Introduction

Building practitioners, consultants and property owners have always known that there is a limited period within which a claim for loss or damage for defective building work can be brought.  What has not been entirely clear is how long that limitation period is.  It has recently been confirmed that, in Victoria, the time limit for bringing a building action, whether in tort or contract, is 10 years from the issue of the occupancy permit, or where no occupancy permit is issued, the date of issue under Part 4 of the Building Act 1993 (Vic) (the Building Act) of the certificate of final inspection of the building work.

Limitation Periods

Limitation periods cap the time within which a party may bring a claim.  They ensure that parties can assess what claims they may be exposed to and the period within which losses may be claimed. They also provide certainty to insurers.

Limitation periods have an important function in building claims – they protect building practitioners and consultants from litigation for unlimited periods after construction but also safeguard property owners against losses arising from latent defects that may arise.  However, it can be difficult to determine when a building claim arises and accordingly to understand when the relevant limitation period commences.  This is particularly so with respect to latent defects, where it may be many years after completion of the design and construction of a building that a plaintiff suffers any damage.

In Victoria, there are two key pieces of legislation that regulate limitation periods with respect to building works.  Section 5 of the Limitation of Actions Act 1958 (Vic) (the Limitation of Actions Act) states that the period of limitation applicable for a claim in contract is six years from the date of breach or for claims in tort six years from the date the defect manifests itself.  Separate to this, section 134 of the Building Act provides that the limitation period for ‘building actions’ is 10 years after the date of the issue of the occupancy permit in respect of the building work (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).

Six years or ten years?

There has been some uncertainty as to how the six year period of limitation under the Limitation of Actions Act, which applies specifically to claims in contract, interacts with the ten year limitation period under the Building Act, which applies to building actions more generally. 

One of the reasons for introducing the ten year limitation period under the Building Act was to provide certainty around this period, which but for this limitation could extend well beyond this ten year period for claims in tort.  Accordingly, it was arguable that the ten year limitation period under the Building Act was intended to deal only with claims in negligence and was not concerned with breach of contract.

Notwithstanding this, there is no express language in the Building Act which excludes contractual claims.  The absence of any distinction in the Building Act between limitation periods for actions in negligence and actions in contract gives rise to an alternative view that the ten year limitation period applies to building actions more generally, including claims in contract. Further some had argued that this limitation period, when read with the Limitation of Actions Act, simply ‘capped’ claims in tort rather than providing for a fresh ten year period (being an extension to the six year period).

Brirek Industries v McKenzie Group Consulting

In Brirek Industries Pty Ltd v McKenzie Group Consulting (Vic) Pty Ltd [2014] VSCA 165, the Victorian Court of Appeal was required to determine whether the period of limitation applicable for contractual or tortious claims (made by a building owner against a building surveyor) is six years from the breach of contract (as per the Limitation of Actions Act) or ten years from the date of issue of the occupancy permit (as per the Building Act). 

The Court of Appeal held that the applicable limitation period was ten years as section 134 of the Building Act did not contain any express limitation confining it to actions in contract or tort and the language used in that provision specifically stated that it operated despite anything to the contrary in the Limitation of Actions Act . 

Conclusion

Accordingly in Victoria, the ten year period of limitation in section 134 of the Building Act applies to building actions, regardless of whether it is an action in tort or an action in contract. In other words it is likely to operate as an extension to contractual claims but in many cases a limitation on claims in tort (where previously the six year period ran from the date the defect manifested).

The determination in Brirek Industries resolves the uncertainty between the operation of the six year limitation period in the Limitation of Actions Act and the ten year limitation period in the Building Act.  Property owners will now be able to clearly ascertain how much time is available for bringing any building actions.  Conversely, building practitioners and consultants should be aware that their exposure to litigation for defective building work is effectively ten years from the date of issue of the occupancy permit, or where no permit is issued, the date of issue under Part 4 of the Building Act of the certificate of final inspection of the building work.