Brirek Industries Pty Ltd v McKenzie Group Consulting (Vic) Pty Ltd [2014] VSCA 165
In joint reasons on an appeal from the County Court, the Court of Appeal of the Supreme Court of Victoria held that the 10-year period in section 134 of the Building Act 1993 (Vic) governs an owner's contract claim against a building surveyor as well as claims in negligence and, in the alternative, that the amendment adding that claim related back to the original pleading. It held that section 17(a) of the Act did not create a contract between the owner and a surveyor engaged by the builder, and that the surveyor owed this owner no duty of care for its delay losses. Further disposition, including the surveyor's contention that no loss was proved, awaited submissions.
What the court decided
McKenzie Group Consulting (Vic) Pty Ltd, a building surveyor engaged by the builder, issued seven building permits on a development including Brirek Industries Pty Ltd's office project, the last two after the planning permit expired [2], [22]. McKenzie admitted that Brirek retained it in April 2004 [65]. Only permits 6 and 7 followed that engagement [206]. The trial judge found no 2002 contract [6]. Assuming the amendment spoke from its date, he held that the six-year contract period barred claims accruing before 2 September 2004 on the April 2004 contract, pleaded on 2 September 2010 [7], [67]. He found no duty of care in tort for the loss claimed [10]. Redlich, Whelan and Santamaria JJA gave joint reasons [13].
The court held that section 17(a) did not create or impute a contract between owner and surveyor, and that Brirek made no attempt at trial to establish a consensus ad idem [82].
The trial judge had read section 134 as a long-stop confined to negligence claims [92]. The court held that this put an "artificial constraint on the plain meaning" of the section [112]. A building action, as defined, covers actions for damages in contract and in tort, and building work includes issuing a permit [113]. Contract actions may be brought within 10 years of the issue of the occupancy permit [135]. Without one, the period runs from the certificate of final inspection [66]. The 2004 contract claims were therefore not statute-barred [136].
On implied terms, whether McKenzie had to tell Brirek the planning permit had expired was a question of breach, and the judge erred by not first asking whether the pleaded implied terms existed [186].
The court agreed that McKenzie owed Brirek no duty to avoid its loss of profit through delay [148], [152]. Novelty need not be an obstacle if the law develops incrementally and by analogy with established categories, and indeterminacy was no barrier [155], [169]. But the statutory scheme was no foundation for a duty for that kind of loss, and vulnerability was the key consideration here [172]. Following the joint reasons in Woolcock Street Investments Pty Ltd v CDG Pty Ltd, the court treated vulnerability as "the plaintiff's inability to protect itself" [173]. Brirek was well able to allocate the risk by contract, including in its contract of sale, and it resisted any contract with McKenzie before 2004 [174].
Relation back mattered only if the section 134 point failed [73]. The court said it would grant leave to add that ground on appeal, as McKenzie identified no prejudice warranting refusal [203]. It held that the amendment related back to the original pleading, and that the trial judge erred in assuming otherwise [200]. The amendment was only a different legal conclusion on facts already in issue, and adding a statute-barred claim between existing parties was not in itself a ground to refuse leave [201]. McKenzie relied on Ormiston JA's observation in Agtrack (NT) Pty Ltd v Hatfield that judges occasionally direct, by specific order, that an amendment take effect only from when it is made [202]. The court found no basis here for granting leave on that condition, and did not decide when, if ever, one may be imposed [203].
The only claims left open were the contract claims on implied terms [206]. As those terms were not said to be in controversy and the trial judge had found permits 6 and 7 issued in contravention of the Act, damages may be the only matter in dispute [207]. The parties were to address McKenzie's notice of contention that Brirek had proved no loss [205], [206]. The court would hear submissions on the further disposition of the appeal [208].
Why it matters
On this decision, contract claims that are building actions in Victoria, like claims in tort, may be brought within 10 years from the issue of the occupancy permit (or, if none, the certificate of final inspection) under section 134. On an owner's delay losses, the court held that the statutory scheme was no foundation for a duty and that this owner, able to allocate the risk by contract, was not vulnerable, so no duty arose on these facts. Under rule 36.01(6) of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) and section 34 of the Limitation of Actions Act 1958 (Vic), adding a statute-barred claim by late amendment between existing parties is not in itself a ground to refuse leave. Here the court found no basis for an order limiting the amendment's effect, so it took effect from the original pleading.
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