In Southland Indoor Leisure Centre Charitable Trust v Invercargill City Council  NZHC 1439 the High Court struck out a cause of action under the Fair Trading Act 1986 as being time-barred under the ten year limitation “long stop” provision in the Building Act 2004. It was the first New Zealand case to consider the issue. The case should be of interest to anyone in the professional indemnity field.
Stadium Southland , a community sports and leisure centre in Invercargill owned by a trust (the “Trust”), was constructed in 1999. The consulting engineer was Mr Anthony Major. In November 1999, during construction, there was visible sagging in trusses spanning the roof over a particular part of the building. The Trust engaged Harris Consulting Engineers Ltd (“HCL”) to peer review the design of the trusses. In December 1999, HCL produced a report (the “Design Report”) which identified defects in the design of the trussses. Mr Major subsequently produced a modification drawing for the trusses.
On 4 January 2000, HCL provided a producer statement which incorporated remedial detail in respect of the modification work to the trusses (the “Design Review”). It also provided a letter dated 4 January 2000 which formed part of the producer statement, and included the proposed remedial detail (the “Letter”). In January 2000, the modification work commenced. In November 2000, the Invercargill City Council (“ICC”) issued a Building Code Compliance Certificate.
In April 2006, the Council became aware of movement in the roofline of the stadium in the vicinity of the trusses. As a result, on 12 April 2006, the Trust engaged HCL to review the roof structure to ensure that the building was safe in the event of snowfall on the roof. On 9 June 2006, Mr Harris of HCL confirmed in a report that the strength of the trusses was adequate to support the design loads specified in the relevant codes when constructed, and those applicable at the time. (the “June 2006 Report”) Mr Harris concluded that the trusses were structurally satisfactory. In September 2010, during a heavy snowstorm, Stadium Southland’s roof collapsed.
Following the the collapse, the Trust commenced proceedings against the Council and the consulting engineer, contending that the collapse of the roof was caused by the failure of the trusses. Specifically, the Trust claimed that the failure of the trusses was caused or contributed to by defects in the design and construction of the modification work carried out on the trusses.
The Council denied liability to the Trust and issued third party proceedings against Mr Harris and his firm, Harris Consulting Ltd.
The Council alleged that HCL was engaged to provide structural engineering peer review services for the original design and redesign of the community courts roof trusses. The Structural Review of December 1999 and the Design Review and letter of 4 January 2000 provided to the Council, concluded that the redesign of the community courts trusses would comply with ultimate code loads once upgraded. In its statement of claim the Council pleads five causes of action against the first and second third parties. Two of these were as follows:
- Breach of Fair Trading Act 1986: The Structural Review and Design Review and letter contained statements that were misleading or deceptive and in breach of s. 9 of the Fair Trading Act 1986. Compensation was sought pursuant to s 43(2)(d) of that Act.
- Breach of Fair Trading Act 1986: As above, but in relation to the June 2006 Report, which contained statements that the strength of the trusses over the community courts was adequate in the event of heavy snowfall.
Strike out application: the FTA claim in relation to the Structural Review/ Design Review
The third parties applied to strike out the Council’s claims where they related to the Structural Review, the Design Review, and the Letter, including the first FTA claim referred to above, on the basis that such claims were time barred by application of s. 393 of the Building Act. The relevant part of s. 393 is subsection (2), which relevant part of which states:
“…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.”
The essence of the applicant’s position was that there was no reason why s. 393(2) would not apply to the FTA cause of action. Reference was made to the dicta of Courtney J in Dustin v Weathertight Homes Resolution Service (High Court, Auckland, CIV 2006-404-276) that whether a cause of action arises at common law, by statute or by virtue of contract, does not alter its nature as a civil proceeding. Reference was also made to the Court of Appeal in Gedye v South  3 NZLR 271 in relation to the predecessor of s. 393(2) that “the expression of [the provision] is cause of action neutral.” In Gedye, the Court pithily stated at paragraph 45-46, in relation to a contention that fraudulent concealment should postpone the ten year longstop:
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.
The Council contended that the FTA prescribed its own limitation period which addressed the issue. Section 43A (and its predecessor s 34(5)) provide that an FTA proceeding must be commenced within three years after the date on which the loss or damage, or the likelihood of loss or damage, was discovered or ought reasonably to have been discovered. The Council submitted that this limitation provision was part of a comprehensive statutory framework applying to s. 9 claims even if that such a proceeding may relate to building work.
The Court referred to s. 50 of the FTA, subsection (1) of which states: “nothing in this Act limits or affects the operation of any other Act.”
Section 393(2) applies without restriction to civil proceedings which relate to building work. That category of case concerning a particular activity which is the subject of statutory definition is not otherwise qualified in any other way. On the strength of this, the Court felt able to determine that s. 393(2) applied without restriction to civil proceedings which related to building work (para 66).
Following Dustin, the Court stated that it was an error to focus on the statutory nature of the cause of action because whatever the nature the cause of action (contractual, statutory or otherwise) by its nature the suit or action remained a civil proceeding. The Court continued at paragraph 67:
Parliament intended the provision to have wide application across the subject field. Its application was not intended to be determined by the legal footing or basis on which a party may choose to sue a building professional but by the statutory definition of the activity to which the limitation rule had application, namely “building work”.
The Court noted that the purpose and effect of the Building Act longstop period would be undermined if claims based on historic building faults could be the subject of claims under the FTA because loss or damage has only relatively recently been discovered (para 69).
The Court noted that there was no reason to suppose that the statutory scheme of the FTA would be undermined by the application of s. 393(2). Furthermore, the Court made the salient observation that the FTA primary period of three years was shorter than the Limitation Act period of six years and so the balance sought to be struck by Parliament in providing a 10 year longstop for civil proceedings relating to building work was arguably more favourable in the context of a s 9 FTA claim (para 70).
It could not have been Parliament’s intention to subvert the need for the certainty s. 393 was intended to provide. Parliament made its intentions clear with the wide an encompassing term “civil proceedings”. This was intended to have comprehensive application, provided that the proceedings related to building work, as defined in the legislation (para 72).
This FTA cause of action was therefore statute barred under s. 393(2) of the Building Act, and was struck out. Having determined the legal principles in the way that it had, the Court did not rehearse applying the law to the facts, given that the acts in question occurred in 2000, so were in on view time barred, the longstop period ending in 2010.
Other causes of actions were considered in the judgment which are not considered in this note.
Other than the interesting and noteworthy policy considerations, the key point appears to be that section 50 of the FTA provides that the provisions of other enactments are unaffected. This includes s. 393(2), the language of which is deliberately broad, and includes all civil proceedings in relation to building work, as defined. The FTA therefore cannot be used to read down the s. 393(2) of the Building Act. Where an FTA claim relates to building work, s. 393(2) shall apply. An FTA claimant has three years from the date on which the loss or damage, or the likelihood of loss or damage, was discovered or ought reasonably to have been discovered. Where the claim relates to building work, this shall not be longer than ten years.