Catchwords

Limitation of action – accrual of cause of action and when time begins to run – where the cause of the action is founded in tort – where the latent defect at the centre of the claim was the appellant’s negligently engineered design

Significance

Given the factual and legal issues in dispute, the appeal from the refusal of the application for summary dismissal of the proceedings on the basis they were statute barred was dismissed.

Facts

In January 2000, Springfield Land Development Corporation (respondent) developed a residential golf course. The respondent engaged Melisavon Pty Ltd (appellant) to design the clubhouse.  The design was completed in mid-2003.

In 2003, the respondent discovered cracking in the lower level slab of the club house.  The appellant informed the respondent that it was due to over watering and minor drainage issues.  The respondent did not make any further inquiries.

The cracking became worse over a period of time from about 2006. The respondent then discovered it was in fact due to a negligent design. In June 2011, the respondent brought proceedings in relation to the cracking, alleging a latent defect in the design had caused it economic loss of $866,258.

The appellant sought summary dismissal of the proceedings on the basis they were statute barred. The appellant argued the cracking became manifest in 2003, and so that was the point at which the claim arose. The respondent argued the claim did not accrue when the cracking first appeared, but when it knew, or could reasonably have discovered, that the source of the cracking was not a minor issue, but was due to negligent design.

Given the factual and legal issues in dispute, the application for summary dismissal was refused at first instance. The appellant appealed that decision.

Decision

The appeal was dismissed. McMurdo P and A Lyons JJ ordered the matter be heard at trial because of the significant factual issues to be determined.

McMurdo P stated, ‘the cause of action was complete when the respondent suffered economic loss, that is, when the respondent had actual knowledge of the appellant’s faulty design or when the faulty design itself became manifest or could be discovered by reasonable diligence’.  This meant that the cause of action did not accrue until the respondent knew the latent defect was caused by the appellant’s negligent design, and not simply when the cracks first appeared.

Holmes J disagreed, stating the economic loss occurred when the defect first became known or manifest, that is, when the cracking first occurred in 2003.  It was not relevant that the respondent did not know the cause of the defect at that point. Holmes J, in dissent, allowed the appeal and gave judgment for the appellant.