The Court of Appeal has upheld the strikeout of a negligence claim as time barred under ss 11 and 14 of the Limitation Act 2010 (Rea v Auckland Council [2024] NZCA 313).

In the Court of Appeal (but not the High Court) the appellants generally accepted that the ‘primary period’ under s 11 of the Act had expired, the claim having been filed more than six years after the act or omission on which it was based. However, they maintained the ‘late knowledge’ provisions of the Act applied.

In determining that the proceedings were filed after the late knowledge period expired, the Court endorsed a “plain and ordinary” interpretation of s 14 of the Act.

Background

The plaintiffs claim alleged negligence by the Council in relation to a Code Compliance Certificate (CCC) for a residential property issued in 2013. This meant that the ‘primary period’ expired in 2019 and proceedings were filed two years later in 2021.

While they were aware of some defects to the property as early as August 2014, and had obtained reports from building surveyors and consultants in March and May 2016, they argued that they acquired late knowledge in March 2019 when they received a further report from engineering and surveying consultants.

The issues on appeal were:

• What is required for the appellants to have “late knowledge”?
• When did the appellants gain actual or constructive “late knowledge”?
• Did some of the appellants’ claims constitute a fresh cause of action that was not time barred?

Decision

What is required for the appellants to have “late knowledge”?

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 actual or constructive knowledge (i.e. they either knew or ought reasonably to have known) of the facts specified in section 14(1), including:

• the fact that the act or omission on which the claim is based had occurred;
• the fact that the act or omission on which the claim is based was attributable (wholly or in part) to, or involved, the defendant; and
• 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 is a defence to the claim if the proceedings were filed at least three years after the late knowledge date.

The appellants argued for a broad meaning of “act or omission on which the claim is based” and, in this context, that it meant that the appellants needed to know (actually or constructively) that there were breaches of the building code, that those breaches were matters that the Council ought to have identified, and that those breaches were causative of their loss. The Court disagreed and held the phrase should be given a plain and ordinary meaning (at [56]). Under s 14(1)(a) they only needed to have knowledge that the CCC had been issued (at [56]) and, under s 14(1)(b), only that the issuing of the CCC was attributable to the Council (at [57]). Further, while s 14(1)(c) requires a plaintiff to know it has suffered damage or loss, the Court determined that this did not require knowledge of any causal link between the defendant’s act or omission and the claimed loss or damage — it was sufficient that the appellants knew or ought to have known that the loss or damage existed (at [62]–[63]).

When did the appellants gain actual or constructive “late knowledge”?

In a defective building claim, loss or damage occurs when latent defects to the building become so obvious that the market value of the building is affected — that is, when the defects become so obvious that any reasonable homeowner would call in an expert. The Court therefore considered that a plaintiff in a defective building claim will have constructive knowledge of the required facts in section 14(1) (at [67]) if:

"… they have information that would lead a reasonable person to begin investigating whether a right to claim exists. They cannot close their eyes to the obvious. They cannot postpone taking action if a reasonable person in their circumstances would take action."

The appellants knew of all the required facts by 23 March 2017 at the latest (at [69]). This information would have led a reasonable person to begin investigations, including taking legal advice. The late knowledge period expired on 23 March 2020 at the latest, so the claim against the Council was time barred (at [71]).

Did some of the appellants’ claims constitute a fresh cause of action that was not time barred?

The Court accepted that, in some cases, the uncertainty of the cause of specific defects may render it premature to strike out a claim on limitation grounds (at [76]). But the Court was not satisfied the appellants could amend their pleading to include a new cause of action that was not time-barred.

This was because all but one of the structural defects identified in a March 2019 report had already been identified in the May 2016 report. Other defects identified in the 2019 report were identified in earlier reports or were too minor to sustain a fresh cause of action.

Our view

The decision brings greater clarity to the application of the Act’s late knowledge provisions, particularly in relation to claims for latent defects. It also highlights the need to act promptly following the discovery of defects and not risk the expiry of a limitation period.

This article was co-authored by William Turner, a Solicitor in our Construction and Infrastructure team.