Construction law expert Christine Meechan KC discusses ‘late knowledge’ and its application in the case Rea & Rea as Trustees of the Waitarua Trust v Auckland Council [2024] NZCA 313.

‍

Mention the phrases “limitation period”, “primary knowledge period” or “late knowledge period” to most lawyers and you will be met with a look of bewilderment. A little like Einstein’s theory of relativity, we have all heard of the law of limitation, but very few people really understand it.

‍

To be fair, even though the Limitation Act 2010 has been in force for over a decade, its innovative ‘late knowledge’ provision (s14) has not been the focus of a judgment by either the Court of Appeal or the Supreme Court.

‍

As Courtney J observed in delivering the Court’s judgement: “The extent of the knowledge required of the facts specified in s 14(1) Act) has not attracted much judicial, or other, attention.”

‍

The Court of Appeal’s judgment has now provided some overdue guidance in relation to what a claimant in a building defects case must prove before it can rely on the late knowledge section to save a claim that would otherwise be out of time.

The timeline

‍

Mr and Mrs Rea owned a home in Te Atatū, Auckland, which they had bought in 2014. On 9 September 2021 they sued the Auckland Council (and the developer and builders) for defects they said existed in the house.

‍

The Council had granted a code compliance certificate (CCC) in 2013. Defects covered by a Master Build insurance policy had been identified as early as 2015, but it was not until March 2016 that building surveyors identified more serious internal and external defects, including structural defects.

‍

Consulting engineers’ reports from two different engineering consultancies (ACH and then Fraser Thomas) in May 2016 and March 2019 confirmed the existence of defects found by the surveyors and identified additional serious defects. A scope of works to address the then know defects had been prepared on 23 March 2017.

The parties competing positions

‍

The Council maintained that the six-year primary period for the purposes of s11 of the Limitation Act started at the latest, on 18 October 2013, the date of the CCC, and expired on 18 October 2019, nearly two years before the proceedings were issued. On that basis the Council applied to strike out the claim.

‍

Defending the application made by the Council, Mr and Mrs Rea argued that they had “late knowledge” of the defects because it was not until they got the second engineers report from Fraser Thomas in March 2019 that they gained sufficient knowledge of the defects and the Council’s responsibility for them for the late knowledge period to start to run. Before that point in time, they maintained they simply did not know enough.                

‍

In the High Court there was an argument about whether the claim was made within the primary period, with Mr and Mrs Rea asserting that the six-year clock did not start ticking at all until they got the Fraser Thomas report in March 2019. That argument was rejected in the High Court and was not pursed in the Court of Appeal.

What is required for ‘late knowledge’ to be established?

‍

The key issue on appeal was what is required for claimants to have ‘late knowledge’ and bring themselves within the extension period established by s14(1): how much does a claimant need to know before time starts to run on the three-year extension?

‍

Or put another way: what did Mr and Mrs Ray have to prove that they did not know by the time the primary period expired on 18 October 2019?

‍

Answering that question required the Court of Appeal to focus on the language used in s14(1)(a)-(e). This provides that to put a pin in the board and start the three-year period running, the claimant either must know, or ought reasonable to have known, certain facts.

Five facts are listed in subparagraphs (a) – (e), but the case focused on three of them:

(a) The fact of the act or omission on which the claim is base;

(b) The fact that the act or omission on which the claim is based was attributable to or involved the defendant;

(c) The fact that the claimant had suffered damage or loss.

‍

Mr and Mrs Rea said that until they got the Fraser Thomas report in March 2019, they knew that there were defects with the building, but did not know the extent of them. Nor did they know that the defects amounted to breaches of the building code that had been caused by the Council’s negligence.

‍

They maintained that while they knew the CCC had been issued on 18 October 2013, they did not know it had been issued negligently on that date, nor did they know the extent of the defects (and therefore the loss) they suffered as a result of the Council’s alleged negligence. In short, they argued they did not know enough to tick all the s14(1) boxes until 19 March 2019.

‍

Rejecting the argument advanced by the owners, the Court of Appeal concluded that s14(1) does not require knowledge of all facts necessary to bring a claim before time stars to run. Knowledge of the extent of the damage or loss and knowledge of a causal connection between the conduct of the defendant (in this case the Council issuing the CCC) and the damage or loss were not required.

‍

It was not material that Mr and Mrs Rea may not have known that the problems with their house amounted to a breach of the building code for which they could sue the Council, or that the defects ultimately proved to be more extensive and expensive to fix.

‍

It was enough that the claimants knew the Council had issued the CCC. That was the actor omission on which the claim was based and there was no room on the basis of the language used in s14 (1) (a) to overlay a requirement of knowledge of negligence.

‍

Having reached that conclusion that the issuing of the CCC itself was the potent “actor omission,” it is not surprising that the Court also rejected that submission the claimants had to know that the alleged defects were attributable to the Council’s alleged breach.

The Court concluded that the claimants only had to know that the Council had issued the CCC, and it was immaterial that it was not clear to them that the defects identified in earlier reports could be blamed on the Council.

‍

What was the critical date?

‍

What then was the date by which Mr and Mrs Rea gained ‘late knowledge’ for the purposes of s14(1)? In answering that question the Court emphasised the requisite knowledge could be actual or constructive – the section uses the terms “gained knowledge“or “ought reasonably to have gained knowledge”.

‍

The Court decided that date was 23 March 2017. By that date Mr and Mrs Rea knew when the Council had issued the CCC. They had reports from both the building surveyors and the first firm of consulting engineers which made it clear that the defects identified included structural defects.

‍

They also knew there would be a significant cost to fix the defects. They had a professionally prepared scope of works. So loss was a reality, not just a possibility.

‍

The late knowledge period therefore expired, at the latest, on 23 March 2020. The proceedings issued on 9 September 2021 were 171 days out of time.

Where to from here?

‍

Although the case involved a claim in tort against a local authority for latent defects, the issues discussed are of universal application to all ‘money claims’. That includes, all claims in contract and tort which are the basis of so much litigation. The case does have what might be described as a very specific factual matrix, but then most cases do.

‍

Will there be an application for leave to appeal to the Supreme Court? Will it succeed? Only time will tell.