in the report of the
3
The Minister of Education v Carter Holt Harvey [2014] NZHC 681 at [107].
Klinac v Lehmann AP15-01, HC Whangarei, 6 December 2001, canvassed the legislative history section 91 of the Building Act
1991 (the predecessor to section 393 of the BA04).
5
Deeming v Eig-Ansvar [2013] NZHC 955 at [25].
6
NZPD Vol. 520 at 5490.
7
Thompson v Christchurch City Council, CIV 2010-409-2298, HC Christchurch, 28 March 2011 at [43]; Deeming at [25].
4
3
Internal Affairs and Local Government Committee, as a need to remove the
temporally unlimited liability of those involved in the construction industry: 8
At present, an owner of a building is able to lay claim against local government – and does –
even if the building is 100 years old and built on a landslip or some other fault. Local
government can be held liable for that. The committee, once again unanimously, decided that
it was in the best interests of the building industry, of local government, and of New Zealand
to limit the period of liability.
Interestingly, the initial drafting of the Longstop in the Building Act 1991 did not
explicitly limit the Longstop to civil proceedings related to “building work”.9 This
was later amended to explicitly limit the application of the Longstop to works relating
to building work. It is the definition of “building work”, to which this essay now
turns.
B. “Building Work”
As referenced above, the application of the Longstop turns on the definition of
“building work” under the BA04. To ascertain the scope of the definition, one must
look first to the definition itself, the wording therein, and the limits of the definition
shaped by case law.
1. Statutory definitions
“Building work” is defined in section 7 of the BA04, as encompassing work:10
(a) For, or in connection with, the construction, alteration, demolition or removal
of a building;
(b) Sitework; and
(c) Design work (relating to building work) that is a 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.
8
NZPD Vol. 520 at 5296.
Deeming, above n 5, [24]; Building Amendment Act 1993.
10
Building Act 2004, s 7.
9
4
The Longstop applies to building work “associated with” design, construction,
alteration, demolition or removal of a building.11
2. Apparent breadth of the definition
The phrase “for, or in connection with” provides the definition of “building work” a
certain breadth. In Carter Holt Harvey Limited v Genesis Power Limited (No 8)
Justice Randerson commented that the expression emphasises the broad scope
Parliament intended the Longstop to take.12 Similarly, in GPE Holdings v Tile ‘N’
Style the Court observed the wide meaning of the phrase requiring merely a link or
relationship between one thing and another. 13 However, for work to be connected
with the construction, alteration demolition or removal of a building, the person
performing the work must have had the particular building in mind.14
The Courts have also considered the words used in the Longstop provision itself
whereby the civil proceeding in question must be “relating to” building work for the
Longstop to come into effect. The issue is whether the words “relating to” widen “for
or in connection with” in the definition of “building work”.
This argument was considered by Justice Asher in the Minister of Education v CHH.
In this case, the defendant, a manufacturer and supplier of allegedly defective
cladding sheets, argued that the Longstop applied because although the manufacture
and supply of cladding sheets did not amount to “building work” itself, it “related to”
building work. In essence, the defendant’s submission was that the words “relating
to” meant that the Longstop could apply to work that did not fall within the definition
of “building work”.15 Justice Asher noted that although it is possible to say there is a
connection between the manufacture and supply of building materials and building
work, the materials in this case were generic and did not relate to any particular
building. 16 His Honour was not satisfied that the phrase “relating to” widened the
11
Building Act 2004, s 393.
Carter Holt Harvey Limited v Genesis Power Limited (No 8) HC Auckland CIV-2001-404-1974, 29 August 2008.
13
GPE Holdings Limited v Tile ‘n’ Style Limited [2014] NZHC 802, at [34].
14
GPE Holdings, above n 13, at [35].
15
Minister of Education, above n 3, at [124].
16
Minister of Education, above n 3, at [125].
