What is sufficient for late knowledge in terms of extending limitation periods? Rea v Auckland Council – COA, 2023

In this month’s article I report back upon the appeal of a construction case previously summarised which deals with late knowledge. Late knowledge is a means by which one can extend the limitation period under the Limitation Act 2010. Potential litigants are restricted in terms of the time they have to bring claims in the Courts for monetary claims which typically must be brought 6 years from date of breach. In certain circumstances, this primary period can be extended by three years from the date of “late knowledge”. 

Facts
Rea owned a residential property. The house had construction defects and was in need of repair. Rea had unsuccessfully sought repair costs against; Auckland Council, the property developers (360 Degrees Limited), the builders (TCCL) and the director of the building company (TC) in the High Court. The claim was struck out in the High Court on limitation grounds. This was the appeal of that decision to the Court of Appeal. 

Construction history/timeline

  • Dec 2012: Building consent was issued

  • Residential home was constructed

  • October 2013: Council issued CCC upon completion of the home

  • Feb 2014: Rea purchased the house

  • Aug 2014: Rea noticed some minor defects, which the builder returned to remedy

  • Nov 2015: Rea contacted Master Build Services pursuant to the guarantee as the builder had stopped returning to fix defects

  • March 2016 - March 2017: Maynard Marks issued 2 reports noting defects + scope of works covered by guarantee

  • 24 May 2016 ACH reported to Maynard Marks about 4 structural and weathertightness defects

  • March 2019: Fraser Thomas Ltd report identifies structural defects, MBIE notified

  • May 2021: MBIE reverse the CCC

Court of Appeal
Rea appealed the strike-out, claiming that the Limitation Period should be extended on grounds of late knowledge (Limitation Act s14(1)). The central issue on appeal was whether the late knowledge provisions in the Limitation Act 2010 could extend the time for when Rea had to bring its claim. Key to resolving this issue were these sub-issues:

(a) What is the “act or omission” on which the claim against the Council is based for the purposes of s14(1)(a) and (b)?

(b) Does Rea require knowledge of a causal connection between the act of omission on which the claim is based and their loss or damage for the purposes of s14(1)(c)?

(c) When did the Rea gain actual or constructive “late knowledge” for the purpose of s 14(1)?

(d) Does some of Rea’s claims constitute a fresh cause of action that is not time barred?

The Court, having been referred to Law Commission papers discussing the introduction of the new Limitation Act 2010 prior to it passing, made the following rulings. 

Firstly, it determined that the act or omission on which the claim is based for the purposes of s14(1)(a) and (b) is the issuing of the CCC by the Council, without more. 

Secondly, damage for the purposes of s14(1) will exist if there are defects that are noticeable and not minor. 

Thirdly, in determining when Rea gained actual or late knowledge, the Court ruled that a claimant has constructive knowledge of the requisite facts if they had 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 Court determined that from 23 March 2017 Rea had actual or constructive knowledge of all these relevant facts:-

  • The CCC had been issued on 18 October 2013;

  • The Council had issued the CCC;

  • There was damage to the property that was more than minor;

  • Repairs would be required including what those repairs would be. 

Knowledge or constructive knowledge of these facts would have led a reasonable person to begin investigations, including taking legal advice. Had they taken legal advice they would undoubtedly have learnt that the matter required urgent attention because of limitation periods. 

Finally, the Court ruled that there was no apparent ability for Rea to establish there were separate defects, that could comprise a cause of action that was not time barred. In particular it ruled that all of the defects identified by the Fraser Thomas report bar one, was already identified in the reports that had already been furnished by 23 March 2017. 

It is clear from this judgment, that the Court of Appeal rejected the proposition put forward by Counsel for Rea, that for there to be late knowledge, the Claimant needs knowledge or constructive knowledge of all of the facts necessary to bring a claim.

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.