Though it has been some 18 months since the Court of Appeal in Victoria clarified how long a property owner has to sue a builder for allegedly defective building works, it is worth restating the now clarified position once again.

There was previously some debate in the law for the construction industry as to the time period which applied. The debate was as to whether the period which applied was six years at a maximum or whether the longer period of 10 years (after the issuing of the occupancy certificate) applied.

In late 2014, in Brirek Industries Pty Ltd v McKenzie Group Consulting Pty Ltd [2014] VSCA 165, the court said that in cases both of breach of contract by a builder and for negligence in the building works, the limit of the time period within which a legal action must be brought is now 10 years.

The Critical Issues

Despite the fact that the case involved the alleged wrongful issuance of building permits, the findings in the case hold wider ramifications for the building industry. The findings in the case apply basically to all types of building work in Victoria.

An indication as to the complexities of the issues in the case is the fact that the trial judge (in the County Court) differed in his interpretation of the law as it then stood, saying that the maximum period was six years within which to sue. The Court of Appeal disagreed, following a line of previous VCAT decisions, saying that in cases where an owner sues for both contract breach and for negligence, the same limitation period applied.

One of the things the court said, and it is hard to disagree, is that it would be unreasonable and inappropriate for a different time limit to apply where a builder is sued for breach of contract as opposed to where a builder is sued for negligent works.

There has not been an appeal to the High Court, so that settles the particular the subject of this article, in Victoria at least. Note that the opposite applies in New South Wales.

So the result of the case is that despite an expressly written time limit in legislation, the maximum period prescribed for a ‘building action’ is 10 years from the OC being issued.

Relevant insurance policies perhaps need to be revisited to ensure that they provide coverage for the full period of the 10 years applicable.

Builders (and their insurers) are now potentially ‘on the hook’ for a longer period after there is an occupancy permit issued for a residential building project.

The clarification/change in the law does not technically mean that a builder cannot actually be sued in cases where it is now beyond ten years since an OC has issued, but it means that if he or she or it is, that builder will have a defence.

Save ‘exceptional circumstances,’ which mean what the words suggest, once a limitation period to sue has passed, an action cannot then proceed. And any solicitor acting for a builder sued for a claim arising in excess of 10 years previously would likely be negligent unless he or she advised their client to ‘take the limitation point.’

At least, despite the fact as just stated, that builders are now potentially ‘on the hook’ for a longer period than six years, there has been clarification in the law, and that is nearly always a good thing for all in the industry.