Lendlease Engineering Pty Ltd v Owners Corporation No 1 PS526704E [2022] VSCA 105
The Court of Appeal held that, under section 134 of the Building Act 1993 (Vic), where cumulative occupancy permits are issued in stages, time for a building action runs from the first permit issued in respect of the defective building work, not from a final permit.
What the court decided
The first issue was when the 10 year limitation period in section 134 commenced [2]. Lendlease carried out the Chevron Apartments project in St Kilda Road, Melbourne [7]. The two owners corporations alleged that the louvre system it installed on Building 2 was defective [10]. Four occupancy permits were issued: the third was dated 6 December 2006 and the fourth, covering all apartments of both buildings, was dated 16 February 2007 [11]. The permits operated cumulatively, and levels 7, 8 and 9 and four other apartments of Building 2 were included only by the fourth [12].
The owners corporations commenced their proceeding in the Victorian Civil and Administrative Tribunal on 13 February 2017 [13]. On 16 May 2019 Lendlease applied to strike out the claims for the rest of Building 2 [14]. It contended that they were brought more than 10 years after the third permit [15]. The Tribunal upheld the owners corporations' position on that issue and on a joinder issue [4]. On appeal, a judge of the Supreme Court held that the fourth permit was the relevant permit [41], but allowed an appeal on the joinder issue [4].
In joint reasons, the Court of Appeal (Beach, Niall and Kennedy JJA) granted leave to appeal, allowed the appeal and refused leave to cross-appeal [6], [139].
The Court reasoned that the words "in respect of the building work" are naturally referable to the defective building work the subject of the action, so that time runs from the permit first issued for that work [65], [68]. As time runs from first issue even if that permit is later cancelled or varied, it would be anomalous for a later permit for the same work to restart it [66]. Where later permits restated completed work, choosing the later permit would reset the clock and would not promote certainty [71]. Difficulty in identifying defective work and the relevant permit did not justify discarding the clear language [72]. Where later defective work affects earlier stages, the limitation period attaches to the defective work [73].
The Court set aside paragraph 2 of Forbes J's orders [139]. In its place, it substituted orders setting aside paragraphs 1 and 3 of the Tribunal's orders and dismissing the claims for the apartments and associated common property of Building 2, except those included only by the fourth permit [12], [139].
On 16 May 2019 Lendlease also filed amended points of defence alleging that the owners corporations were not the relevant owners of the louvres [76]. On 4 October 2019 the owners corporations applied to join 137 private lot owners as co-applicants [78]. It was undisputed that the lot owners' own time to sue had expired [3].
The Court held that the judge was correct on joinder [6]. It refused leave to cross-appeal, finding proposed grounds 1 and 2 "without merit" [113]. It applied the principle that a new party cannot be added once time for a claim by or against it has expired, as that would effectively defeat a limitation defence [109]. The Tribunal's broad procedural powers do not displace that principle [109]. Nor does its joinder power allow it to join parties to defeat the defence [111].
The Court did not decide whether joinder might succeed on another basis, as the lot owners sought joinder as claimants in their own right [90]. Whether the owners corporations could themselves recover the entire cost of the louvres was irrelevant to that application [114], [135]. The Court also held proposed ground 3 "unsustainable" [138]. That ground challenged the judge's finding that it was not open to the Tribunal to find the owners corporations acted for the lot owners, a finding their own evidence amply supported [136], [137].
Why it matters
In my view, on a staged project, advisers should identify the permit first issued in respect of each alleged defect. Lot owners with their own claims for defects within their lots should sue within time, and not rely on later joinder or on the owners corporation's claim. The Court construed section 134 in the form set out in its reasons, so readers should check the current text [16].
Numbers in square brackets are paragraph numbers of the judgment. This note summarises a decided case for education and is not legal advice. See how the notes are written.