12
5
definition of “building work”, and instead considered the words a necessary
grammatical link that did not add any meaning or broaden the scope of the
Longstop.17
3. Limits on the definition
Despite the arguably broad definition of “building work”, the Court has recognised
the danger of extending the meaning of the definition into areas outside the scope of
the legislation. Commenting on the legislative intent behind the BA04 in Deeming v
Eig-Ansvar (Deeming), Justice Doogue noted that:18
But the intention of the Act was not to extend the ambit of the expression to any activity no
matter how remote it was from the actual building of the house so long as a causal connection
between the two events could be traced.
The determination of what is “building work” within the meaning of the BA04 has
been described by the Court in Thomson v Christchurch City Council as a fact
specific enquiry, dependent on the surrounding circumstances of the case.19
Given the apparently fact-specific nature of the issue, it is useful to distill some of the
key themes from the case law in relation to when work is, and is not, considered
“building work” and why.
4. Factors to consider when determining the limits of “building work”
A synthesis of the relevant case law highlights the following factors as relevant to
determining whether or not something constitutes “building work” for the purposes of
the Longstop.
17
Minister of Education, above n 3, at [126].
Deeming, above n 5, at [41].
19
Thompson, above n 7, at [45].
18
6
(a) Does it concern generic specifications or standard product supply?
The first factor to consider when determining whether particular work constitutes
“building work” is whether it is “work” at all – or whether it is the mere supply of
generic specifications and/or supply of a standard product.
This issue was considered in Thomson v Christchurch City Council, where the owners
of a leaky home appealed against the adjudicator’s decision not to join Equus, the
manufacturer and supplier of a an allegedly defective cladding system, as a
respondent. 20 Counsel for Equus contended that the supply of the cladding system
and accompanying specification comprised “building work”. The appellants, on the
other hand, submitted that negligent deficiencies in a manufacturer’s general
specifications and stock recommendations as to how a particular product should be
used did not constitute “building work”. 21
The Court agreed with the appellants, and differentiated between this scenario (the
mere provision of building products provided for use in a building, yet not performed
“in connection with” the design, construction etc of the building) and a faulty
specification of an integral part of a building such as elevators or staircases which
would clearly constitute “building work”.
Similarly, in the Minister of Education v CHH, Justice Asher found that the defective
cladding manufactured and supplied by the defendant did not constitute “building
work”. One reason for this finding was that the proceedings did not relate so much to
the installation of the cladding but the qualities of the cladding itself. 22 Thus, the
problems were not held to relate in any direct way to the construction process. This
distinction was described by Justice Asher as the type of “bright line boundary”
required by such statutory limitations.23
20
Thompson, above n 7.
Thompson, above n 7, at [42].
Minister of Education, above n 3, at [145].
23
Minister of Education, above n 3, at [146].
21
22
7
Justice Asher also found it relevant that the focus of BA04 is on regulating the
practices of designers and builders, as distinct from suppliers of building products,
stating that:24
It would be surprising if a long stop within the 2004 Act was designed to cover claims by
those persons who did not do work covered by the 2004 Act. The long stop could be
expected to be limited to the work that comes within the ambit of the 2004 Act. That work
does not include manufacturing or supplying building components.
(b) Was the work undertaken for a specific construction?
Case law has confirmed that for work to constitute “building work” for the purposes
of the Longstop, the work undertaken must be undertaken as part of and for a specific
construction.
In North Shore City Council v Attorney General (the Grange) the Council claimed
that the Building Industry Authority (BIA) had breached its duty of care when it
reported in 1995 that the Council’s processes were adequate to assess compliance
with the Building Code. 25 The Attorney General argued that the Council’s causes of
action were “civil proceedings relating to building work”, and as they concerned the
1995 report the ten-year period had expired.26 This argument was proffered despite
the fact that the construction in question was not granted consent and constructed until
1999.
