25 May 2023
A recent decision by the Court of Appeal has sparked interest amongst engineers and lawyers alike. The Court found engineers could be added as defendants to claims for compensation beyond the Building Act 2004’s 10-year ‘long stop’.
10-year long-stop
In lawsuits, certain time limits apply to bringing a case to court. The time limits depend on the type of claim being made. Historically, a claim for compensation in a civil lawsuit couldn’t be brought “10 years or more from the date of the act or omission on which the proceedings are based”. Until now, this 10-year limit extended to engineers ‘joined’ to claims as contributors to compensation.
In essence, if a building owner pursued a consenting authority (Wellington City Council, for instance) for negligently issuing building consents, the consenting authority could ‘join’ the relevant engineer or firm to the case. That way, the engineer could contribute according to the proportionate share of fault assigned to the engineer.
The case
Beca Carter Hollings and Ferner Limited v Wellington City Council [2022] NZCA 624 involved a ‘joining’ claim by the Wellington City Council against Beca for a contribution towards any compensation the Council would need to pay to the owner of an office building that had been irreparably damaged in the 2016 Kaikoura earthquake.
The Council argued that Beca had breached its duty of care by designing a building that was not up to the standard required by the Building Code and that Beca was, therefore, jointly liable. Beca argued it could not be liable for the work as the claim was brought more than 10 years after Beca’s PS4, making the Council ‘out of time’.
Timeline
Beca’s work on the building concluded by March 2008, the building owner commenced proceedings against the Council in August 2019, and the Council attempted to ‘join’ Beca in September 2019.
The Court agreed with the Council, and Beca was liable beyond the long stop, breaking the standard interpretation of the Building Act.
Following the Court’s decision in December 2022, Wellington City Council has 2 years after a resolution between itself and the plaintiff (building owner) to pursue contractors (including engineers, surveyors, builders, architects, and developers) through contribution claims. This meant that Wellington City Council had two years from the time the dollar value of its liability was established (whether through a court decision, award, or agreement between the parties) to pursue Beca, regardless of how long ago Beca did the relevant work. What does this mean for you? Engineers can now be pursued for liability beyond 10 years.
Next steps
This decision has been appealed to the Supreme Court but will remain the leading precedent in the meantime. This is still a developing area of law. Engineering New Zealand will continue to monitor the case from the outcome of the Supreme Court decision and beyond, and update our members accordingly. Following the Supreme Court’s decision, Engineering New Zealand will consult with ACE NZ whether any changes to the short and long form agreements are necessary.
Recommendations
We recommend engineers take practical steps in response to this decision, such as:
1) Storing your documents for longer than 10 years. The documents may be required as evidence. Talk to I.T. experts about the best way to store information electronically, as the courts have moved toward electronic discovery.
2) Talk to your insurer. As your window for liability has been opened, you may wish to review your professional insurance policies. These may increase your costs, which is something to remember when negotiating new contracts.
3) Check your contracts – Engineering New Zealand will keep you updated with any changes. Please check your emails and periodically ensure you’re using the most up to date version of the contracts we supply.
Conclusion
Wellington City Council has tried to ‘join’ Beca to contribute to compensation for a damaged building after the 10-year-long stop. The Court agreed with the Council that Beca could be liable for contribution up to 2 years after the Council’s liability is determined, rather than in accordance with the 10-year-long stop per the standard interpretation of the Building Act.
Beca is appealing the decision, but in the meantime, it provides a precedent for future cases.
We suggest you store your documents electronically and retain them, check you are using the latest versions of our documentation, speak to your insurer, and remember to include any increased costs in your charge-out rate.
Tēnā koe to Christine Gordon, senior associate at Simpson Grierson for providing a useful webinar to our members on the topic, which prompted a lot of questions and feedback from our members. Please read this related article by Christine and Ella Arbuckle.
Please note that this article is not a substitute for legal advice. If you have any specific legal questions, we recommend you seek independent legal advice.
