Victorian Court of Appeal clarifies when time starts to run where multiple occupancy permits issued

In the decision of Lendlease Engineering Pty Ltd v Owners Corporation (OC) No 1, the Court of Appeal overturned an earlier decision of the Victorian Supreme Court which held that, in the case of multiple occupancy permits, the limitation period for building actions starts to run from the date of the final occupancy permit.

The Court of Appeal’s decision is significant to the construction industry in clarifying the commencement date for limitation periods under the Act for projects that involve more than one occupancy permit. It provides greater certainty regarding limitation periods for building actions, which are often relevant to defect or breach of statutory warranty claims brought against builders and related claims against other building professionals.

Going forward, parties must now consider the date of issue of the occupancy permit applicable to the building work that is the subject of a claim in a building action. There may be different limitation periods that apply to claims on a single project.

For current building actions, if the occupancy permit for the relevant building work was issued more than 10 years before the claim was brought, limitation defences that were not previously raised based on earlier decisions should be considered.

Background

Section 134(1) of 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, regardless of whether the occupancy permit is subsequently cancelled or varied.

In 2004, a builder was engaged to carry out the construction of an apartment complex and refurbishment of an existing building in South Yarra, Victoria. The works were completed in separable portions. Four occupancy permits were ultimately issued in respect of the works in eight months. The occupancy permits operated cumulatively.

The builder said that the most of the OC’s claims were time-barred by law because they were brought more than 10 years after the date of the third occupancy permit, which was the occupancy permit issued “in respect of the building work” for the purpose of section 134(1) of the Act. However, the OC said the limitation period only took effect from the last occupancy permit issued in respect of all building work.

In accepting the OC’s contention, the Victorian Civil and Administrative Tribunal determined that the 10-year limitation period in section 134(1) started from the date of the final occupancy permit. The decision was upheld by the Victorian Supreme Court. 

The builder appealed to the Victorian Court of Appeal. The limitation issue was one of a number of matters addressed in the appeal.

Decision on Appeal

In finding in favour of the builder on the limitation issue, the Court of Appeal focused on the context, legislative purpose and clear language of section 134(1) of the Act.

The Court of Appeal identified elements in the language of section 134(1) indicating that time runs from the date an occupancy permit is first issued in relation to building work the subject of the claim in a building action:

• the limitation period is expressly said to commence from the date of issue of the occupancy permit “in respect of the building work”, as opposed to any subsequent or final occupancy permit;
• the phrase “whether or not the occupancy permit is subsequently cancelled or varied” would be inconsistent if subsequent occupancy permits were construed to ‘restart’ the limitation period when ‘cancellation or variation’ does not have such an effect; and
• there is no language that indicates parliament intended the commencement of the limitation period to be the ‘final’, ‘current’, or ‘last’ occupancy permit.

In the case of occupancy permits expressed to operate cumulatively, the Court of Appeal determined that any subsequent occupancy permit does not restart time running for the purpose of the limitation period as the language in section 134(1) requires the identification of the occupancy permit.

The Court of Appeal emphasised that this interpretation promotes certainty because, if that were not the case “… the limitation period would depend on happenstance, not required by the Act, as to the form of a later occupancy permit. It would ignore the critical fact that the relevant building work had been completed and was ready for occupation in accordance with the first occupancy permit.”

Co-written by Nicola Macrow of Pinsent Masons.