Lendlease Pty Ltd v Owners Corporation No 11 PS526704E & Ors [2022] VSCA 105

Jeanette Barbaro  |  Tom Kearney  |  Michael Lo  |  Sean Bricknell

Key takeout

In Victoria, where there are multiple occupancy permits that have been progressively issued with respect to a staged development, the 10 year limitation period under s 134 of the Building Act 1993 (Vic) (Act) starts to run from the date of the first occupancy permit that relates to the relevant ‘building work’ that is the subject of the ‘building action’ (i.e. a claim in relation to defective building works). It is not from the the date of the last staged occupancy permit for the building project is issued.

The consequence of this decision is that developers and building owners in Victoria may face significantly shorter limitation periods than previously expected.

In determining the applicable 10 year limitation period, it is critical:

• to identify the occupancy permit or certificate of final inspection for the actual works that are the subject of the a claim for defective building works; and
• that the building permit referred to in the occupancy permit clearly identifies the building works it relates to (including referencing the drawings relied on by the relevant building surveyor when issuing the building permit).

This is to avoid disputes as to whether the alleged defective building work is the subject of the relevant occupancy permit or certificate of final inspection.

Facts

This case is an appeal of a 2021 Supreme Court decision Lendlease Engineering Pty Ltd v Owners Corporation No. & Ors [2021] VSC 338 which we previously covered here.  To recap the key facts:

• Lendlease Engineering Pty Ltd (contractor) undertook building work for which four occupancy permits were issued.  The final two permits were dated 6 December 2006 and 16 February 2007.
• On 13 February 2017, Owners Corporation No. 1 PS526704E (owners corporation) commenced proceedings in VCAT alleging defective building works.
• Section 134 of the Act provides that 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.
• The contractor applied to dismiss the proceeding, saying that the claims were more than 10 years after the relevant occupancy permit (dated 6 December 2006) was issued.  The owners corporation said that the limitation period commenced from the date of issue of the last occupancy permit, being 16 February 2007.  VCAT agreed with the owners corporation and found that the claims were not outside the limitation period.
• On appeal the Supreme Court agreed with VCAT and held that the relevant occupancy was the final occupancy permit issued for the works and therefore the proceedings were issued in time.
• The contractor sought leave to appeal to the Court of Appeal on three grounds.  The primary ground was that the Trial Judge erred in holding that the final occupancy permit was the relevant occupancy permit under s 134 of the Act.

Decision

The Court of Appeal overturned the earlier decision and made clear that the 10 year limitation period runs from the date of the occupancy permit that is first issued in relation to the specific building work that is the subject of the claim for defective building works.  The Court of Appeal considered that:

• section 134 of the Act expressly states that the 10 year limitation period commences from the date of issue of the occupancy permit ‘in respect of the building work‘;
• the phrase ‘whether or not the occupancy permit is subsequently cancelled or varied‘ in section 134 of the Act supports the proposition that Parliament intended the limitation period to commence when the first occupancy permit concerning the building work is issued, even if subsequently cancelled or varied, and it would be inconsistent for the limitation period to ‘restart’ if subsequent occupancy permits are issued in respect of the same work, but a cancellation or variation does not have such an effect;
• the drafting of section 134 of the Act demonstrates Parliament’s intention to define an occupancy permit by reference to the relevant building work; and
• the interpretation of section 134 of the Act adopted by the owners corporation creates uncertainty because if the limitation period is ‘reset’ by a subsequent occupancy permit purporting to incorporate the same building work of a prior occupancy permit. This is even though no further building work has been undertaken, it ignores the fact that the relevant building work had been completed and was ready for occupation in accordance with the first occupancy permit.  

Whilst the Court of Appeal’s decision focuses on occupancy permits, we consider that the same reasoning would apply to a certificate of final inspection.

The Court of Appeal also reasoned that its interpretation facilitates the connection between the limitation period and the building work the subject of the ‘building action‘, and is consistent with the purpose of the Act, namely to specify a single ‘trigger date‘.