The Supreme Court offered the provisional view that adoption of this argument would
be an unusual and unfair result that Parliament could not have intended. 27 No loss
could possibly have been caused to the Council by the conduct of the BIA before
construction of the apartments. The Court thought it was “plain enough” that
“building work” under the BA04 relates to work associated with any individual
building.28 This was also consistent with section 7 of the BA04, the interpretation
24
Minister of Education, above n 3, at [147]
North Shore City Council v Attorney General (the Grange) [2012] NZSC 49 at [4].
26
The Grange, above n 25, at [207].
27
The Grange, above n 25, at [207] – [208].
28
The Grange, above n 25, at [209].
25
8
section, which contemplates construction, alternation, demolition, or removal of “a
building”.29
The requirement that “building work” must relate to a specific building was also
adopted by Justice Asher in the Minister of Education v CHH. In this case, at the
point when the defendant did the work (i.e. manufactured and supplied the cladding),
the work did not relate to any individual building, but to future unspecified
buildings.
30
His Honour found the Supreme Court’s analysis in the Grange
persuasive, and further noted as a matter of statutory interpretation that the definition
“building work” refers to “building” in the singular for a particular reason, especially
as other parts of the BA04 deliberately use “buildings” in the plural.31
(c) Was the work undertaken during construction?
This factor is similar to that canvassed in (b) and is exemplified by The Grange,
whereby the Supreme Court made a provisional finding that the Longstop did not
apply to the BIA’s actions because construction of the apartments did not begin until
four years after the actions complained of. This is consistent with Klinac, where the
Court held that the “building work” requirement indicates that the building work itself
must be directly related to the cause of action pleaded.32
(d) Was it “design work” within the definition?
The Longstop covers “building work associated with…the design…of any building”.
It is important to consider what constitutes “design” for the purposes of this
definition.
In Deeming, the Court had to determine whether the activities of an engineer who
produced a geotechnical suitability report on land prior to a subdivision constituted
“design” for the purposes of “building work”. Justice Doogue considered that design
must be design of a building. The report was concerned with whether ground
29
The Grange, above n 25, at [209]; Building Act 2004, s 7.
Minister of Education, above n 3, at [132].
Minister of Education, above n 3, at [129].
32
Klinac, above n 4, at [45].
30
31
9
conditions resulting from a subdivision were suitable for the construction of houses.
To the extent that the report referred to houses, it only did so on the assumption that
the houses of certain characteristics would be constructed. 33 The Court noted in
obiter, however, that if the engineer had provided loading recommendations which
were incorporated into the design of foundations for a particular building the engineer
could be described as undertaking “building work”.34
The outcome of Deeming can be contrasted to the work undertaken in Carter Holt
Harvey Limited v Genesis Power Limited, whereby the design calculations and
seismic analysis of a boiler for a particular building was found to constitute design for
the purposes of “building work”. 35 This case was subsequently cited in Southland
Indoor Leisure Centre Charitable Trust v Invercargill City Council36 where the Court
held that a negligent structural engineering peer review of the steel community courts
trusses at Stadium Southland constituted “design work”. 37 The work related to a
specific building; it was that design input which was the basis on which modifications
were made to the trusses; and it was a condition precedent to obtaining consent
approval.38
This position is consistent with Thomson v Christchurch City Council where the
Court considered that “design” work must be associated with the design of the
individual building or an element of it.39 For example, design of essential items of a
building such as elevator and windows would clearly constitute “building work”.40
(e) Relevance of causation
The possibility of a causative link between the actions or omissions of the defendant
and the damage suffered by the plaintiff is a different question from whether the
defendant’s actions constitute “building work”. For example, in Deeming, the fact that
there may have been a relationship between the engineer’s report and subsequent
33
Deeming, above n 5, at [34].
Deeming, above n 5, at [40].
35
Carter Holt, above n 12, at [53].
36
Southland Indoor Leisure Centre Charitable Trust v Invercargill City Council [2014] NZHC 1439 at [34].
