Clarifying limitation periods and the ability of owners corporations to join individual lot owners

26 October 2021

Where multiple occupancy permits are issued for a single project, there may be uncertainty as to determining the relevant statutory limitation period applicable to bringing a building action, prescribed by section 134 of the Building Act 1993 (Vic) (Act).

Additionally, an owners corporation may need to consider whether it can join individual lot owners to a proceeding after the statutory limitation period relevant to that individual lot owner’s claims have expired.

The Victorian Supreme Court in Lendlease Engineering Pty Ltd v Owners Corporation No.1 & Ors1 provided clarity on these issues and held that:

  • the final occupancy permit certifying all the whole of the works is the relevant permit for the purposes calculating the limitation period under the Act; and
  • where an owners corporation commences proceedings within time and subsequently seek to join lot owners who would otherwise be time barred, those lot owners will be time barred unless there is demonstrative evidence to establish that the owners corporation commenced the proceeding on their behalf.

What happened?

On 13 February 2017, the owners corporation of the Chevron apartment complex (Owners Corporation) commenced proceedings against Lendlease Engineering Pty Ltd (Lendlease), alleging breaches of statutory warranties given under the Domestic Building Contracts Act 1995 (Vic) in relation to defects in louvered metal shades in both the common property and private apartments.

Lendlease delivered the building in four separable portions and four occupancy permits were issued. The third and fourth occupancy permits, dated 6 December 2006 (Permit 3) and 16 February 2007 (Permit 4), were relevant to the alleged defective works.

Section 134 of the Building Act 1993 (Vic) (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. It does not distinguish between multiple permits.

Lendlease sought to dismiss the proceeding on the basis that:

  • the Owners Corporation did not have standing to bring a claim regarding allegedly defective works on the individual lots; and
  • some of the claims were statute barred as they had been brought more than 10 years after Permit 3 was issued.

The Owners Corporation submitted that the limitation period commenced from the date of issue of the last occupancy permit, being Permit 4.

VCAT agreed with the Owners Corporation and found that the claims were not time-barred.

Subsequently, the Owners Corporation sought to join individual lot owners to address the Owners Corporation’s lack of standing in respect of defects in the individual lots. VCAT allowed the joinder, notwithstanding that the limitation period had expired, on the basis that the Owners Corporation had commenced proceedings on behalf of the individual lot owners.

Lendlease appealed to the Victorian Supreme Court.

What did the Victorian Supreme Court say?

Which occupancy permit is relevant for the limitation period?

The Court held that the purpose of the Act is to provide an efficient and effective system for issuing building and occupancy permits and administrating and enforcing building safety matters and resolving building disputes. This requires that any statutory limitation must be able to be easily determined.

The Court considered the language of the Act, and in particular noted the distinction between ‘an’ occupancy permit and ‘the’ occupancy permit. The Court held that the reference to ‘the’ occupancy permit in section 134 of the Act was a reference to the occupancy permit that best reflects the whole of the work in the building and that it would be contrary to the purposes of the Act to make the limitation period dependent upon the business choices of builders, who are in control of how the building work is conducted and as a consequence could exert influence on the applicable limitation period.

Accordingly, the Court held that the occupancy permit or certificate of final inspection which certifies the whole of the building work, being Permit 4, is the relevant permit for determining when the limitation period commences.

Joinder of claims – Are private lot owners able to bring statute barred claims?

The Court rejected the argument of the individual lot owners whom the Owners Corporation had sought to join 20 months after the proceeding commenced by claiming that the individual lot owners’ claims were not statute barred because the Owners Corporation had commenced the proceeding on their behalf.

The Court emphasised that joining new parties to a proceeding was not simply procedural but is properly characterised as commencing a new action.

However, the Court left open the possibility for limited circumstances where an owners corporation commences proceedings within time and lot owners subsequently bring a time barred claim. Lot owners would not be time barred where they can establish that the owners corporation commenced the proceeding on their behalf.

Why is this case important?

The decision has removed much of the uncertainty around establishing when the statutory limitation period under section 134 of the Act commences where multiple occupancy permit were issued for a single development.

For both claimants and respondents alike, when dealing with a claim for a building action in relation to a development with multiple occupancy permits, they should be aware that the limitation period commences on the date of the final occupancy permit for the whole of the building work.

For lot owners wanting to bring a claim against a builder for a building action, they should ensure that they directly commence proceedings within the statutory limitation period. Alternatively, they should ensure that they can clearly demonstrate that the owners corporation acted on the their behalf in commencing a proceeding. Otherwise, they risk being time barred from bringing their claim.

This article was written by Alan Chiang, Partner, Con Koutsantony, Senior Associate and Soha Refaat, Solicitor. 

1[2021] VSC 338.

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