Timothy Bates of Auckland law firm TM Bates & Co examines the decision of Rea & Rea v 360 Degrees Ltd which explores the limitation regime under the Limitation Act 2010, and the availability of the extension of it through “late knowledge”.
This case concerned an Auckland property which suffered from serious building defects. The owners (Rea) sought to bring a claim of negligence against four defendants.
The fourth defendant Auckland Council (the council) moved to have the claim struck out on the basis that the proceedings had been filed too late, and were, therefore, time-barred.
The decision addressed the intersection of the key legislation which covers the ambit of limitation in construction — the Limitation Act 2010 and the Building Act 2004.
These enactments set time limits within which proceedings must be filed. The public interest in access to justice versus not having members of the public being unfairly troubled by historic litigation, is finely balanced.
The facts
• The council issued a building consent for the property on December 12, 2012.
• A Code Compliance Certificate was issued for the property on October 18, 2013.
• The plaintiffs purchased the property on February 11, 2014, then made an insurance claim with Master Build for minor aesthetic issues in August 2014.
• The property was inspected by Maynard Marks, and on March 10, 2016, their report was provided to the plaintiffs and Master Build, identifying 31 defects with the property.
• A further structural review was carried out by ACH Consulting Ltd on March 24, 2016, when a further five structural and weathertightness defects were identified.
• Maynard Marks provided the scope of remediation works, including those recommended by ACH Consulting Ltd on March 23, 2016, and produced a quantity surveyor’s report on January 30, 2018.
• In late 2018 the plaintiffs engaged another building surveyor, Fraser Thomas Ltd, who produced a report on March 19, 2019. This report recorded substantially more structural defects and extensive workmanship issues with the property.
• On application of the plaintiff, MBIE found that the CCC issued should be reversed, and the council reversed it on June 2, 2021.
• The plaintiffs issued proceedings on September 9, 2021. The strike out application which this case concerns was made by the council on December 6, 2021.
Limitation argument
The council argued the proceedings had been filed outside the primary period, namely more than six years after the CCC was issued.
Furthermore, the council argued the claim was not saved by the late knowledge date.
The primary period as set out in section 11 of the Limitation Act 2010 is extended out by a further three years where late knowledge (actual or constructive) is established to have occurred after the commencement of the primary period.
In order to establish late knowledge date, section 14 sets out the key facts that are required to be found. They were summarised by the court as knowledge of the following facts:
• That the act or omission had occurred.
• That the act or omission was attributable to, or involved, the defendant.
• That the plaintiff had suffered damage or loss.
Ultimately, the court ruled that the proceedings had been filed outside the primary period, as the CCC had been issued on October 18, 2013, six years thereafter being October 18, 2019. Proceedings were not filed until 2021.
On the question of late knowledge, the court ruled that all three elements were present as at the time (March 23, 2016) the ACH Consulting Ltd report was received by the plaintiffs.
At that point they had sufficient knowledge of the defects and economic loss resulting from them (arising in the reduction in value of the house due to the defects) to have acquired late knowledge for the purpose of section 14 of the Act.
Mr and Mrs Rea’s argument that a negligent report that does not identify all of the defects further extends the late knowledge date was not accepted by the High Court.
This is an important decision in terms of the application of the late knowledge extension to the primary limitation period.
The outcome is not surprising however, as it is effectively the same finding a court was likely to have had to apply under the former Limitation Act 1950, and prior case law in the form of Invercargill City Council v Hamlin.
Under the previous act, the six-year limitation period would not run until all elements of the cause of action were present such that the cause of action could be said to have accrued.
Appeal launched
This decision of Rea & Rea v 360 Degrees Ltd & Others has been appealed to the Court of Appeal.
Note: This article is not intended to be legal advice (nor a substitute for legal advice). No responsibility or liability is accepted by TM Bates & Co or Building Today to anyone who relies on the information in this article.
