Is The Door Shut On Your Building Action? How Long Do You Have To Sue For Building Defects?
By Peter Micevski, Solcitor, Lovegrove Solicitors
October 2013
The Building Act 1993 entitles any person or company affected by building defects to pursue legal action to have all defects attributable to the builder, and all consequential damage, rectified at no cost to them by the builder or by others at the builder’s expense.
This is so as long as the builder is alive, solvent and traceable, and the building action is brought within 10 years of the date of issue of the occupancy permit in respect of the building work.
Seem simple? In actual fact, it is not as simple as it sounds.
In the case of building defects that are discovered after the 10 year limitation period, the law is murky on whether or not a building action can still be brought against a builder or other building practitioner.
Section 134 of the Building Act says:
“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…”
However, since many building claims are in put in contract and negligence, the law becomes tricky. The Limitations of Actions Act 1958 (Vic) provides for a 6 year limitation period for claims in both. For a claim in contract, the 6 year period runs from when the defective work was performed. For a claim in negligence, the 6 year period runs from when the defects became known.
The controversy surrounding s 134 of the Act is whether s 134 of the Act creates a new 10 year limitation period for Victorian building actions (‘replacement approach’) or merely creates a ‘long stop’ beyond which the six year limitation periods for tort and/or breach of contract (under the Limitations of Actions Act) cannot extend, for example, in the case of latent defects (‘long stop approach’).
In two decisions of VCAT, Thurston v Campbell [2007] VCAT 340 and Hardiman v Gory [2008] VCAT 267, the replacement approach was favoured. With this approach, persons or companies affected by building defects have 10 years to bring an action from the date of completion of the building works. Building works are completed when an occupancy permit is issued with respect to the building work, or if an occupancy permit is not issued, the date of issue of final inspection of the building works.
It was believed that this approach was the intended purpose of the Act, which is, to provide property owners with additional protection in terms of years beyond the very short number of years that now exist. It also provides certainty because the statutory point of the limitation period is more fixed.
However, this approach was rejected in the 2011 County Court case of Brirek Industries Pty Ltd v McKenzie Group Consulting (Vic) Pty Ltd.
There, the Victorian County Court held that the 10 year period in the Building Act does not replace the normal 6 year limitation period in the Limitation of Actions Act. The Building Act section provides an extra limitation period for situations where the defects take many years to become known.
Given that Brirek is the most recent authority on the issue, the implications of this decision are significant.
We understand that the decision is currently on appeal to the Victorian Court of Appeal and a decision from the court will be welcomed to provide clarity to an issue that has caused uncertainty for some time.
What does this mean to you?
Building owners should act on the basis that they have 10 years to sue for building defects from the date of issue of the occupancy permit.
Building owners should be aware of the date of issue of the occupancy permit in respect of their building and ensure they bring a building action immediately when defects are discovered. Waiting too long can be costly.
We recently acted for a building owner who brought a building action to our attention 5 years after defects with respect to the building owner’s building were discovered. Unfortunately, by that time, the 10 year limitation period in the Building Act had expired and the building owner was shut out to bring a building action before VCAT. As a result, the building owner has suffered loss and damage as a result of inaction.
For advice on all aspects of construction claims, please contact our office on 9600 1643.
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