37
Southland, above n 36, at [39]
38
Southland, above n 36 at [40].
39
Thompson, above n 7, at [44].
40
Thompson, above n 7, at [45].
34
10
damage to the houses due to geotechnical issues was not relevant to the question of
whether the engineer contributed to the design or construction of the house.41
As Justice Asher concluded in the Minister of Education v CHH, it is not possible to
propose a neat cut-off line to determine definitively what is, and what is not,
“building work” for the purpose of the BA04.42 However, while each determination is
fact-specific, the above factors have been considered relevant in previous judicial
determinations.
III.
LIMITATION PERIOD FOR WORKS THAT DO NOT CONSTITUTE
“BUILDING WORK”
Based on the above, there are clearly cases pertaining to building defects where the
claim does not relate to “building work”, such as product manufacture and supply for
an unspecified building or the provision of generic faulty specifications (NonBuilding Work Claims). The Longstop does not apply to these Non-Building Work
claims.
This section of the essay will explore the applicable limitation period in Non Building
Work Claims, including the application of the six year limitation period pursuant to
LA50 and whether the “reasonable discoverability” test applies to Non-Building
Work Claims. For the reasons below, it is arguably difficult to see how “reasonable
discoverability” can apply to a case which does not involve “building works”.
A. Limitation Act 1950
This essay focuses on the LA50 rather than the LA10. The LA10 applies to acts or
omissions occurring after 1 January 2011, so the LA50 will remain relevant to
construction lawyers for a while yet.43
41
Deeming, above n 5, at [39].
Minister of Education, above n 3, at [144].
43
Section 23B of the LA50 bars any claim being brought after the last of the two periods: the later of 31 December 2015 or 15
years after the date of the act or omission on which the action is based. Conceivably then, the LA50 will be phased out in
December 2025, as the last possible act or omission that can be brought under the LA50 would have occurred in December 2010.
For the future, both a discoverability (late knowledge) principle and a longstop bar are provided for in the LA10
42
11
1. Section 4 and accrual
Section 4(1)(a) of the LA50 provides a six year limitation period for tortious claims
from the date on which the cause of action accrued. 44
The accepted rule is that a cause of action accrues when every fact exists which it
would be necessary for the plaintiff to prove in order to support his or her right to the
judgment of the Court.45 For a claim in negligence, this includes damage resulting
from a breach of a duty of care.
2. Date of damage
A question for the courts has been to determine when the date of damage occurs. This
can be determined with reference to the orthodox “occurrence” test, or the
“reasonable discoverability” doctrine.
(a) Orthodox “occurrence” test
The orthodox “occurrence” test provides that time runs from the actual date the
damage happened.
A classic example of the operation of this test is demonstrated by Thom v Davys
Burton46 where a prenuptial agreement between Mr Thom and his wife contracting
out of the provisions of the Matrimonial Property Act 1976 was void due to the
negligence of Mr Thom’s solicitors in 1990. Mr Thom argued that he did not suffer
loss until 1999, when the Family Court refused to treat the agreement as effective.
The Supreme Court disagreed, finding that the cause of action accrued in 1990, at the
point where he “did not get what he should have got”.47 It was at this point where Mr
Thom had an immediate claim for the costs of remedying the deficiencies in the
agreement and thereby suffered measureable economic loss.48
44
Limitation Act 1950, s 4.
Thom v Davys Burton [2008] NZSC 65 at [2].
46
Davys Burton, above n 45.
47
Davys Burton, above n 45, at [25].
48
Davys Burton, above n 45, at [26].
45
12
(b) “Reasonable discoverability”
The doctrine of reasonable discoverability is a judge-made doctrine that has been
applied in latent building defect cases.49 The doctrine is such that time runs from the
date the damage became apparent or manifest, or reasonably ought to have become
apparent or manifest.
