Building actions in Victoria can be commenced up to 10 years after the work is completed

Building, Construction & Engineering eBulletin - 7 August 2014

Summary

The Victorian Court of Appeal has confirmed that legal proceedings relating to building actions can be brought up to 10 years after the occupancy permit or certificate of final inspection is issued.

This has been an ongoing area of confusion for Victorian lawyers, builders and home owners alike, given the different approaches taken by the Victorian Civil and Administrative Tribunal (VCAT) and the Victorian County Court (County Court) as to the period within which a legal proceeding can be commenced for building actions.

Recently, one of the parties to a building action before the County Court appealed its interpretation of the time within which a building action can be commenced to the Court of Appeal.1 As both VCAT and the County Court are required to interpret the law in the same way as the Court of Appeal, the resulting interpretation by the Court of Appeal will now have to be followed by both VCAT and the County Court.

In this eBulletin, we look at the decision and what it means for owners, developers, builders and other building professionals.

 

Quick Links

 

What happened?

VCAT and the County Court have long been at odds over the time within which building actions may be commenced in Victoria.

VCAT's stance has been that legal proceedings for defective building works could be commenced up to 10 years after the occupancy permit or certificate of final inspection for the work was issued, regardless of whether the claim was for negligence or breach of contract.

By contrast, the County Court's position was that if the legal action is for a breach of contract, the proceeding must be commenced within 6 years from when the contract was breached - which is usually at the time the building work is undertaken.

These conflicting approaches arose because of perceived ambiguity in the wording of the limitation period in the Building Act 1993, and because VCAT is not required to interpret the law in the same way as the County Court.

Recently, one of the parties to a building action before the County Court appealed its interpretation of the time within which a building action can be commenced to the Court of Appeal. As both VCAT and the County Court are required to interpret the law in the same way as the Court of Appeal, the interpretation by the Court of Appeal of the time within which a building action can be commenced under the Building Act will now have to be followed by both VCAT and the County Court.

 

Guidance from the Court of Appeal

The Court of Appeal has now determined that so long as the proceeding for a building action is commenced within 10 years after the occupancy permit or the certificate of final inspection was issued, it does not matter if it is more than 6 years after the contract was breached.

The Court of Appeal expressly agreed with the approach which has been consistently applied by VCAT and said that the County Court was not correct in interpreting the time period set out in the Building Act, as only applying to claims in negligence and that claims for breach of contract still needed to be brought within the time period provided for in the Limitation of Actions Act.

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What this means for you

The Court of Appeal decision provides certainty for parties to legal proceedings for defective building works in Victoria as to the time within which the legal proceeding must be commenced.

Owners and developers bringing building actions against builders and building professionals now know that their claim will have been made within time, so long as the legal proceeding is commenced within 10 years of the occupancy permit or certificate of final inspection being issued.

Whilst builders, building professionals and their insurers might not be as pleased to know that they remain liable for defective works for as long as 10 years after work is completed, the limitation period does provide some comfort where a builder or building professional has been negligent, but where the damage does not manifest for many years later. In these circumstances, the time for issuing a legal proceeding against the builder or building professional is still limited to 10 years after the occupancy permit or certificate of final inspection was issued - even if the damage does not manifest for many years after the work was completed.

As a result of this decision, building professionals should ensure that they maintain their professional indemnity insurance for at least 10 years following the completion of a project.

Authors
Ashlea Hawkins, Lawyer
Nicole Feeney, Special Counsel

Further information


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

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