Statutory time bars and contractual limitations of liability can be powerful weapons in a defendant’s armoury. Recent decisions have highlighted the importance of keeping limitations defences front of mind for parties to potential claims. They also illustrate some of the nuances that may apply when determining whether a claim may be time-barred or limited by agreement.

Statutory limitation periods

Statutory limitation periods act as a complete bar to obtaining relief in civil proceedings, once the relevant statutory time period has expired. It is critical for defendants to consider limitation issues early when a dispute or a potential claim arise, to avoid:

• inadvertently taking steps which might re-set the limitations clock, such as an acknowledgement of liability or a part payment; or
• settling a claim for which a limitation period is about to expire, given the possibility that the claimant may not issue proceedings in time.

For almost all claims now, the Limitation Act 2010 is the statutory regime that imposes time-bars, with the express purpose of encouraging claimants to enforce their claims without undue delay. It applies to civil proceedings in courts, tribunals and arbitrations.

The most common limitation period that arises in the commercial context is the six-year time limit for “money claims”, which encompasses claims for monetary relief at common law, in equity or under an enactment. However, the limitation period is shorter for some types of claims. For example, claimants have:

• 90 days to raise a personal grievance under the Employment Relations Act 2000 (same for claims relating to sexual harassment when the limitation period is 12 months).;
• two years to pursue a defamation claim; and
• three years from when the plaintiff knew or ought to have known of its loss or damage to bring a claim relating to contraventions of the Fair Trading Act 1986.

Parties to contracts may agree to alter the limitation period or contract out of the Limitation Act 2010 altogether. This is particularly important when considering claims under service contracts and sale and purchase agreements, which may contain terms that bar claims brought after very short periods of time, such as 18 months. It was once not unusual for insurance policies to bar claims where proceedings were not issued within as short a period as a year after the loss was suffered, although this is no longer common.

In some circumstances where the claimant has late knowledge of certain facts relevant to their claim, the statutory limitation period may be extended up to 15 years from the date of the act or to omission on which the claim is based. The limitations clock may also start to run again if the defendant has acknowledged liability or has made a part payment in respect of the liability. Construction claims have a 10-year long stop for limitations purposes.

When deployed successfully, limitation defences are a complete answer to claims that would otherwise be meritorious. When considering a dispute resolution strategy, it is therefore vital to assess whether a limitation period is about to come into effect or whether a limitation defence is already available. Unnecessary legal costs may be avoided by bringing an enforceable limitation period to the attention of the plaintiff and persuading them not to commence proceedings, or by applying to dismiss claims that have been brought out of time.

Statutory time bar cases

We discuss below four cases from 2024 involving statutory time bars and contractual limitation defences, and highlight some of the nuances that may apply.

Case 1

Whangārei District Council v Daisley [2024] NZCA 161

In 2004, Mr Daisley purchased some land, including a long-established quarry. Shortly after he began working the quarry, the Whangārei District Council asserted that he did not have the necessary resource consent to do so. Mr Daisley maintained that the quarry enjoyed existing use rights, but over a period of five years, the Council sought to prevent him from quarrying the area by issuing abatement and enforcement notices and eventually seeking an enforcement order in the Environment Court.

The Council did not search certain hard copy records it held until asked to do so by Mr Daisley’s solicitor in September 2009. These searches revealed that a land use consent had been issued for the quarry in 1988. The Council had, therefore, been wrong to prevent Mr Daisley from working the quarry. Preventing him from exploiting the quarry to its full potential had a detrimental impact on his finances, ultimately forcing him to sell the property to avoid a mortgagee sale. However, Mr Daisley waited until August 2015 to commence proceedings against the Council, alleging negligence and misfeasance in public office.

Limitation issues – extension of time for continuing breach and fraudulent concealment

The main issue in the case was whether Mr Daisley’s claim was barred by the Limitation Act 1950, the predecessor to the Limitation Act 2010, which would ordinarily prevent claims being brought after six years following the accrual of the relevant cause of action (unless the default time period was extended).

The High Court held that the Council’s limitation defence failed because Mr Daisley’s cause of action accrued on a continuing basis or had been concealed by fraud within the relevant statutory meaning.

The Court of Appeal overturned the High Court’s decision, in part on the basis that while there might have been a continuing breach of duty, there was no allegation of such a breach within the six-year limitation period. However, Mr Daisley’s negligence claim was not time-barred, because of a narrow exception to limitation defences in cases of fraudulent concealment. This exception applied to the negligence claim because Council officers were provided with credible information that their records might contain evidence of existing use rights but had failed to search for that evidence. That failure was subjectively reckless and amounted to fraudulent concealment. This exception did not, however, apply to Mr Daisley’s misfeasance claim, as there was no subjective recklessness by the Council officers as to the limits of their authority.

Although Mr Daisley was partially successful in defeating the Council’s limitation defences, but for the exception for fraudulent concealment, his claim, which was substantial, may have been denied in its entirety.

The Supreme Court has granted leave to appeal the Court of Appeal’s judgment, so the story of this claim may not be over yet.

Case 2

Tasman District Council v Buchanan & Ors [2024] NZCA 133 – The longstop statutory time bar under the Building Act 1991

In 2008, Ms Buchanan and Mr Marshall purchased an architecturally designed home oriented around a swimming pool which was built in accordance with a building consent in 2004. The property was issued a code compliance certificate in 2006, two years before the purchase. Unfortunately for the purchasers, despite no issues arising from Council inspections in 2009 and 2012, the pool fencing was found to be noncompliant when the property was again advertised for sale in 2019. The owners remedied the non-compliant fencing and issued proceedings against the Council in 2020 seeking compensation for the costs of doing so and the diminution in value caused by the loss of amenity and aesthetic value.

