10 year limitation period for all building actions

​On 6 August 2014, the Victorian Court of Appeal (Redlich, Whelan and Santamaria JJA) handed down its decision in Brirek Industries Pty Ltd v McKenzie Group Consulting (Vic) Pty Ltd (Brirek Industries).¹  The matter related to the interpretation of s 134 of the Building Act 1993 (Vic) (Act).  The Court confirmed that a building action can be commenced up to 10 years after the date of the occupancy permit or final certificate under the building contract.

Consequences of decision: 10 years to claim

The Court of Appeal’s decision in Brirek Industries effectively:

• extends the period under which a property owner can claim against a builder for breach of the building contract from 6 years to 10 years;
• limits the period under which a property owner can claim against a builder for breach of a deed from 12 years to 10 years; and
• extends the period under which a property owner can claim against a builder in negligence from 6 years after the defect became apparent to 10 years after the occupancy permit.

The 10 year limitation period will apply even if a building has a latent defect that does not become apparent until (for example) 12 years after the occupancy permit was issued.

Property owners should be mindful of the 10 year limitation period and take steps to ensure that they do not allow the period to lapse when there are defects apparent at a property.

If property owners are concerned that they may have a building action and expiry of the 10 year limitation period is imminent, they may wish to commence proceedings to ensure the possible action is not statute barred.  Assuming the proceedings are commenced in the Supreme Court, the property owner has a 1 year period from the commencement of proceedings to serve the Writ on the other parties.  If the property owner decides not to continue with the action, it can simply allow the Writ to lapse.

Background

The case concerned a multi-faceted claim by the plaintiff (Brirek) arising out of an alleged agreement with the defendant building surveyor (McKenzie).  Brirek alleged that McKenzie had breached the agreement causing significant delay in the development of Brirek’s property.  By reason of that delay, Brirek argued that it had suffered loss and sought damages from McKenzie.

The main breach of contract alleged by Brirek was McKenzie’s failure to issue building permits in accordance with the Act.  However, Brirek also argued that McKenzie was negligent and had breached certain implied terms in the contract.

At the initial trial, the County Court found in favour of McKenzie on all points and dismissed Brirek’s claims.  One of the bases on which the trial judge found in favour of McKenzie was that Brirek had brought its breach of contract claim out of time (more than 6 years after McKenzie had actually committed the breach of contract alleged by Brirek).  In so finding, the trial judge applied the standard 6 year limitation period for contractual causes of action (as set out in the Limitation of Actions Act 1958 (Vic) (LAA)).

On appeal to the Court of Appeal, Brirek argued that the 6 year limitation period in the LAA was superseded by s 134 of the Act.  The question addressed by the Court of Appeal was whether s 134 applied to all causes of action arising out of building works or whether it was limited to causes of action based on negligence.

Limitation periods in building actions

In simple terms, s 134 of the Act states that a building action (which is defined by s 129 to mean “an action…for damages for loss or damage arising out of or concerning defective building work”) cannot be brought more than 10 years after either the occupancy permit or the certificate of final inspection has been issued.

In Brirek Industries, McKenzie argued (successfully at trial) that s 134 only applied to building actions based on negligence.  Accordingly, the standard 6 year limitation period would continue to apply to building actions based on breach of contract.  If that were the case, then Brirek’s claim based on McKenzie’s alleged breach of contract would be statute-barred as it was brought more than 6 years after McKenzie had issued the building permits (which Brirek said was done in breach of the Act and therefore in breach of the contract).

The Court of Appeal rejected that argument, overturning the trial judge’s interpretation of s 134.  The Court of Appeal held that s 134 applied to all building actions equally, whether they be for negligence or breach of contract (with the exception of any claim for damages for death or personal injury, which has no limitation period under the Act).²   Accordingly, the Court held that Brirek’s breach of contract claim was not statute-barred, it having been brought within 10 years from the date on which the occupancy permit for the relevant property was issued.

¹[2014] VSCA 165.