The Victorian Civil and Administrative Tribunal (VCAT) has long adopted the position that the ten year period for which an action can brought against a builder as stated in Section 134 (S134) of the Building Act 1993 (the Act), is intended to replace the period of six years provided by the Limitations of Actions Act 1958. This position has not been without its critics.

The recent County Court decision of Brirek Industries –v- McKenzie Group Consulting, adopts the alternative position. That is, any cause of action will be statute barred upon the expiration of the six year period under the Limitations of Actions Act 1958.

The ‘replacement’ interpretation

The view adopted by VCAT is that S134 is designed to replace the existing 6 year period provided by the Limitations Act in respect to negligence and contract, therefore allowing all building actions to be brought within 10 years after the date of the occupancy permit.

The ‘longstop’ interpretation

The ‘longstop’ view adopted in the particular case mentioned incorporates both the Act and the Limitations Act. That approach says that any cause of action will be statute barred upon the expiry of the 6 year period under the Limitations Act, but upon manifestation of a latent defect, a cause of action will accrue to the plaintiff that will become statute barred after either 6 years from the date of manifestation, or 10 years from the date of the occupancy permit.

The case is proceeding to the Court of Appeal in 2013, providing the court with an opportunity to scrutinize the interpretations adopted. The decision of the Court of Appeal will hopefully give clarity to practitioners in respect to the length of the liability period for a builder following construction.

The legislation

Section 134 of the Building Act 1993 (Vic) provides:

“despite anything to the contrary in the Limitations of Actions Act 1958 or any other Act or Law, a building action cannot be brought more than ten years after the date of the occupancy permit in respect of the building work”

Section 5.1 of the Limitations of Actions Act 1958 (Vic) provides that:

“the following actions shall not be brought after the expiration of six years from the date on which the cause of action accrued
a) …actions founded on simple contract…or actions founded on tort”

Despite the decision in the case, VCAT have continued to apply a ‘replacement’ interpretation.

Problem

The wording of S134 creates ambiguity and it is unclear whether or not the intention was for S134 to replace Section 5 (1) of the Limitations Act and effectively increase the limitation period by four years in the case of latent defects.

Effect of differing interpretations

With two distinct interpretations, builders and contractors involved in defect disputes can effectively pre-select the jurisdiction in which the dispute is run. For example, a pleading that incorporates an element that falls outside the exclusive jurisdiction for domestic building matters can be heard in the County Court.

The argument over interpretation is led by a close analysis of the words of the statute itself.

The established position in another recent case was that, upon analysis of the second reading speech the clear intent for S134 was for it to replace S5 of the Limitations Act.

However, the argument based on the second reading speech was rejected, with the wording interpreted to mean that the ‘longstop’ approach was more preferred.

Conclusion

For those in the building and construction industry, the decision of the case offers a more preferred position in the form of the ‘longstop’ interpretation.

Given the consistency of the second reading speech and the words of the statute in support of a ‘longstop’ approach, it would appear that the court should determine the Appeal in favour of the ‘longstop’ interpretation.

For further information please contact:

Benjamin Broadhead
Special Counsel
03 5226 8549
bbroadhead@harwoodandrews.com.au