The classic statement of the doctrine derives from the Privy Council in Hamlin:50
The plaintiff's loss occurs when the market value of the house is depreciated by reason
of the defective foundations, and not before. If he resells the house at full value before the
defect is discovered, he has suffered no loss. Thus in the common case the occurrence of the
loss and the discovery of the loss will coincide.
(…)
This approach is consistent with the underlying principle that a cause of action accrues
when, but not before, all the elements necessary to support the plaintiff’s claim are in
existence. For in the case of a latent defect in a building the element of loss or damage
which is necessary to support a claim for economic loss in tort does not exist so long as
the market value of the house is unaffected.
(Emphasis added)
There is no general doctrine of reasonable discoverability enshrined in New Zealand
law. 51 Nevertheless, it has been recognised as applying in cases of latent building
defects. However, it is unclear whether the application of the reasonable
discoverability test extends to Non-Building Work Claims. It is arguable that the
doctrine does not apply in these types of cases.
49
And to cases of sexual abuse. Invercargill City Council v Hamlin [1994] 3 NZLR 513 (CA) (majority reasoning) affirmed by
Privy Council [1996] 1 NZLR 513 (PC).
50
Hamlin, above n 1.
51
Murray v Morel & Co Ltd [2007] NZSC 27 at [38].
13
B. Reasonable discoverability and Non-Building Work Claims
There is a strong argument that the reasonable discoverability test does not apply to
Non-Building Work Claims as precedent has confined the application of the doctrine
to latent building defect cases.52 Reasonable discoverability is the exception, not the
rule. Therefore, arguably a Non-Building Work Claim is not the kind of latent
building defect case envisaged by Hamlin, and is more analogous to a product
liability case.
This appears to be a novel argument – one that was not considered in Justice Asher’s
strikeout judgment in the Minister of Education v CHH, despite the finding that the
supply of cladding materials did not constitute “building work”.53
1. Reasonable discoverability is confined to latent building defect cases
The Supreme Court has recognised that the reasoning of the Privy Council in Hamlin
means that cases of the Hamlin kind do not involve a departure from the orthodox
approach as to when a cause of action accrues. 54 Instead, Hamlin recognises that a
claim in negligence for latent building defects involves economic loss which only
occurs once the market value of the building is affected.55 This is different to a claim
for physical damage, and thus Hamlin is not authority for the proposition that the
accrual of a cause of action is postponed until the plaintiff has reasonably discovered
loss.56
This is consistent with the orthodox occurrence test, because there is no loss until the
building defect becomes reasonably discoverable – the discovery itself causes the
loss. 57 This is a specific approach which has been judge-made for the specific
circumstance of latent building defects. This is reflected in the Privy Council’s
52
And cases relating to sexual abuse and personal injury.
Minister of Education, above n3. Note that this was a strikeout application, and accordingly it may not have been the
appropriate stage to address novel limitation issues and/or issues of reasonable discoverability which may need to be assessed on
detailed expert evidence. This issue may yet be raised in the substantive proceeding.
54
Murray, above n 51, at [42].
55
Christine French “Time and the Blamelessly Ignorant Plaintiff: A Review of the Reasonable Discoverability Doctrine and
Section 4 of the Limitation Act 1950” (1998) 9 OLR 255 at 260. Christine French was counsel for Hamlin in both the Court of
Appeal and Privy Council and now sits on the Court of Appeal.
56
Murray, above n 51, at [53].
57
French, above n 56, at 260.
53
14
judgment where it was stated that “their Lordships propose to confine their advice to
the particular context of latent defects in buildings”.58
In Murray v Morel 59 the Supreme Court rejected the application of the reasonable
discoverability doctrine across the entire field of limitation. While the Court did not
preclude developing the doctrine on a case-by-case basis, it limited the principle’s
applicability to few recognised cases, including:
(a) Hamlin (latent building defects);
(b) S v G60 (sexual abuse); and
(c) G D Searle & Co v Gunn61 (personal injury).
