A recent decision of the Victorian Court of Appeal has provided clear direction on the limitation period for bringing a building action in Victoria. This long awaited decision brings some certainty to an area of law much debated in the building industry, and has a significant impact on water authorities who engage contractors to carry out building work in Victoria.

The decision

In Brirek Industries Pty Ltd v McKenzie Group Consulting (Vic) Pty Ltd [2014] VSCA 165 (Brirek), the Victorian Court of Appeal held that the proper interpretation of s134 of the Building Act 1993 (Vic) is that a claimant may bring a building action founded in contract or tort within 10 years of the date of the certificate of occupancy or certificate of final inspection.

Since its enactment, the impact of s134 of the Building Act on the limitation periods set by the Limitation of Actions Act 1958 (Vic) (Limitation Act) has been the subject of debate. Under s5 of the Limitation Act, a claimant has six years to bring an action in contract or tort from the date the cause of action arises. After that time the claim is statute barred and cannot be bought. However, s134 of the Building Act provides that:

Despite anything 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)…

On one interpretation, s134 of the Building Act does not affect claims in contract and serves only to create a ‘long-stop’ date for bringing an action in negligence for defective building work. On this interpretation, the six year limitation period under the Limitation Act applies to all building actions except in relation to negligence claims relating to latent defects where the cause of action does not become apparent until after the six year limitation period expires. In such cases, the claimant has a maximum of 10 years from the date of the occupancy permit to bring an action in negligence for defective building work under s134 of the Building Act.

However, the Court of Appeal did not accept that s134 of the Building Act is confined to negligence claims. The Court preferred the view that s134 operates to override or replace the six year limitation period created by s5 of the Limitation Act, providing instead for a 10 year limitation period from the date of the occupancy permit for all building actions, including actions for breach of contract.

Implications of the decision

This decision has clear implications for any water authorities who engage contractors and building design consultants to carry out building work.

In summary, the current position in Victoria is as follows:

• Under s134 of the Building Act, a building action may be bought within 10 years of the date of issue of the occupancy permit or final certificate.
• Section 134 of the Building Act applies to building actions based in contract and tort (e.g. negligence).
• After this 10 year period, all claims are statute barred. A claim cannot be bought for defective building work after the expiration of the 10 year limitation period, even where the defect is latent and does not become apparent within that 10 year period.

The decision in Brirek means that water authorities in Victoria effectively have longer than previously thought to commence an action for breach of contract for defective building work. The decision clarifies that the relevant limitation period for bringing a building action is 10 years from the date of the certificate of occupancy under s134 of the Building Act (rather than six years under the Limitation Act). Water authorities may need to reassess the insurance requirements they include in their building contracts in the context of this decision.