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Balancing the time limit

Feature Articles

Cite as: July 2015 89 (7) LIJ, p.49

The limitation period for building actions in Victoria has been in flux for years due to differing interpretations of the Building Act. The Court of Appeal has now clarified the matter. 

By Fabienne Loncar

Snapshot
  • The Victorian Court of Appeal recently held that all building actions have a limitation period of 10 years pursuant to s134 of the Building Act 1993 (Vic), replacing the five year limitation period set out at s5(1)(a) of the Limitation of Actions Act 1958 (Vic).
  • The Court’s decision to extend the limitation period in Brirek Industries Pty Ltd v McKenzie Group Consulting (Vic) Pty Ltd [2014] VSCA 165 turned on its interpretation that a “building action” for the purposes of s134 included claims arising in both tort and contract, and agrees with VCAT’s long standing interpretation of the relevant legislation.
  • The decision is seen as striking a fair balance between protecting consumers and the interests of building professionals.
  • Commonly, building actions for loss or damage arising from or concerning defective work arise under contract or in tort. There has been a long-standing difference of opinion between the Victorian Civil and Administrative Tribunal (VCAT) and the County Court as to the relevant time limitation that applies to such actions in Victoria.

    Section 5(1)(a) of the Limitation of Actions Act 1958 (Vic) (Limitation Act) effectively provides that actions founded on simple contract (including contract implied in law) or action founded on tort (including actions for damages for breach of statutory warranty) shall not be brought after the expiration of six years from the date on which the cause of action accrued.

    Section 134 of the Building Act 1993 (Vic) (Building Act) provides: “Despite anything to the contrary in the Limitation of Actions Act 1958 . . . a building action cannot be brought more than 10 years after the date of issue of the occupancy permit in respect of the building work . . . or, if an occupancy permit is not issued, the date of issue . . . of the certificate of final inspection of the building work”.

    Uncertainty has arisen as to how s134 of the Building Act applies in this sphere, that is, whether it replaces provisions of the Limitation Act by providing additional time to start building actions, or acts as a long stop to such claims.

    The difference between the differing interpretations is crucial. Should s134 replace the Limitation Act provisions, all building claims would have a limitation period of 10 years. On the other hand, the purpose of a long stop provision means a claim will become statute barred on the earlier of the expiration of the limitation period or the long stop.1

    The Court of Appeal in Victoria has now determined that all building actions, whether arising under contract or in tort, have a 10-year limit under s134, and that this section effectively replaces the Limitation Act for building actions.

    Interpretation of s134 in VCAT

    The two leading decisions on s134 as handed down in VCAT are Thurston v Campbell (Thurston)2 and Hardiman v Gory (Hardiman).3 In both decisions, VCAT expressed preference for the replacement approach and held that building actions have a 10-year limit under s134.

    Thurston concerned proceedings started in 2005 by the owners of a building against the builder for a leaking roof. The occupancy permit had been issued on 12 June 1996 and therefore would only have remained alive through the operation of s134.

    Senior Member Lothian had regard to s35 of the Interpretation of Legislation Act 1984 (Vic), which directed consideration to the Second Reading speech for the Building Bill.

    Lothian SM considered the intent of the speech was for the Building Act to replace the Limitation Act provisions, particularly having regard to the following extract: “The Building Bill defines a clear starting date – the date of issue of an occupancy permit – and a clear conclusion date of 10 years after the date of issue. This will remove the existing ambiguity surrounding the time during which the building owner retains the right to issue proceedings. This will provide property owners with additional protection in terms of years beyond the very short number of years that now exist”.4

    On this basis, Thurston et al were permitted to maintain their claim against Campbell, despite the proceedings having been commenced 9½ years after completion of the works.

    Similarly, Hardiman involved a claim against the owner-builders, Mr and Mrs Gory, for the cost of investigation and rectification of defective sub-floor ventilation. The occupancy permit was taken to have been issued on 7 November 1997 and proceedings were commenced on 1 June 2007, nine years and seven months after completion.

    Deputy President Aird also favoured the replacement interpretation by interpreting the phrase “despite anything to the contrary” in s134 to read “but for the provisions of this section, s5 of the Limitations of Actions Act would apply”.5 As such, the applicant’s claim was found to have been started within the time allowed by s134.

