Tick Tock! Limitation lessons from Lee v Whangarei DC

The majority of legal proceedings about construction defects raise issues about limitation. These are the very basic limitation principles that apply:

  • The  Limitation Act 1950 and the Limitation Act 2010 require claimants to commence legal proceedings within six years.
  • In many construction defects cases, the six year period does not start until the defects are discovered or are reasonably discoverable.
  • The Building Act 2004 provides a long-stop to any limitation period, of 10 years from when the defective construction work was carried out.

Although the above principles are well-established, many people fail to appreciate the risks of limitation. The recent decision Lee v Whangarei DC [2015] NZHC 2777 provides an good example:

  • Ms Lee commissioned a house to be built in Ruakaka between 2006 and 2008.
  • In late 2007, she observed leaks within the house and some defects were confirmed in a February 2008 building inspection report.
  • She subsequently obtained more reports which confirmed further defects.
  • Because of the construction defects, Ms Lee refused to pay the builders in full. That refusal led to a variety of legal proceedings, nearly all of which were decided against Ms Lee.

Unfortunately for Ms Lee, she appears to have been so side-tracked by the disputes regarding payment that she did not commence legal proceedings in the High Court about the construction defects until May 2014. The Court decided that Ms Lee had discovered the defects more than six years earlier. The defendants successfully argued the defence of limitation.

This case illustrates how important it is for claimants and respondents in construction cases to understand how the limitation defence works and to always keep an eye on the ticking clock. If limitation is a risk, it is prudent to get clear legal advice. Ms Lee regularly chose to represent herself in legal proceedings instead of engaging lawyers. Had she done so, she may have had a happier outcome.

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