How long is a builder liable for defective works?
White v Noble Trading as WR & EM Noble (Domestic Building) [2014] VCAT 413
How long, post completion, does a claimant have the opportunity to commence action against the builder for defective works? Does it matter when the defects were discovered, or does the time start counting upon completion of the works? This is a vexed question, and the recent case of White v Noble Trading as WR & EM Noble (Domestic Building) [2014] VCAT 413 (“White v Noble Trading”), while providing a strong endorsement for a particular method of limiting the time to take action, is an example of how these questions are long but settled.
Limitation of Actions Act 1958 (Vic) (“Limitations Act”)
In the past, a lack of statutory regulations has led to builders being held liable for defective workmanship completed many years prior, with often no substantial limitation of the time within which a claimant could commence action. Upon the introduction of the Limitations Act in 1958, the bringing of actions, including actions founded on contract, tort and breach of statutory duties, became limited to six years after the date on which the cause of action accrued. Effectively, for builders, this meant that an action could be brought by a claimant either six years after the damage was caused, or six years after the damage was discovered. Though the new provisions were initially thought to be generous to builders, the commencement of the six year period after which damage was discovered meant that latent defects, discovered many years after the building work was completed, resulted in builders remaining open to claims “in perpetuity”.
Introduction of Building Act 1993 (Vic)
Following amendments to the Building Act 1993 (Vic) (“Building Act”), section 134 introduced a new time limitation for commencing action in relation to completed works. Section 134 reads as follows:
“Despite anything contrary in the Limitation of Actions Act 1958,…, 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.”
At first glance, section 134 imposes a clear limitation period in which claimants can bring an action under the Building Act, running from the time of issuing the occupancy permit or certificate of final inspection, whichever it may be, until the expiry of ten years. It was thought that the ten year period was a good compromise between the interests of owners who need protection from building defects appearing after completion of the works, and builders who wanted less uncertainty and protection from ongoing liability.
This view, the so called “replacement view”, is the one that VCAT has most recently endorsed. In White v Noble Trading, Member Farrelly said at paragraph 40 that section 134 “…provides a clear cut, special limitation period for building actions, intentionally free of the uncertainty that may arise in identifying a date of accrual of a cause of action”.
However, this is in stark contrast to an earlier Victorian County Court decision, in which the Honourable Judge Shelton said that “the “long stop” or “an absolute cap” approach is the proper interpretation” of section 134. The long stop theory means that although generally a cause of action is statute barred upon expiry of the six year period under the Limitations Act, where a latent defect manifests, the resulting cause of action expires either 6 years from the date of discovery or 10 years from the date of the occupancy permit or certificate of final inspection. Effectively, the long stop approach provides a choice of jurisdiction, with one option being more preferable depending on the time of accrual of the cause of action.
It is important to note at this stage that VCAT does not adopt the doctrine of precedent. Previous decisions, although respected, are not binding upon other Members. While White v Noble Trading is a strong endorsement of VCAT’s views on the application and interpretation of section 134 and its interaction with the Limitations Act, the debate between the replacement view and the long stop approach is still being battled. It will no doubt be interesting to see how these questions become answered. In the meantime, builders and owners alike should carefully consider any limitation upon the period they can commence action or be subject to action and when discovering a latent defect, seek legal advice to minimise the risk of being ‘out of time’.
Berrigan Doube Lawyers are experienced in providing legal advice to owners corporations and owners corporation managers. The above article should not be taken as legal advice but if you have any comments in relation to this article or require assistance with any owners corporations questions, please do not hesitate to contact Jenny Wang or Lindsay Crofton of Berrigan Doube Lawyers on 03 9600 2577.
Lindsay Crofton
Associate
Berrigan Doube Lawyers
