The Victorian Court of Appeal overturns the decision of the Supreme Court of Victoria in determining the limitation period for building actions where multiple occupancy permits are issued for the same building work.
In the case of Lendlease Engineering Pty Ltd v Owners Corporation No.1 & Ors  VSCA 105 (the Lendlease case), the Court of Appeal has overturned the earlier decision of the Supreme Court in the proceeding, determining that the 10-year limitation period under s134 of the Building Act 1993 (Vic) (the Act) runs from the occupancy permit first issued in relation to the defective building work the subject of a building action, and not from any ‘final’ occupancy permit.
The impact of the Court of Appeal decision is that where multiple occupancy permits are issued for the same building work, there will be no extension to the limitation period for building actions by virtue of the issuance of a final occupancy permit.
The key facts are:
- The works the subject of the proceeding were completed in separable portions and four occupancy permits were issued in relation to those works, the last of which on 16 February 2007 (the final occupancy permit).
- The final occupancy permit certified that all the apartments and common property were suitable for occupation.
- On 13 February 2017, the Owners Corporations commenced proceedings against Lendlease alleging breaches of the statutory warranties in s8 of the Domestic Building Contracts Act 1995 (Vic).
- Lendlease sought that most of the claims made by the Owners Corporations be summarily dismissed as they concerned allegedly defective building work in apartments for which the Owners Corporations had no standing to bring claims; and for which an occupancy permit had been first issued more than 10 years ago, meaning that the limitation period under s134 of the Act had expired (the limitation issue).
- In response, the Owners Corporations sought to join apartment owners to the proceeding (the joinder issue) and contended that the limitation period had not expired because it ran from the issue of the final occupancy permit. The VCAT found in favour of the Owners Corporations on both issues.
- On appeal, the Supreme Court upheld the decision of the VCAT in respect of the limitation issue but found that the VCAT erred on the joinder issue.
See our article on the earlier decision of the Supreme Court that sets out a detailed summary of the facts, and the decisions of the VCAT and the Supreme Court.
The decision of The Court of Appeal
Lendlease appealed the decision of the Supreme Court on the limitation issue and the Owners Corporations cross-appealed on the joinder issue. (The Owners Corporations’ cross-appeal was unsuccessful.)
The limitation issue
The Court of Appeal found that the Supreme Court erred in respect of the limitation issue and held that the limitation period prescribed by s134 of the Act runs from the occupancy permit that is first issued in relation to the defective building work the subject of the building action.
In reaching its determination, the Court of Appeal first considered the language in s134 of the Act. The Court of Appeal observed that the limitation period prescribed by that section was stated to commence from the date of issue of the occupancy permit “in respect of the building work“. In giving those words meaning, the Court of Appeal noted that the definition of “building action” (in s129 of the Act) made the phrase “building work” used in s134 naturally referable to the “defective building work” the subject of a “building action”. Further, the Court of Appeal also observed that the limitation period imposed by s134 is stated to operate “whether or not the occupancy permit is subsequently cancelled or varied” and that it would be anomalous if a subsequent occupancy permit restarted the limitation period, whereas its being cancelled or varied did not. Finally, the Court of Appeal observed that there is nothing in the language of s134 which suggested that Parliament intended the limitation period for a building action to commence from some “final”, “current” or “last” occupancy permit.
In addition to considering the language in s134 of the Act, the Court of Appeal also observed that there were no surrounding provisions in the Act which suggested that the limitation period prescribed by s134 should be interpreted in some other way. The Court of Appeal stated, contrary to the reasoning employed by the Supreme Court, that there was no special significance in the use of the words “an” occupancy permit versus “the” occupancy permit in ss21 or 134 of the Act, and that making such a distinction would render uncertain the effects of any occupancy permit and the limitation period under s134. The Court of Appeal considered that the single “clear trigger date” intended by Parliament for the commencement of the limitation period under s134 can be readily identified by reference to the date of issue of the occupancy permit in respect of the relevant defective building work and that alleged unfairness or the object of certainty does not otherwise justify the bending of the words in the Act.
Impact of the decision of the Court of Appeal
The decision of the Court of Appeal in the Lendlease case provides important clarity in relation to the limitation period prescribed by s134 of the Act and is a welcome relief for builders and other industry participants concerned by the potential repercussions of the earlier decision of the Supreme Court. Moving forward, owners and owners corporations will need to consider carefully which occupancy permit was issued in respect of building work so as to determine the applicable limitation period when commencing any building action.
Owners and owners corporations, and contractors, designers, building surveyors and others drawn into building actions should obtain advice in relation to whether time is still running for commencement of a building action in circumstances of staged building work with staged issue of occupancy permits.
If you have any questions in relation to this case, please don’t hesitate to contact a member of our Construction & Engineering team.
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