Further, Parliament’s enactment of the Longstop in the BA04 is, in itself, an
endorsement that the correct accrual test for limitation in “building work” cases is the
reasonably discoverability test, and as Honorable Justice French has commented, was
Parliament’s “approval of the continued use of that test” subject to an overriding
longstop.62
Latent building defects cases are fundamentally characterised by the presence of
“building work”. If the boundary is not drawn at this point, the most logical place,
then the remotest of acts associated with construction could be framed as contributing
to a latent building defects case (despite such acts not constituting “building work”).
Arguably then, Non-Building Work Claims such as the supply and manufacture of
generic building materials, do not constitute “latent building defect” cases of the sort
envisaged in Hamlin.
58
Hamlin, above n 1, at 526. Similarly in Hunt v New Plymouth District Council HC New Plymouth CIV-2006-043-435, the
Court commented rejected the application of reasonable discoverability in a negligent misstatement case because the claim was
not concerned with “latent defects” and commented at [67] that “Hamlin is confined to latent defects in buildings and there is no
general principle of reasonable discoverability in relation to limitation periods.”
59
Murray, above n 51.
60
S v G, [1995] 3 NZLR 681 (CA).
61
G D Searle & Co v Gunn,[1996] 2 NZLR 239 (CA).
62
French, above n 55 at 261.
15
2. Classification of Non-Building Work Claims
The Non-Building Work Claims detailed above may be more appropriately
categorised (or analogised) as ‘product liability’ cases rather than latent building
defects cases. Arguably if these Non-Building Work Claims are not latent building
defect cases, reasonable discoverability does not apply. For example, in the Minister
of Education v CHH, where the manufacture and supply of building products was
found not to be “building work”, the Court is arguably dealing with product liability
in respect of the defective cladding, rather than a latent building defects case.
In a product liability case, the loss is not dependent on the plaintiff’s knowledge at all.
Loss occurs when the plaintiff receives the flawed product as confirmed by the
Supreme Court in Davys Burton (supra);63
The asset which the plaintiff acquired was, as a result of the combined negligence of his
solicitors and himself, defective in that it did not give him the protection which it was his
purpose to obtain. The product…was created with an inherent flaw. That flaw
represented actual damage or harm which was suffered by the plaintiff from the
moment the defective prenuptial agreement came into existence.
Similarly, in the early case of White v Taupo Totara Timber Company64, where Mr
White had purchased roofing materials that had a latent defect which only manifested
itself seven years later, Justice Gresson rejected the introduction of a “knowledge”
principle when determining when the cause of action accrued.
This principle could equally apply to the negligent geotechnical suitability report in
Deeming, whereby, to use the words of Davys Burton, the report was “created with an
inherent flaw”.65
For cases of this kind, therefore, it is argued that loss is suffered at the date of supply
of the defective product whether the party was aware it was a ‘dud’ or not.
63
Davys Burton, above n 46, at [49].
White v Taupo Totara Timber Company, [1960] NZLR 547.
65
Deeming, above n 5.
64
16
3. Longstop
The learned author Professor Stephen Todd has observed that a longstop provision is
an essential concomitant of the discoverability doctrine – “the one should not be
introduced without the other”. 66
The undesirability of applying a reasonable discoverability test where the Longstop
provision does not apply has similarly been recognised by the Law Commission in
Limitation of Civil Actions, a Discussion Paper.67 All the Commissioners agreed that
the concept of reasonable discoverability would raise practical difficulties when it
applied outside the area of building negligence, particularly because “the only longstop provision is section 91 of the Building Act, any other case to which the principle
is applied [i.e. Non-Building Work Claims] is potentially open ended.”
The necessity of having a corresponding longstop has also been judicially recognised.
