Key points

In Brirek Industries Pty Ltd v McKenzie Group Consulting Pty Ltd [2014] VSCA 165, the Victorian Court of Appeal confirmed that:

  • in building actions brought in Victoria, the limitation period for making claims in contract and tort (including claims involving latent defects) runs for 10 years, from the time that the occupancy permit or certificate of final inspection is issued; and
  • all claims will be statute barred after this 10 year period expires.

This is the position despite the general six-year limitation period for claims in contract and tort under the Limitation of Actions Act 1958 (Vic) (“Limitation Act”).

Background

Brirek Industries Pty Ltd (“Brirek”) developed and sold a two-storey office block in South Melbourne. The dispute arose in the context of a contract between Brirek and McKenzie Group Consulting (Vic) Pty Ltd, a private building surveyor (“McKenzie”). Brirek alleged that McKenzie had breached its duty, in contract and in tort, in relation to the issue of building permits during construction.

The key question was whether Brirek was statute barred from bringing an action against McKenzie. The answer turned on the interaction of the limitation period under the Limitation Act and Building Act 1993 (Vic) (“Building Act”). In particular:

  • section 5(1) of the Limitation Act applies a six-year limitation period to claims brought in contract and in tort. If loss or damage is caused by a breach of contract, the limitation period starts from the time of the breach. By contrast, in tort claims, the limitation period only starts from the time that the defect is discovered; and
  • section 134 of the Building Act provides that despite anything to the contrary in the Limitation Act, a building action cannot be brought more than 10 years after the date that an occupancy permit is issued, or if occupancy permit is not issued, the date a certificate of final inspection is issued.

The building permits in question were issued more than six years before Brirek brought its claim against McKenzie, but less than 10 years after the issue of the occupancy permit.

Arguments of the parties

McKenzie argued that Brirek was statute barred from bringing its breach of contract claim, since the six year limitation period under the Limitation Act had expired. This was based on an argument that section 134 of the Building Act only applied to negligence claims and was intended to create a 10 year limitation period for tort claims, including claims involving latent defects.

Brirek argued that section 134 of the Building Act prevailed over the Limitation Act and created a separate limitation regime for building actions brought in contract and in tort. On this approach, Brirek’s claims against McKenzie would not be statute barred.

Decision at first instance

The court accepted McKenzie’s argument at first instance. Shelton J held that section 134 was intended to prevent claims being brought in negligence outside the 10 year statutory period and that the six year cap under the Limitation Act continued to apply with respect to claims for breach of contract.

Decision of the Victorian Court of Appeal

The Court of Appeal overturned Shelton J’s decision at first instance. The Court held that section 134 applies to claims in both contract and tort, as long as the building action is commenced no later than 10 years after the occupancy permit or the certificate of final inspection is issued.

The court’s approach extends the limitation period for breach of contract claims, but caps the time for bringing claims in tort, where the claim is founded on latent defects.

The decision therefore strikes a balance between the interests of owners, who now have 10 years from the time of issue of an occupancy permit to commence a building action, and builders and insurers, who will not be liable beyond the 10 year cap in cases involving latent defects.