Engineering New Zealand’s recent Court of Appeal judgment has caught the attention of both engineers and attorneys, as it has significant implications for their professional liability. The court ruling states that claims for compensation can be filed against engineers beyond the 10-year “long stop” period provided by the Building Act of 2004. This decision has sparked discussions and concerns within the engineering community. In this article, we will explore the background of the ruling, its impact on engineers, and provide recommendations for navigating this new landscape.
The 10-year long stop period refers to the time limit for filing a civil case seeking compensation. Previously, if it had been “10 years or more from the date of the act or omission on which the proceedings are based,” a civil case could not be filed. This limitation also applied to engineers who could be joined as contributors to compensation claims.
For instance, if a building owner initiated legal action against a consenting authority, such as the Wellington City Council, for improper issuance of building permits, the consenting authority could “join” the engineer or engineering firm involved in the project to the lawsuit. The engineer’s contribution would be determined based on the proportion of fault assigned to them.
In the case of Beca Carter Hollings and Ferner Limited v. Wellington City Council [2022] NZCA 624, the Wellington City Council filed a “joining” lawsuit against Beca, seeking a contribution toward compensation for damages caused by the Kaikoura earthquake in 2016. According to the arguments put forward by the Council, Beca had breached its duty of care by designing a building that did not meet the Building Code requirements. Beca contended that the Council was “out of time” as the claim was made more than ten years after Beca’s involvement.
The Court ruled in favour of the Council, holding Beca accountable for violations that extended beyond the 10-year-long stop period. As a result, the Wellington City Council has two years from the settlement with the building owner (reached in December 2022) to pursue contractors, including engineers, through contribution claims. This means that engineers can now be held liable for claims that go beyond the previously established 10-year limit.
While an appeal of this ruling is pending in the Supreme Court, it currently stands as the prevailing precedent. It is an evolving area of law, and Engineering New Zealand will closely monitor developments and provide updates to its members. The organization will also engage with ACE NZ to assess the need for any modifications to the short and long-form agreements in light of this ruling.
In response to this decision, engineers are advised to take practical steps to protect themselves and mitigate potential risks. Here are some recommendations to consider:
Keep comprehensive records: It is crucial to maintain thorough documentation related to your projects for more than ten years. These records may serve as evidence in the event of a claim or dispute. With the shift towards electronic discovery, consult with IT professionals to determine the best approach for securely retaining information electronically.
Consult with your insurer: Given the extension of engineers professional indemnity insurance beyond the 10-year mark, it is advisable to review your professional insurance policy and ensure that it provides adequate coverage. Discuss any concerns or questions with your insurer to understand the implications of the ruling on your specific policy. It is also important to consider that this extension may lead to increased insurance costs, which should be factored into your business considerations.
Review and update contracts: Regularly review your contracts and stay updated on any changes or updates provided by Engineering New Zealand. It is essential to use the most recent versions of contracts to align with any adjustments made in response to legal developments. Regularly checking your emails and staying informed will help ensure compliance and reduce potential liabilities.
In conclusion, the recent Court of Appeal judgment extending the long-stop period for liability has significant implications for engineers. The ruling establishes a precedent that engineers can be held liable for claims beyond the previously established 10-year limit. To navigate this new landscape, it is crucial for engineers to keep comprehensive records, consult with their insurers, and review and update contracts. By taking proactive measures, engineers can better protect themselves and their businesses in light of this ruling.