By: Richard Flinn and Laura Glasson

Rea v Auckland Council [2024] NZCA 313

In the recent decision of Rea v Auckland Council [2024] NZCA 313, the Court of Appeal provides a useful analysis of the elements required to assess when time starts to run for the purpose of assessing limitation, and in particular, for the purposes of the statutory late-knowledge period in cases involving latent defects.

Background

• The Reas purchased a residential property in February 2014. Because they had a Master Build Guarantee assigned to them at the time of purchase, they notified some minor workmanship issues to the builder for remediation. As a result, various reports were completed throughout 2016 and 2017 (the prior reports) which identified a range of issues (both structural and otherwise) with the property construction.
• On 19 March 2019, the Reas obtained their own engineering report, which concluded again that there were defects with the property requiring repair. The list of defects provided in the Reas’ report was slightly more extensive than the previous reports.
• Auckland Council (Council) had issued a code compliance certificate (CCC) in 2013. The Reas applied for a MBIE determination regarding the issue of the CCC. A final determination was issued on 4 May 2021, which concluded that while the Council was correct to issue the CCC, the house did not comply with the Building Code. The CCC was reversed.
• In September 2021, the Reas filed proceedings against the Council, along with various other parties. The Reas claimed the cost to repair the defective property. Central to the claim was an allegation of negligence against the Council for issuing the CCC, despite the property’s failure to meet building code standards.
• The Council brought a strike out application on grounds of limitation, because the proceeding was filed outside the primary limitation period in s 11 of the Limitation Act (the Act). The Reas opposed the strike out application, stating that the claim was filed within the ‘late knowledge period’ allowed under s 14(1) of the Act. It was the Reas’ position that time for the purpose of the ‘late knowledge period’ ran from the date that they received their own engineering report on 19 March 2019, because it was not until they received that report that they had sufficient knowledge of the full extent of the defects. It was argued that the advice received up until 19 March 2019 had been negligent, and therefore did not start the clock running.

High Court decision

The High Court confirmed that the primary period under s 11 of the Act ran from the date of the CCC and therefore expired on 18 October 2019 (before the proceedings were filed on 9 September 2021).

It was also determined that the ‘late knowledge period’ began to run earlier than the date of the Reas’ own engineering report. That is because 12 out of the 19 defects listed in the Statement of Claim had already been identified in the previous reports, and no evidence had been provided to show that the previous reports were in any way negligent.

Court of Appeal decision

The Reas appealed the High Court decision. In their view, the High Court had erred in its interpretation of the knowledge required for the ‘late knowledge period’ to begin running under s 14(1) of the Act, which states that:

“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:

…”

It was the Reas’ position that the reports obtained prior to their own engineering report only identified breaches by the builder, as opposed to breaches by the Council. Therefore, they could only have known of the relevant facts from 19 March 2019 when their own engineering report identified the breaches by the Council.

Courtney J stepped through a useful legislative history of the Limitation Act, including stressing the Act’s key purpose, which is to encourage claimants to make claims for monetary or other relief without undue delay by providing defendants with a defence to stale claims.

Ultimately, the Court found that:

• s 14(1) does not require knowledge of all facts necessary to bring a claim. All that was required in this case was knowledge that the CCC had been issued. The CCC was clearly attributable to the Council.
• The only fact of which knowledge is required under s 14(1)(c) is the fact that the claimant has suffered damage or loss. There is no requirement of knowledge of a causal link between the act or omission, and the loss or damage.
• The Reas had either actual or constructive knowledge by 23 March 2017, when they received one of the prior reports. The late knowledge period, therefore, expired at the latest on 23 March 2020 and the claim against the Council is time-barred.

Key takeaways

This decision emphasises the importance of timely legal action (and seeking prompt legal advice) once issues arise. That is the case regardless of any further investigations that may be required to confirm the full liability of any party to a dispute.

Courts will apply limitation periods according to the “plain and ordinary meaning” of the Limitation Act, with the aim of preserving the Act’s key purpose.

The clarification provided by the Court of Appeal around the knowledge requirements for late knowledge periods is helpful in providing certainty to entities involved in construction claims, as well as their insurers.