Limitation periods for building actions – are you out of luck and out of time?

On 8 June 2022, the Victorian Court of Appeal handed down its decision in Lendlease Engineering Pty Ltd v Owners Corporation No 1 [2022] VSCA (Lendlease).

This case considered the limitation period under section 134 of the Building Act 1993 (Vic) (Building Act) and when the time to commence a building action ends where there is more than one occupancy permit or certificate of final completion issued for different stages of works for a project.

The limitation period in section 134 of the Building Act provides a ‘long stop’ date whereby, whether an action is brought in contract or in tort, the period of time to commence such a building action is 10 years from the issuing of the occupancy permit or certificate of final inspection.[1]

The decision in Lendlease clarifies that the limitation period of 10 years for building actions begins to run from the date an occupancy permit or certificate of final inspection is first issued in respect of the works to which the claims relate.  This is an important issue to consider when deciding to commence proceedings for defective building works.

Builders and other parties facing building related actions should consider whether some or all of the claims made against them for defective works, where there are multiple occupancy permits issued for a project, may be statute barred.

Background

1. On or around 22 December 2004, Lendlease (Builder) was engaged by 519 St Kilda Road Developments Pty Ltd ACN 106 203 963 (Developer) to carry out the construction of domestic building works described as the ‘Chevron Apartments’ (Works).
2. The Works comprised of a refurbishment of the existing Chevron Hotel and the construction of a new nine-storey apartment building with below ground parking. The Works were completed in separable portions pursuant to six building permits and four occupancy permits were issued in respect of the Works.
3. Following the completion of the Works, the Owners Corporation No 1 PS526704E (OC) alleged that the sunshade louvre system installed by Lendlease was defective and required replacement.
4. On 13 February 2017, the OC commenced proceedings in the Victorian Civil and Administrative Tribunal (VCAT) against the Builder for breaches of the implied statutory warranties under section 8 of the Domestic Building Contracts Act 1995 (Vic) and in negligence for the defective works claimed by the OC.
5. The Builder argued that the claims brought by the OC were brought more than 10 years after the date of the ‘Occupancy Permit BS14426/2005/0074/3P dated 6 December 2006’ (OP3), which was the occupancy permit issued in respect of the works which were claimed to be defective by the OC.
6. Relevantly, section 134 of the Building Act provides:
   1. ‘Despite any thing to the contrary in the Limitation of Actions Act 1958 or in any other Act or law, 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 (whether or not the occupancy permit is subsequently cancelled or varied) or, if an occupancy permit is not issued, the date of issue under Part 4 of the certificate of final inspection of the building work.’
7. The OC argued that the limitation period only took effect from the last occupancy permit issued in respect of the Works.
8. Lendlease’s submissions relevantly included that:
   1. The purpose of section 134 of the Building Act was to limit building actions from being brought within 10 years after the issue of the occupancy permit in respect of the building work ‘to which the occupancy permit relates’.
   2. In the case of multiple occupancy permits, time must commence to run from the date of issue of the permit that relates to the building work the subject of the complaint in the building action.
   3. It would be anomalous if subsequent occupancy permits were construed to ‘restart’ the limitation period for building actions, given that a cancellation or variation of a building permit did not have such an effect.
   4. The idea that the period ‘restarted’ cannot be intended, given the definition of a building includes any part of a building, and given an occupancy permit can be issued for any part of the building.
9. The Owners Corporation submitted that:
   1. Section 134 was intended to provide certainty for property owners, builders and insurers ‘as to when time starts to run for claims for the negligent design and construction of buildings’.[2] In support of this, the Owners Corporation relied upon the second reading speech of the Building Bill.[3]
   2. Lendlease’s argument would result in disadvantage to purchasers who would have ‘little or no knowledge of the number of occupancy permits issued, or which occupancy permit applied to which building work’.[4] It would also reintroduce ‘confusion and increased litigation risk’ on the issue of what defect claims might be statute barred.
   3. The final occupancy permit effectively deemed there to be compliance with the requirements of the Building Act ‘such that it was important that completion of the whole building was identified for limitation purposes, as well as for safety purposes’.  It was submitted that when there are discrete occupancy permits, section 134 should apply to the last occupancy permit issued for the works.
10. In interpreting section 134 of the Building Act, the Court held that time runs from the date an occupancy permit is first issued in respect of the defective work, based on the following three (3) reasons:
    1. That the words ‘in respect of the building work’ in section 134(1) of the Building Act, were interpreted to relate to the works for which the occupancy permit was issued and not to any ‘final’ occupancy permit.[5]
    2. Parliament’s intention for section 134 of Building Act was that time would run from the date an occupancy permit was first issued, even if such permit was subsequently cancelled or varied.[6]
    3. There is no language in section 134 of the Building Act to suggest that time should start to run for building actions for the ‘final’ or ‘last’ occupancy permit and this omission appears deliberate.
11. On this basis, the appeal was allowed by the Court of Appeal.
12. This decision is significant within Victoria because the statutory limitation period for building actions that involve stages of works with multiple occupancy permits commences when the relevant occupancy permit is issued for the defective works which are being claimed.
13. As a consequence of this decision all involved in the construction industry (for example developers, builders, experts and legal practitioners) will need to exercise care and skill to identify, in the case of multiple stages of work with multiple occupancy permits, which occupancy permit relates to the defective works and when the 10 year long stop limitation period expires or has expired.
14. If you are an owner or owners corporation who has defective works on your property, this case reinforces the need to obtain prompt and timely advice as claims for defective works may be statute barred sooner than previously thought. Conversely, builders and others facing claims for defective works should also consider whether any such claims may, in whole or in part, be statute barred and out of time.

[1] See Brirek Industries Pty Ltd v McKenzie Group Consulting (Vic) Pty Ltd [2014] VSCA 165.

[2] Lendlease at [55] per Beach JA; Niall JA and Kennedy JA.

[3] Victoria, Parliamentary Debates, Legislative Assembly, 30 November 1993, 1346 (RI Knowles, Minister for Housing).

[4] Lendlease at [56] per Beach JA; Niall JA and Kennedy JA.

[5] Lendlease at [65] and [68] per Beach JA; Niall JA and Kennedy JA.

[6] Lendlease at [66] per Beach JA; Niall JA and Kennedy JA.

Queries

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Disclaimer

This article is general commentary on a topical issue and does not constitute legal advice. If you are concerned about any topics covered in this article, we recommend that you seek specific legal advice.