The Supreme Court of Victoria clarifies when limitation periods start to run for building actions and reject individual lot owners' late joinder application

Date published

06/07/2021

Sectors

Locations

This article was co-authored by Scott Walker, Paralegal.

The recent decision of the Supreme Court of Victoria
(Lendlease Engineering Pty Ltd v Owners Corporation No 1 & Ors [2021] VSC 338):

  • clarifies which occupancy permit is relevant when calculating time under s 134 of the Building Act 1993 (Vic) (Building Act); and
  • rejected the lot owners’ argument that their claims were not statute barred because the Owners Corporation had commenced the proceeding on their behalf.


Background

The Owners Corporation of the Chevron Apartments on St Kilda Road (Owners Corporation) commenced proceedings against Lendlease Engineering Pty Ltd (Contractor) who had provided statutory warranties for the building work. The Owners Corporation sought orders from Victorian Civil and Administrative Tribunal (VCAT) for rectification of alleged defective building work relating to a system of louvres fitted on the exterior of the building.

The Contractor applied to have most of the claim summarily dismissed under s 75(1) of the Victorian Civil and Administrative Tribunal Act 1998 (VCAT Act) (dismissal application) on two bases:

  • First, the Contractor contended that the Owners Corporations only had standing to bring the claim in relation to defects of those parts of the louvre system which were on common property.
  • Second, the Contractor submitted that some of the claims brought by the Owners Corporations were brought more than 10 years after the relevant occupancy permit had been issued and were thus statute barred pursuant to s 134 of the Building Act.


The application was met with a responding application for joinder of the 137 individual owners of the private lots affected by the defective louvre system (joinder application). The private lot owners’ claims were statute barred because time expired on or about 16 February 2017 and the joinder application not made until 2019.

In its reasons, VCAT refused the Contractor’s dismissal application on the basis that the proceeding was commenced within time and then permitted the joinder application joining the private lot owners to the proceeding. Interestingly, the private lot owners’ claims were allowed despite being statute barred with VCAT finding that the Owners Corporation commenced its action within time and it did so on its own behalf and on behalf of the affected private lot owners.

The Contractor appealed the outcome of both applications to the Supreme Court of Victoria.

Construction of Section 134 - Which occupancy permit is relevant for limitation periods?

The first question of law to be addressed in the appeal was whether, in cases where multiple occupancy permits are issued in respect of a building project, proper construction of the Building Act means that time starts to run for a “building action” from:

  • the date of issue of the occupancy permit issued in respect of the allegedly defect building work for which damages are claimed; or
  • the last occupancy permit issued in respect of the entire building project.


If time begins to run from when the relevant occupancy permit was issued, the time available to bring a claim would be shorter than if the relevant date is from date of issue of final occupancy certificate.

Section 134 of the Building Act stipulates that:

“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 (whether or not the occupancy permit is subsequently cancelled or varied) 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.”

In order to understand the meaning of s 134, one “begins with the ordinary and grammatical meaning of the words” used within the provision, in the context of the Building Act as a whole and with regard to the Act’s legislative purpose[1]. Any ambiguity of the provision should be resolved by a construction which gives effects to the legislative purpose.[2]

This, however, only takes us so far when the Building Act allows for more than one occupancy permit to be issued in respect of a building (i.e. staged building permits are allowed and, in a staged development, occupancy permits can also follow a staging process)[3] and unhelpfully, s 134 is silent as to how the relevant occupancy permit is to be identified.

The relevant purposes of the Building Act are:

  • to regulate building work and building standards;
  • to provide an efficient and effective system for issuing building and occupancy permits and administering and enforcing related building and safety matters and resolving building disputes; and
  • to limit the period within which building actions may be brought.[4]


While the Court acknowledged that the purpose of limitation provisions is to limit the time within which a person can bring a cause of action (and, we would say, give the construction industry and their insurers more certainty on potential future exposures), the Court noted that the Building Act does not contain any extension provisions which might otherwise ameliorate the effects of a limitation period.[5]

Dismissing the Contractor’s appeal on the limitation question, the Court held that the 10-year limitation period starts to run from the date of issue of the “occupancy permit that best reflects the whole of the work in the building covered by either occupancy permit or by the certificate of final inspection”.[6]

A key factor in the Court’s decision on the proper interpretation of s 134 was the “deliberate”[7] distinction between ‘an occupancy permit’[8] and ‘the occupancy permit’[9]. The Court held:

