A few years ago now, a case decision of the County Court was good news for builders (and other building practitioners, including architects) insofar as it stated that the time limit to bring a building action for defective building work was six years from the breach, if the “building action” was based on a breach of contract.
The term “building action” is defined in the Victorian Building Act 1993 to mean “an action (including a counter-claim) for damages for loss or damage arising out of or concerning defective building work.”
In turn, “building work” is defined as including “the design, inspection and issuing of a permit in respect of building work.”
In section 3 of the VBA, the main definition of “building work” is stated to mean “work for or in connection with the construction, demolition or removal of a building.”
Therefore, the reference to “building action” can also include claims against architects, whether they are the initial respondent to a claim or later respondents in regard to allegedly defective design or poor contract administration.
Architects need to be wary of being joined to civil claims for damages given their comparative attraction as holders of professional indemnity insurance. Needless to say, though, there should be at least a reasonably arguable claim made out against them before they are joined as co-respondents or sued as the initial respondent.
For example, in the last few years I had carriage of a matter whereby an architect was sued for negligent design in not providing proper allowance for acoustics/noise attenuation between floors in an expensive two-storey home. Despite there being evidence of the client’s brief not being followed - including instructions that there was to be “no noise,” the architect appeared not to have allowed for this effectively in the design.
The only respondent to the case was the architect because it was decided that on balance the builder had simply built the home according to the plans. The building action was brought as a claim in negligence and also as a breach of contractual duty under the architect’s retainer agreement with the owners.
Returning back to the County Court decision, the upshot was that it was only if the owner or other party could bring the claim on the grounds of a breach of a “duty of care” owed by the building practitioner (such as a claim in negligence) that the 10-year limitation period within which to sue would apply.
The 10-year limitation period is more generous to potential complainants because it is longer than six years. It is found in section 134 of the Building Act 1993 which reads:
“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...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.”
Building industry associations and practitioners alike welcomed the decision of the County Court because it operated to restrict the period of time within which, for example, a domestic building owner could sue a builder for defective work to a period of six years from when the breach of contract occurred.
For claims based on breach of contract, the 10-year period post completion would not apply, and the shorter period would be applicable. However, the 10-year limitation would still apply to negligence actions.
This decision ran contrary to a line of VCAT cases that had decided previously that the 10-year period in section 134 of the Building Act 1993 is a stand-alone provision that replaces the six-year rule in the Limitation of Actions Act, regardless of whether the claim is brought as a breach of contract or as a claim in negligence.
The Country Court decision was recently overturned by the Supreme Court in the case of Brirek Industries Pty Ltd v McKenzie Group Consulting (Vic) Pty Ltd. The judgment was finally received in August 2014, and it has removed any perceived advantage that building practitioners may have thought they had gained from the earlier County Court judgment.
On appeal, the Supreme Court concluded that the Judge should have held that the applicable limitation period is that provided for in section 134 of the Building Act 1993, so that the time limit for bringing a “building action” both in contract and in “tort” for negligence is 10 years from the issue of the occupancy permit (or certificate of final inspection).
This contrasted with the trial judge’s “long stop” interpretation which had meant that (in the relevant case):
- All contract claims founded on the issuing of building permits by the relevant building surveyor were time barred for being brought outside six years; and
- While a claim in negligence against the RBS could be made any time up to 10 years after completion (and approval of an occupancy permit), the Judge found that the RBS did not owe a duty of care in negligence.
The Supreme Court looked at an earlier 2006 decision of Moorabool Shire Council v Taitapanui as support for their interpretation that section 134 was in fact ‘all-encompassing’ for building actions of any description. In that case, the Judges had referred to section 134 as governing claims both in contract and in negligence and they did not appear to see the provision as a ‘long stop’ rule.
In the end, the Supreme Court justices stated that in their opinion, “the interpretation of the provision adopted by the trial judge places an artificial constraint on the plain meaning of the words in section 134 of the Building Act.”
Noting that the words of section 134 do not contain any express limitation that confines their application to cases in contract versus other claims in tort/negligence, the Court said in the decision that “The construction given to section 134 by the trial Judge imposes unwarranted limitations on the scope and applicability of the section.”
Whilst the result may not be welcomed by building practitioners generally, it has at least afforded some certainty to the question of “how long does a complainant have?” which in our view seems to accord with the intention of those who drafted the Building Act 1993.