Brirek Industries Pty Ltd v McKenzie Group Consulting (Vic) Pty Ltd – more claims against building practitioners?

by DLA Piper
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On 6 August 2014, the Victorian Court of Appeal handed its decision in Brirek Industries Pty Ltd v McKenzie Group Consulting (Vic) Pty Ltd [2014] VSCA 165. 

The decision clarified the operation of limitation periods in building actions (put, whether a six or ten year limitation period applies). The decision is not good news for building professionals and their insurers, as it allows claimants more time in which to bring claims in building actions. Claimants now have 10 years from the date of issue of the occupancy certificate to issue proceedings for any building action (rather than the usual 6 years for claims in contract or negligence).

Facts

Brirek Industries Pty Ltd (Brirek) was the part owner of land in inner city Melbourne (land).

In March 2001, a planning permit was issued for a four unit development on the land.

In 2002, Brirek engaged a builder for the project. Unbeknownst to Brirek, the builder was not registered as a commercial builder.  The builder engaged McKenzie Group Consulting (Vic) Pty Ltd (McKenzie), building surveyors, to provide building surveying services for the project. 

In October 2002, construction work commenced. McKenzie issued various permits. In October 2003, the planning permit expired. No-one, including the builder, Brirek or McKenzie, noticed that the permit had expired, and work continued on site. McKenzie also (wrongly) issued various building permits after the expiration of the permit.  

Brirek subsequently discovered that there was no valid planning or building permit and that the builder was not registered. As a result, changes to the design were required to obtain a new planning permit, and a new, registered builder had to be engaged.

In November 2006, Brirek applied for and obtained a new planning permit, and, in 2007, appointed new builders, who completed construction . In 2008, Brirek sold the property for $1.8M.

Brirek issued a proceeding against McKenzie claiming breach of contract and negligence.

The allegations

At trial, Brirek alleged that McKenzie had breached its duties in contract and in tort by, amongst other things:

  • Issuing building permits:

- when the builder was not a registered commercial builder.

- when there were no planning permits in place.

  • Failing to warn Brirek about the expiry of the permit.

Brirek alleged that by virtue of McKenzie’s negligence, it had suffered loss and damage.

Brirek commenced its proceeding more than six years after the issuing of the relevant permits, but within ten years of the occupancy permit being issued.  Accordingly, the case put in issue whether the six year Limitation of Actions Act 1958, or 10 year, Building Act 1993 limitation period applied.

McKenzie’s defence

McKenzie argued that the six year limitation period (under the LOA Act) applied, and, accordingly, Brirek was ‘out of time’ in making its claims. Brirek argued that the Building Act applied and that it had ten years (from the date of the issuing of the occupancy permit) in which to bring its claims against McKenzie.  At first instance, the County Court of Victoria held that the LOA Act applied and, accordingly, Brirek was out of time to bring its claims against McKenzie.

Appeal Decision

The Court of Appeal considered the apparent conflict between section 134 of the Building Act which provides for a ten year limitation period, and section 5 of the LOA Act which provides for a six year limitation period for claims in contract and tort. 

The Court of Appeal overturned the trial judge’s decision and found that the applicable limitation period for building actions (in contract and tort) is ten years from the issue of the occupancy permit and, accordingly, Brirek was not statute barred from bringing its claims against McKenzie.

The Court of Appeal decision also clarified that, with respect to building actions, ten years is the cut off for all claims in negligence, irrespective of when any damage has become apparent.

Key take home point

Builder practitioners and their insurers should be aware that claimants in Victoria now have ten years from the date of issue of any occupancy certificate in which to bring proceedings (and appropriate insurance cover should be arranged).

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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