“An occupancy permit may be required in respect of the building work. That occupancy permit is clearly in respect of identified building work. … [if the proper construction of s 134 was that time ran from the date of issue of an occupancy permit in respect of the particular building works to which the building action relates], s 134 would logically have referred to an occupancy permit which would then reference the particular building work. Section 134 refers to ‘the occupancy permit…”[10]

Accordingly, the Court determined that “the limitation period was not intended to apply form the varying dates of each occupancy permit” required under s 21(1)(a) of the Building Act, but rather the occupancy permit identified in s 21(1)(b) of the Building Act. This, said the Court said, is ‘[c]onsistent with … the circumstance where an occupancy permit is not issued, [and] time runs from the certificate of final inspection’.[11]

The Court noted two particular benefits of this interpretation:

  • in the absence of an extension provision in the Building Act, it provides certainty to the parties; and[12]
  • in circumstances in which the limitation period would otherwise be subject to a variable time limit dependent on the business decisions of those doing the building work (e.g. whether the contractor chooses to “arrange the business of building work by progressive or sequential building or occupancy arrangements, or proceeds in relation to the building as a whole”), it provides a fixed and foreseeable limitation period.[13]


We agree with the Court’s straightforward approach which will avoid extensive and costly disputation on a preliminary, fact specific question. It will also assist contractors, owners and prospective purchasers alike to know when time starts to run without legal assistance and without VCAT’s intervention.

Are private lot owners able to bring statute barred claims?

The second key issue was that the 137 private lot owners did not seek to be joined to the proceeding until 20 months after their claims were statute barred.

At the initial application, the lot owners sought to explain their delay on the basis that they had always believed the louvre system was located on common property and it was not until the Contractor raised ownership in its defence and served expert surveying evidence that ownership of the louvre system was put in issue. The owners the joinder application was essentially procedural to ensure the correct parties / owners were identified. The owners submitted that no prejudice arose from the joinder.

Understandably, the late application to bring an otherwise statutorily barred claim was opposed by the Contractor and, on losing the argument at first instance, the Contractor appealed.

The question before the Court in the judicial review was whether the joinder application of the private lot owners ought to have been dismissed pursuant to s 134 of the Building Act as the claims were out of time and statute-barred and, thus, doomed to fail.

Firstly, the Court rejected VCAT’s statement that the joinder, in the unique circumstances of this proceeding, was “simply a formality” and agreed with the Contractor that joining new parties to a proceeding was not simply procedural but of substance, properly characterised as commencing a new action.[14]

The Court left the possibility somewhat open for the very specific circumstances where an Owners Corporation commences proceedings within time and private lot owners subsequently seek to bring a time barred claim. In that circumstance, joinder might be allowed if the private lot owners can establish that the Owners Corporation had commenced the proceeding on behalf of its members.

While not a complete impossibility, it is hard to foresee circumstances where private lot owners will have sufficient evidence to support a factual finding that an Owners Corporation were acting on their behalf when proceedings were commenced without also naming private lot owners as applicants. It is equally hard to foresee how an Owners Corporation would have standing to obtain rectification or replacement beyond the common property even if the owners could establish that the Owners Corporation were acting on their behalf.

In our view, quite rightly, the Court granted the Contractor leave to appeal the VCAT’s decision in relation to the joinder.[15]

Read other items in Australian Insurance Brief - July 2021

 

[1] Lendlease Engineering Pty Ltd v Owners Corporation No 1 & Ors [2021] VSC 338 (Forbers J) (‘Supreme Court Decision’) [24]

[2] Ibid

[3] Noting that it is a matter for the person applying for the building permit whether they wish to apply for a single permit or staged permits but the legislation requires the building permit in either case to state whether an occupancy permit is required for the whole of the building as well as whether one is required for the part where the work is to be carried out.

[4] Building Act 1993 (Vic) s 1(a), (c) and (h)

[5] Supreme Court decision (n 1) [46]

[6] Ibid [57]

[7] Ibid [54]

[8] See Building Act s 21 (emphasis added)

[9] See Building Act s 134 (emphasis added)

[10] Supreme Court decision (n 1) [55] (emphasis added)

[11] Ibid

[12] Ibid [58]

[13]] Ibid [59]

[14] Ibid [68]

[15] Ibid [96]