Supreme Court rules a limitation defence bars a $4 million quarry claim

A limitation defence may seem dry, but it made a $4 million difference in a NZ Supreme Court decision released yesterday. The facts, however, are anything but dry.

Mr Daisley bought land with an existing quarry in 2004. Soon after, however, the Council told him that quarrying was not permitted.

The Council issued abatement notices, infringement notices, a search warrant and – finally – brought enforcement proceedings in the Environment Court in July 2009.

In September 2009, Mr Daisley searched the Council’s archives and found that the Council had in fact issued a consent for quarrying back in 1988.

By that stage, the bank had enforced and Mr Daisley sold the land in a forced sale in December 2009, for $90,000 below value.

The new owner was subsequently allowed to use the quarry.

Mr Daisley sued the Council in August 2015 for loss of profits from being unable to use the quarry ($4 million) and for loss of value on reselling the land ($90,000). Because proceedings were brought in August 2015, the key limitation date was August 2009.

There were events both before and after August 2009. Did his claim arise before or after that date? The Supreme Court drew three distinctions.

First, there are claims for a singular breach causing both initial and subsequent damage of the same kind. If the breach and initial damage are out of time, there is no claim for any subsequent damage (even if that damage occurs within time).

Second, if there are episodic breaches, each breach is treated separately. Some early breaches may be time-barred, while some later breaches may not be.

Third, there are claims for a continuing breach -- a course of action that cannot be divided into discrete events. It does not matter that the start of the course of action is out of time, because the claim continually refreshes. However, damage arising before the limitation date cannot be claimed.

Here, the Supreme Court ruled that the claim against the Council was for episodic acts. It rejected a characterisation of the claim as an omission and therefore a continuing breach. Because the episodic acts took place before August 2009, there was no claim for the $4 million in lost profits.

The $90,000 loss was different. The Court said that this claim depended on a contingency – the sale of the land – and the claim therefore did not start until the contingency occurred. As a result, it was not time-barred. It’s not clear to me that there is a sufficient difference in principle between the two types of losses. This will remain a fertile ground for disputes.

While the Court described the Council as “dilatory”, “ungracious” and “certainly negligent, perhaps grossly negligent”, the limitation defence won the day, allowing the Council to avoid a $4 million judgment.

For true limitation fans, there’s a bonus: an extensive discussion of the exception for fraudulent concealment.