A recent Victorian Court of Appeal decision in Brirek Industries Pty Ltd v McKenzie Consulting Group Pty Ltd has held that owners can now sue their builder up to 10 years after a certificate of occupancy being issued.

This decision clarifies two seemingly conflicting limitation periods prescribed in the Building Act 1993 (Vic) (Building Act) and the Limitations of Actions Act 1958 (Vic) (LAA) as well as conflicting decisions between the Victorian Civil and Administrative Tribunal and the County Court.

Background

Brirek was the owner of a property on which it constructed an office block.  Brirek commenced legal proceedings against McKenzie later, alleging that McKenzie as building surveyor, issued building permits after the planning permit had expired and failed to inform Brirek of that fact, in breach of its contractual and statutory obligations.

The relevant issue before the Court of Appeal was whether the action was time barred as the building permits had been issued by McKenzie more than 6 years before the relevant legal claims had been made but within 10 years of the date of the occupancy permit.

Comparison of statutory limitation period

Section 134 of the Building Act provides that:

"Despite anything 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..."

The LAA puts a 6 year limitation period for claims brought in simple contracts or torts and relevantly provides that:

"The following actions shall not be brought after the expiration of 6 years from the date on which the cause of action accrued:

(a)…actions founded on simple contract…or actions found on tort..."1

Competing arguments

The two arguments put forward by the parties are known as the "long stop approach" and the "replacement approach".

Brirek argued that section 134 of the Building Act replaced the 6 year limitation period imposed by the LAA and that the limitation period for claims in contract and negligence was 10 years.

The competing argument put forward by McKenzie was that section 134 simply introduces a "cap" on the time when an action can be brought.  The implication being that the "long stop approach" is typically aimed at permitting claims of negligence, "to address situations where a plaintiff does not become aware that it has suffered damage, by reason of negligence, until later than the time when the breach was committed."2

The Court of Appeal favoured the replacement argument which was consistent with the comments contained in the second reading speech, about how the Building Act was intended to operate.

Practical implications

Anyone wishing to bring a building action now has a period of 10 years from the date when the occupancy permit was issued or the date of issue of the certificate of final inspection to commence a building action, regardless of whether that action is in negligence or contract.