Victorian Court of Appeal determines that building matters must be commenced within 10 years in Brirek Industries Pty Ltd v McKenzie Group Consulting (Vic) Pty Ltd [2014] VSCA 165

September, 2014

The Victorian Court of Appeal has recently clarified the interpretation of section 134 of the Building Act 1993 (Vic) in Brirek Industries Pty Ltd v McKenzie Group Consulting (Vic) Pty Ltd [2014] VSCA 165 and has determined that section 134 creates a separate limitation regime of 10 years for all building actions, including those arising in contract.

Legislation

Facts

The issue arose at first instance in the County Court in Brirek Industries Pty Ltd v McKenzie Group Consulting (Vic) Pty Ltd [2011] VCC 294. During the course of that matter, Brirek, who had engaged McKenzie’s services as a building surveyor on a development project, sought to amend its pleadings to amend the date of its alleged contract with McKenzie from late 2002 to April 2004.

In terms of the contractual claim, the Court found the amendment, which was made in September 2010, took effect on the date it was made and, accordingly, was time barred under the Limitations of Actions Act 1958 (Vic) given that more than 6 years had elapsed since the last building permit had been issued by McKenzie in May 2004. Shelton J found McKenzie did not owe Brirek a duty of care in tort, and accordingly Brirek failed in its action on all counts.

Appeal

Brirek appealed to the Court of Appeal on the basis that section 134 of the Building Act allowed a 10 year limitation period for building actions from after the date of issue of the occupancy permit in respect of the building work or, if an occupancy permit is not issued, the date of issue of the certificate of final inspection of the building work, and that this section applied to both contractual and tortious claims.

The Court of Appeal agreed with Brirek, and considered that the breadth of the definition of “building action” included claims in contract and tort.

The Court of Appeal held at [135] “The construction given to s 134 by the trial judge imposes unwarranted limitations on the scope and applicability of the section. In our opinion, actions founded on contract, independent of any tort claim, fall within the scope of s 134 and may be brought within 10 years from the date of issue of the occupancy permit”.

Impact on Insurers

It is clear that section 134 applies in relation to actions as between home owners and builders. This decision also provides long-awaited clarity on the uncertainty surrounding the limitation period for building actions in Victoria in terms of insurer recoveries. It may be useful to review those files and determine whether any recoveries can be commenced or amended based on the current interpretation of section 134.

A related question is whether the current reading of section 134 prescribes a 10 year long stop for appeals against decisions of insurers. Appeals against decisions of insurers are generally lodged with VCAT. Sections 59A and 60 of the Domestic Building Contracts Act 1995 (Vic) provide that such proceedings are in the way of “reviews” of decisions, rather than actions for loss or damage. For this reason, we consider it highly unlikely that an appeal to VCAT would be caught by section 134.

Should such an appeal be made to a Court instead of VCAT, that action would be for damages arising from breach of the insurance policy. However for the matter to be considered a building action, it would still need to arise out of defective building work. This seems to us a long bow to draw, as any proceedings would in fact arise out of the beneficiary’s rights under the insurance contract.

Further, on our reading of the Ministerial Order, the Victorian Parliament has chosen not to legislate a time limit for making claims under HWI policies, which means claims can be made at any time. If section 134 were to be read as prescribing a 10 year long stop for appeals against decision of insurers, it would create the unusual situation of allowing the beneficiary the option to make a claim at any time on the policy, but allow only 10 years from completion of the work to appeal that determination. It seems unlikely that this was the intent of Parliament.

Contact Mills Oakley

 

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Daren Curry

Partner | Insurance (Sydney)

T: +61 (2) 8289 5817

E: dcurry@millsoakley.com.au

 

 

 

 

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