MTECC News 22.10 ||| Separable portions and multiple occupancy permits – the application of the 10-year limitation period for building actions was clarified in Lendlease Engineering Pty Ltd v Owners Corporation No 1 PS526704E & Ors  VSCA 105.
The Victorian Court of Appeal recently handed down its decision in Lendlease Engineering Pty Ltd v Owners Corporation No 1 PS526704E & Ors  VSCA 105.
The Court of Appeal found that where multiple occupancy permits have been issued in respect of a project, the 10 year limitation period pursuant to s.134 of the Building Act 1993 (Vic) (the Act):
- commences on the date the occupancy permit was first issued in respect of the work which is the subject of the building action;
- does not start and stop each time a separate occupancy permit is issued; and
- does not start from the date of the final occupancy permit.
The Court of Appeal overturned an earlier Supreme Court decision which held that, where a project had multiple occupancy permits issued, it was the final occupancy permit that was the relevant permit for the purpose of calculating the limitation period.
In late 2004, Lendlease Engineering Pty Ltd (Lendlease) (as Contractor) was engaged by way of a design and construct contract to carry out the construction of a project (the Works) known and described as ‘Chevron Apartments’ situated in St Kilda.
The Works comprised:
- the refurbishment of the existing Chevron Hotel into 67 apartments over three levels (Building 1); and
- the construction of a new nine-storey apartment building comprising a further 232 apartments including three levels of below-ground car parking (Building 2).
The Works were completed in separable portions pursuant to six building permits. Four occupancy permits were also issued in respect of the Works as follows:
- Occupancy Permit BS14426/2005/0074/1P dated 23 June 2006.
- Occupancy Permit BS14426/2005/0074/2P dated 19 October 2006.
- Occupancy Permit BS14426/2005/0074/3P dated 6 December 2006 (OP3); and
- Occupancy Permit BS14426/2005/0074/4F dated 16 February 2007 (OP4).
The Owners Corporations (the OC) commenced proceedings in the VCAT on 13 February 2017 (being 3 days before the 10 years limitation period of OP4). The OC, amongst other things, alleged defective building works to a sunshade louvre system installed by Lendlease at Building 2.
Each occupancy permit was issued on completion of specific stages. Permits OP3 and OP4 related to the alleged defective works which were undertaken on Building 2. Critically, OP3 related to the occupancy of most (but not all) of the apartments in Building 2. OP4 provided that all apartments and common property were suitable for occupation.
Lendlease contended that the claims were brought more than 10 years after the date of OP3 (6 December 2006), which was the occupancy permit issued ‘in respect of the building work’ for the purposes of s.134 of the Act.
The OC contended that the limitation period only took effect from the last occupancy permit issued in respect of all building works, being OP4 (16 February 2007).
The Court’s decision
The Court of Appeal rejected the OC’s position finding that “in construing s.134 it is necessary to commence with the ordinary and grammatical meaning of the words used, taking into account both context and legislative purpose”. Further that “consideration of context must be ‘in its widest sense’, including taking into account the surrounding statutory provisions, as well as the ‘mischief’ the statute is intended to remedy.”
Having considered the language of s.134(1) of the Act, the Court of Appeal held “a number of features suggest that time runs from the date an occupancy permit is first issued in respect of the defective work.“
This lead to the conclusion that “the ordinary meaning of the words therefore suggests that the occupancy permit ‘in respect of the building work’ is intended to apply to the occupancy permit that is first issued in relation to the defective building work the subject of the building action — not any ‘final’ occupancy permit.”
For large projects, there are often a series of occupancy permits issued. These can be weeks or months apart. As a result, different works under the project will be subject to different limitation periods.
The decision highlights the importance of monitoring the timing of all issued occupancy permits together with the respective works to which each permit relates. When commencing proceedings an assessment will need to be made to ensure that the works which are the subject of a ‘building action’ are referable to a specific permit, which is not outside the 10 year limitation period.
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