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

The Victorian Court of Appeal has held that the 10 year limitation for commencing a building action in s. 134 of the Building Act 1993 (“Building Act”) is not confined to negligence claims, but also applies to actions founded in contract.  The Court of Appeal also held that, on the facts of the case, no duty of care was owed by the building surveyor to the owner to prevent the type of loss suffered by the owner.

The facts

In a proceeding commenced in the County Court of Victoria on 5 December 2008, the Appellant (“Brirek”) alleged that the Respondent (“McKenzie”) had breached a 2002 contract in which McKenzie had agreed to provide building surveying services in respect of the construction of a proposed building on a site owned by Brirek.  McKenzie issued seven building permits between November 2002 and May 2004. Brirek claimed that the permits were issued in breach of the 2002 contract.  Brirek also claimed that McKenzie owed it a duty of care in carrying out the services it had agreed to provide.

Late in the trial (on 2 September 2010) Brirek was granted leave to amend its statement of claim to allege in the alternative that it had retained McKenzie in April 2004.  Both parties and the judge proceeded on the mistaken assumption that the amended claim was to be treated (for limitation of action purposes) as if it had been commenced on the date of the amendment and did not relate back to the date of the original proceeding.

McKenzie claimed that there was no contract between the parties in 2002 and that the action based on the 2004 contract was statute barred by s. 5(1)(a) of the Limitations of Actions Act 1958 (“Limitations of Actions Act”) which provided that claims in contract “shall not be brought after the expiration of six years from the date on which the cause of action accrued”.

Section 134 of the Building Act provides:

“134 Limitation on time when building action may be brought

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.”

McKenzie argued that the purpose of s. 134 was to provide a “long stop” of 10 years from the date of the issue of the occupancy permit for claims in negligence, to address situations where a plaintiff does not become aware that it has suffered damage until considerably later than the time when the breach was committed.

The County Court decision

The trial judge held that there was no contract between McKenzie and Brirek in 2002. The trial judge also held that, on the assumption that the amendment to allege a 2004 contract took effect from the date of the amendment in December 2010, the limitation period for the 2004 contract was six years as provided in s 5(1)(a) of the Limitations of Actions Act and the claim was therefore statute barred, the last permit having been issued by McKenzie on 27 May 2004.

The trial judge accepted McKenzie’s submission that the 10 year limitation period in s. 134 should be interpreted as being confined to actions involving negligence only and as operating exclusively as a “long-stop”.

The trial judge also held that McKenzie did not owe Brirek a duty of care in tort with respect to the particular loss and damage for which Brirek claimed damages.

The appeal

The Court of Appeal found that the trial judge’s interpretation of s. 134 of the Building Act placed an “artificial constraint on the plain meaning of the words” of that section.  The section did not contain any express limitation that confines its application to cases in contract or in tort, or that its operation was limited to physical loss and damage.  The words “despite anything to the contrary in the Limitations of Actions Act 1958 or in any other Act or law” in s. 134 mean that the period provided for in s. 134 operates despite the different periods in the Limitations of Actions Act.

No duty of care owed by building surveyor

The Court of Appeal upheld the trial judge’s rejection of Brirek’s claim that the building surveyor owed it a duty of care to avoid the damage it sustained.  The Court of Appeal distinguished Moorabool Shire Council v Taitapanui (2006) 14 VR 55 by referring to the different type of damage being claimed in the present case (financial loss in the nature of its holding costs) to that in Moorabool Shire Council and other cases which applied that case (defective workmanship causing “diminution loss”).  The Court of Appeal also highlighted the relevance of vulnerability in the present case by noting the parties’ capacity to regulation their relationships and allocate risk amongst themselves.

Discussion

Brirek resolved the difference between the interpretation of s. 134 being applied by the County Court (the “long stop” approach) and in VCAT (VCAT had interpreted the section in accordance with the position subsequently adopted by the Court of Appeal).  The decision also contains a reference to the correct approach to statutory interpretation and the circumstances in which extrinsic materials such as a Second Reading Speech should be considered, ie, that the ordinary principles of statutory construction should be exhausted before resorting to extrinsic materials.  The Court of Appeal’s decision in Brirek was based on its interpretation of the plain meaning of the words in the relevant section of the Building Act.