Confirmation That the Limitation Period for 'Building Actions' is 10 Years, Not Six

by K&L Gates LLP
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Introduction

The recent Victorian Court of Appeal decision of Brirek Industries Pty Ltd v McKenzie Group Consulting (Vic) Pty Ltd [2014] VSCA 165 (Brirek Case) has settled the appropriate time period, at least in Victoria, in which a 'building action'1 must be brought.

The Brirek Case has removed significant confusion surrounding how the limitation period in section 134 of the Building Act 1993 (Vic) (Building Act) operates alongside that contained in the Limitation of Actions Act 1958 (Vic) (Limitation Act).

Key Point

There is now no uncertainty that the limitation period for commencing any Victorian 'building action' (whether in contract or tort) is found in section 134 of the Building Act, which provides that:

"…a building action cannot be brought more than ten years after the date of issue of the occupancy permit…or, if an occupancy permit is not issued, the date of issue… of the certificate of final inspection of the building work"

The Facts of Brirek

On 5 December 2008, a property developer (Brirek) commenced proceedings in the Victorian County Court against a private building surveyor (McKenzie) contending that McKenzie had breached its duty, in both tort and contract, to appropriately provide relevant building permits. Brirek claimed that, as a result of the alleged breaches, it had suffered loss and damage.

Brirek's claims were brought after the general six year limitation period under the Limitation Act, but before the 10 year period under the Building Act. On the facts of this case, if the former applied over the latter, Brirek would be barred from seeking relief.

The Decision at First Instance

At trial, Brirek contended that section 134 of the Building Act applied to all of its claims, both in contract and tort, such that none was barred for want of time. The key point of contention, however, was whether section 134 applied to the contractual aspect of Brirek's claim.

McKenzie relied upon section 5(1)(a) of the Limitation Act whereby a claim in contract "…shall not be brought after the expiration of six years from the date on which the cause of action accrued" (ie from the date of the breach of the contract).

After placing particular reliance on the second reading speech of the Minister for Planning on the Building Bill 1993 (Vic), Judge Shelton concluded that section 134 of the Building Act had no application to a 'building action' based in contract.

His Honour decided that section 134 of the Building Act only applies to claims in negligence with respect to defective building work and does not extend the six year contractual limitation period in the Limitation Act, as argued by Brirek.

The Court of Appeal's Decision

On appeal, the Court of Appeal noted that the approach of Judge Shelton was unnecessarily constrained. Their Honours decided that actions founded in contract, independent of any tort claim, fall within the scope of section 134 and may be brought within 10 years from the date of issue of the occupancy permit2.

Outcome of the Decision

The Court of Appeal's decision has now provided decisive guidance on when the limitation period for a 'building action' begins and when it ends.

The practical results of this decision are:

  • in the context of a 'building action', the limitation period in section 134 of the Building Act replaces the limitation period in section 5(1)(a) of the Limitations Act3
  • insurance and risk management tools must be structured to reflect the six year limitation period being replaced
  • building owners must be aware that a contractual or tortious 'building action' must be commenced within 10 years after the issue of either:
    • the occupancy, or
    • final inspection certificate.

The case may become relevant in New South Wales, the Australian Capital Territory, the Northern Territory and Tasmania, where legislation containing time limits for commencing contractual and tortious actions for defective building work differ from the relevant general limitation acts4.

Conclusion

Building and construction professionals should seek appropriate advice if concerned that this decision may potentially revive certain 'building actions' previously thought to be statute barred.


[1] Under the Building Act 1993 (Vic) a 'building action' is defined as "…an action (including a counter-claim) for damages for loss or damage arising out of or concerning defective building work."
[2] Brirek Industries Pty Ltd v McKenzie Group Consulting (Vic) Pty Ltd [2014] VSCA 165, [135].
[3] This decision accorded with earlier interpretations of section 134 given by the Victorian Civil and Administrative Tribunal: see Thurston v Campbell [2007] VCAT 340.
[4] See respectively section 109ZK of the Environmental Planning and Assessment Act 1979 (NSW); section 142 of the Building Act 2004 (ACT); sections 159 and 160 of the Building Act 1993 (NT); section 73 of the Development Act 1993 (SA); sections 255 and 266 of the Building Act 2000 (Tas).

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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