    Decision of the County Court at first instance

    The above dichotomy was considered by Shelton J of the County Court in Brirek Industries Pty Ltd v McKenzie Group Consulting (Vic) Pty Ltd (Brirek),6 and for the first time by an authority superior to VCAT.7

    During the course of that matter, Brirek, who had engaged an employee of McKenzie as a building surveyor on a development project, sought to amend its pleadings to alter the date of its alleged contract with McKenzie from late 2002 to April 2004.

    McKenzie submitted that Brirek was statute barred from relying on the April 2004 contract as leave to amend was granted to Brirek on 2 September 2010 and, pursuant to s5 of the Limitation Act, any breaches which occurred before 2 September 2004 were statute barred.

    In his judgment, Shelton J had regard to both Thurston and Hardiman,8 but elected not to follow them.

    His Honour found s134 applied to claims in negligence only, was not concerned with contractual claims and operated exclusively as a long stop provision.9 As such, Brirek’s claim against McKenzie under the April 2004 contract was found to be time barred. The Court did not find McKenzie owed Brirek a duty of care and therefore Brirek lost on all counts.

    Brirek’s appeal

    Brirek appealed to the Court of Appeal10 on the basis that s134 applied to both contractual and tortious claims, and therefore all its claims against McKenzie were within time.

    The Court found for Brirek and held that: “The words of s134 . . . should not be read down so that they are confined in their operation to claims in tort in such a way that it is only those claims that have the benefit of, and are subject to, the 10-year limitation stipulated. The construction given to s134 by the trial judge imposes unwarranted limitations on the scope and applicability of the section. In our opinion, actions founded in contract independent of any tort claim, fall within the scope of s134 and may be brought within 10 years from the date of issue of the occupancy permit”.11

    A primary focus of the Court’s decision was uncertainty in building cases as to when damage is sustained. Woolcock Street Investments Pty Ltd v CDG Pty Ltd was relied on by the Supreme Court for the premise that damage does not occur until the defect manifests itself. More recently, Cyril Smith & Associates Pty Ltd v The Owners-Strata Plan No 64970 [2011] NSWCA 181 confirmed it is sufficient for the physical defect to become apparent, not the cause itself, for time to start to run.

    Brirek gave the example that in practical terms where a latent defect takes five years to develop, the consumer is only permitted one further year under the six-year limitation in contract to take action as time starts to run from the date of the contract. In negligence, however, time does not start to run until a defect becomes manifest, meaning that building professionals can be at risk for extended periods after completion.

    The Court accepted that the interpretation of s134 proposed by Brirek provided greater protection for consumers by extending the time for them to bring claims in contract from six years to 10, but placed a long stop on claims of 10 years which would provide comfort to building professionals.

    Brirek also argued that s33 of the Limitation Act meant that s134 prescribed another period of limitation for building actions.12 This submission was also accepted by the Court.

    Comment

    Practitioners in this area no doubt appreciate the guidance provided by this decision, that building actions in Victoria have a limit of 10 years, both in contract and in tort. The author agrees with the Court’s view that, overall, a 10-year limit strikes a balance between the competing interests of consumers and building professionals13 in what is often a highly contested space.

    Fabienne Loncar is a senior associate in the insurance team at Mills Oakley Lawyers practising in home warranty insurance, property damage claims and general insurance litigation. 1. Limitation Periods – Building Act 1993 (Vic), s134, (2006) 22 BCL 243. 2. [2007] VCAT 340. 3. [2008] VCAT 267. 4. [2007] VCAT 340 at [27]. 5. [2008] VCAT 267 at [9]. 6. [2011] VCC 294. 7. This was not the first time s134 was considered by a Court, but rather the first detailed review of the operation s134 of the Building Act having regard to s5 of the Limitation Act. 8. Note 7 above, at [84]. 9. Brirek Industries Pty Ltd v McKenzie Group Consulting (Vic) Pty Ltd [2011] VCC 294 at [78] and [88]. 10. Brirek Industries Pty Ltd v McKenzie Group Consulting (Vic) Pty Ltd [2014] VSCA 165. 11. Note 10 above, at [135]. 12. Note 10 above, at [98]. 13. Note 10 above, at [95].

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