On appeal, the Court held that when the Council carried out inspections in 2009 and 2012, those inspections did not contribute to the existence of any defects in the property. Those defects had existed from 2006, and the Council did not owe any duty to take reasonable care to protect the property owners from the loss of litigation rights against it. The owners’ claim was arguably a claim relating to the original building work in 2004–2006, and while the Court did not need to decide the point, it expressed a view that the 10-year longstop limitation applied from the date of the property’s original construction so as to bar any such claim, not when the negligent inspections took place. This was because: 

• there was no physical change in 2009 or 2012 – these were inspections of an already constructed pool; and 
• if the limitation clock could be reset by subsequent failures to identify defects, time could run indefinitely in respect of these claims, which would be inconsistent with the purpose of the 10-year longstop.

This case illustrates the potentially harsh consequences that limitation defences can have for claimants. This claim was time-barred, even though the plaintiffs acted promptly once they become aware that they had a claim.

Case 3

Hobday v Selwyn District Council [2024] NZHC 550 – An unusual limitation issue – late service of a claim once filed

On 17 October 2022, Mr and Mrs Hobday filed proceedings against the Selwyn District Council and the vendors of a property they purchased in 2014, alleging that the property was not watertight. The Hobdays had filed proceedings within the 10-year longstop date under the Building Act 2004 (by one day). However, they subsequently failed to serve their claim within 12 months of filing.

Under r 5.72 of the High Court Rules, statements of claim must be served within 12 months of being filed. Failure to achieve service results in the proceeding being treated as discontinued unless an extension is granted.

In this case, by what appears to have been an oversight by the Hobdays’ solicitor, the statement of claim was not served in time. This meant that the Court would need to grant an extension of time for service if the Hobdays were to have the ability to pursue a remedy against the Council. The High Court declined to grant the extension, finding that in the circumstances, the Council was the innocent party vis-a-vis the delay and there was not a good reason to grant an extension of time. In reaching this view, the Court stressed the importance of the 10-year longstop: “Part of the reasoning for the long stop is that conducting litigation 10 years after the events in issue involves self-evident difficulties in respect of inter alia the availability of witnesses, the dimming of memories and the availability of records.”

Case 4

Beca Carter Hollings & Ferner Ltd v Wellington City Council [2024] NZSC 117 – Claims against third parties

In this case, the Supreme Court clarified that the 10-year longstop provision applicable to construction claims under the Building Act 2004 does not affect the right of defendants to claim contribution from joint tortfeasors. Contribution claims are subject to section 34 of the Limitation Act, which allows a defendant two years to pursue joint tortfeasors from the date on which their liability to the original plaintiff is quantified.

This case concerns the allegedly defective design of a building by Beca, who issued a producer statement for the building in March 2008. BNZ filed proceedings against Wellington City Council in August 2019, alleging that it was negligent in issuing consents and approvals for the building. The next month, the Council filed a third party notice against Beca, seeking contribution in the event that it is liable to BNZ. Beca applied to strike out the claim against it on the basis that the Council’s claim had been brought more than 10 years since its alleged negligent act or omission.

In a majority judgment, the Supreme Court noted that the purpose of the 10-year longstop period is to provide finality and certainty, while the contribution regime was intended to remedy the injustice that may occur if a defendant’s ability to pursue contribution from responsible parties is at the whim of the plaintiff’s choice of defendant. The Court considered that effect must be given to both of these regimes. Accordingly, the 10-year longstop period applies to the primary claim and, from the point that the defendant’s liability is quantified, they have two years to issue proceedings against any joint tortfeasors.

Contractual limitations of liability

Tauranga City Council v Harrison Grierson Holdings Ltd & Anor [2024] NZHC 714

In a recent judgment, the High Court considered the effect of limitation of liability clauses in the ACENZ/IPENZ Conditions of Contract for Consultancy Services (CCCS) and Short Form Agreement (SFA), which are standard form consultant agreements in the construction industry.

This case concerned the design of a transport hub. The Tauranga City Council had engaged Harrison Grierson to produce the structural design for this hub, as well as PS1 and PS4 producer statements. The CSSS entered into with Harrison Grierson limited its liability to “five times the fee, with a minimum amount of $500,000 and maximum liability of $2,000,000”. The Council also engaged Constructure Auckland to peer review Harrison Grierson’s design and provide a PS2 producer statement under an SFA. The SFA also limited Constructure’s liability to “five times the fee (exclusive of GST and disbursements) with a maximum limit of $500,000”. Standard limitation clauses were also included in Harrison Grierson’s PS1s and Constructure’s PS2s.

Substantial re-design work was required due to issues which arose during the delivery phase of the work. The Council ultimately abandoned construction and sold the site to the main contractor for $1. It then issued proceedings against Harrison Grierson and Constructure, seeking more than $26 million in damages. However, the Court held that the limitation of liability clauses in the CCCS and SFA operated to limit liability arising under the Building Act, the Fair Trading Act and for negligent misstatement. The limitation clauses in the producer statements, however, were not effective as the Court held that it was the contracts between the parties which determined the extent of liability – not the terms of the producer statements.

This case confirms that limitation clauses will be enforced on their own terms. It also cautions against relying on limitation clauses in producer statements, as these will be subordinate to the terms of the consultant agreement and any limitation clauses they contain. We considered this case in more detail in a recent legal update by our Construction and Infrastructure team which can be accessed here.