In Askin v Knox (before the Longstop was introduced) Cooke P recognised the
unfairness that could arise for defendants if allegations of negligence are raised too
many years after the work has been done due to the application of the reasonable
discoverability test. 68 The Privy Council in Hamlin observed that Parliament acted
“swiftly” on this suggestion with the introduction of the section 91(2) Longstop.69
The above is consistent with the view held in other jurisdictions. The United
Kingdom Law Reform Committee’s report on latent damage undertook a survey of
legislation in other jurisdictions where a version of reasonable discoverability is
adopted. The survey concluded that reasonable discoverability is invariably
accompanied by an overriding longstop provision.70
It must be noted that there is now an indirect longstop for such claims under the LA50
(as amended by the LA10) which will be phased out by December 2025. 71
66
The Law of Torts in New Zealand (3rd ed, Brookers, Wellington, 2001) 26.5.06 at (2).
Preliminary Paper 39, Limitation of Civil Actions: A Discussion Paper (February 2000, Wellington, NZ) at [18]) observed in
the context of the Fair Trading Act 1986, section 43(5).
68
Askin v Knox [1989] 1 NZLR 248 at 255.
69
Hamlin, above n 1, at 523.
70
UK Law Reform Committee Report “Latent Damage” (Cmnd 9390, Twenty-Forth Report, 1984); cited in Murray at [59].
71
Limitation Act 1950, s 23B. No action may be brought under the LA50 the later of 31 December 2015, or 15 years after which
the act or omission is based.
67
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Technically then, the last act or omission that can be brought under the LA50 is
December 2025. Once the LA50 is phased out, the LA10 has a longstop period of 15
years to money claims.72
However, regardless of this indirect longstop, Parliament’s imposition of the 10 year
BA04 Longstop came about as a result of the reasonable discoverability doctrine for
“building work” cases. Arguably, the phasing out of the LA50 through section 23B is
incidental, and does not by default mean that reasonable discoverability can now be
extended to all types of cases including Non-Building Work Claims.
C. If reasonable discoverability does not apply, then what limitation period
should apply?
If the doctrine of reasonable discoverability does not apply to Non-Building Work
Claims, plaintiffs pursuing a claim whereby the LA50 applies will be left with the 6
year period running from the date of damage based on the orthodox “occurrence” test.
The issue of whether reasonable discoverability applies to Non-Building Work claims
was not addressed in the strike-out judgment of Justice Asher in the Minister of
Education v CHH.73 It remains to be seen whether such an argument is raised in the
substantive hearing and, if so, whether the Court agrees that reasonable
discoverability is not only limited to latent building defect cases, but that in order for
reasonable discoverability to apply one also requires “building work”.
IV.
CONCLUSION
The application of the Longstop turns depends on whether the act in question
constitutes “building work” for the purpose of the BA04. Ultimately, this is a case by
case analysis. Case law has developed several guiding factors, such as whether the
work was undertaken for a specific construction.
72
Limitation Act 2010, s 11(3).
The refusal to strike out has been appealed. It is unclear whether the argument that the proceedings are barred by the 6 year
limitation period has been raised, or whether this will be dealt with in the substantive hearing if the strike out appeal is refused.
73
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If the work under consideration has relevance to the overall framework of
construction, but does not constitute “building work”, the Longstop does not apply.
The issue then becomes what limitation period should apply, and in particular,
whether Hamlin’s reasonable discoverability test applies to this six year limitation
period? Precedent has confined the application of the doctrine to latent building defect
cases. 74 Arguably, a Non-Building Work Claim is not the kind of latent building
defect case envisaged by Hamlin, and is more analogous to a product liability case.
If this interpretation is correct, the normal six-year period of limitation applies, with
the cause of action accruing from the date the plaintiff got something less than they
bargained for.
Accordingly, a plaintiff who gets around the Longstop by successfully arguing that
the act complained of does not fit within the definition of “building work” could find
that he/she has lost the advantage of Hamlin’s reasonable discoverability doctrine
relating to latent building defect cases.
74
And cases relating to sexual abuse and personal injury.
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