BUILDING ACT (VIC) & LIMITATIONS OF ACTIONS ACT (VIC)

In Victoria, section 5 of the Limitations of Actions Act (“Limitations Act”) provides that an action for a breach of contract cannot be brought after the expiration of six years from the date the cause of action accrued (or in other words, when the breach of contract occurred).

Section 134 of the Building Act 1993 (Vic) (“Building Act”) provides that a ‘building action’ cannot be brought more than ten years after the date of issue of the occupancy permit or certificate of final inspection in respect of the building work.

The Building Act defines ‘building action’ to mean an action for damages for loss or damage arising out of or concerning defective building work.

In the last decade there has been uncertainty as to whether the time within which a building action must be brought is six years (as contemplated by the Limitations Act) or ten years (as contemplated by the Building Act).

In Brirek Industries Pty Limited v McKenzie Group Consulting (Vic) Pty Limited Judge Shelton of the County Court held that the application of section 134 of the Building Act and the extension of the limitation period (from six years to ten years) were limited entirely to claims in negligence with respect to defective work. Importantly, for all other claims, including claims for breaches of contract, Judge Shelton ruled that the six year limitation period under section 5 of the Limitation Act applies.

The decision of the County Court in Brirek was controversial because it acknowledged cases in the Victorian Civil and Administrative Tribunal, such as Thurston v Campbell [2007] VCAT 340 and Hardiman v Gory [ 2008], which held that the ten year limitation period applied to actions for breach of contract and tort, but elected not to follow them.

The County Court’s decision in Brirek was appealed to the Supreme Court of Appeal, which this week gave greater clarity on the application of section 5 of the Limitations Act and section 134 of the Building Act.

The Court of Appeal determined that the interpretation of the Building Act adopted by the County Court at first instance was too constrained, and that section 134 of the Building Act does not contain any express limitation that confines its application to cases in contract or in tort.

In effect, insofar as ‘building actions’ are concerned, section 134 of the Building Act displaces or replaces section 5 of the Limitations Act.

Accordingly, the Court of Appeal overturned the County Court’s decision and held that actions for breach of contract and tort fall within the scope of section 134 of the Building Act and may be brought within ten years from the date of issue of the occupancy permit or certificate of final inspection in respect of defective building work.

Developers and builders should take careful note of the ruling of the Court of Appeal in Brirek because it highlights their potential exposure to the risk of litigation within the ‘long stop’ limitation period under the Building Act (whether such litigation involves an action for breach of contract or an action in tort).