Exceptions To Limitation Periods For Defective Building Work
Introduction
The recent NSW Supreme Court decision in Sydney Capitol Hotels Pty Ltd v Bandelle Pty Ltd [2019] NSWSC 1825 confirms that certain claims which are made 10 years after the date of the occupancy permit will not be time barred under section 134 of the Building Act 1993 (Vic).
General Principle regarding Limitation Periods
In Victoria, there are two Acts which prescribe limitation periods, namely:
Section 5 of the Limitation of Actions Act 1958 (Vic); and
Section 134 of the Building Act 1993 (Vic).
Pursuant to section 5 of the Limitation of Actions Act, a claim in contract or tort must be brought within six years from the date on which the ‘cause of action accrued’. Accordingly, a claim in contract must be brought within six years from the date on which the breach of contract and a claim in negligence must be brought within six years of when the tortious wrong, such as negligence occurred.
Pursuant to section 134 of the Building Act, a ‘building action’ for defective building work cannot be brought more than 10 years after the date of the issue of the occupancy permit, or where an occupancy permit has not been not issued, the date on which the certificate of final inspection was issued in respect of the building work.
Exceptions
The decision of the Victorian Supreme Court in Australian Rail Track Corporation Ltd v Leighton Contractors Pty Ltd [2003] VSC 189 (Australian Rail Case) confirmed that section 134 of the Building Act will not prevent claims which are accidentally, incidentally or indirectly associated with defective building work from being made after the expiry of 10 years from the date of the occupancy permit.
In the Australian Rail Case, a beam constructed by Leighton Contractors Pty Ltd (Leighton) on a highway overpass in Victoria collapsed and blocked the railway tracks underneath. The tracks were not damaged, but the obstruction caused pure economic loss to various parties.
The Victorian Supreme Court held that the claim in relation to the defective works performed by Leighton was not a building action pursuant to section 134 of the Building Act as the loss and damage was only accidentally, incidentally or indirectly associated with defective building work. As a result, the 10 year limitation of action period prescribed by section 134 of the Building Act did not apply. Instead, the claims were subject to the six year limitation period prescribed by section 5 of the Limitation of Actions Act whereby they must be brought within six years of the date on which the ‘cause of action accrued’, namely when the beams collapsed.
Recently, in Sydney Capitol Hotels Pty Ltd v Bandelle Pty Ltd [2019] NSWSC 1825, Sydney Capitol Hotels Pty Ltd (Sydney) commenced proceedings alleging that a fire broke out in the building which it occupied due to defective building work performed by Bandelle Pty Ltd (Bandelle) in 1997 and that it suffered damages as a result.
Bandelle argued that Sydney’s claim was time-barred pursuant to section 6.20 of the Environmental Planning and Assessment Act 1979 (NSW) (EP Act) which prescribes a limitation period of 10 years for claims in connection with defective building work.
The NSW Supreme Court rejected Bandelle’s argument and instead followed the reasoning in the Australia Rail Case. Accordingly, the Court determined that section 6.20 of the EP Act did not apply as the loss and damage was only accidentally, incidentally or indirectly connected with the defective building work.
Conclusion
By reason of the matters outlined above, section 134 of the Building Act shall not operate as a time bar for all claims arising from defective building work which are made 10 years after the date on which the occupancy permit was issued.
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