The long-stop limitation period extends to all building work, so says Court of Appeal

23 December 2020

Those in the building and construction industry will benefit from clarification provided by the NSW Court of Appeal on the operation of the long-stop limitation period in the Environmental Planning and Assessment Act.

In issue

The only issue before the court was to determine whether the plaintiff’s claim was statute-barred by s 6.20 of the Environmental Planning and Assessment Act 1979 (NSW) (the Act). This provision is the successor to the former s 109ZK, and imposes a maximum limitation period in an action for loss or damage arising out of or in connection with defective building work of 10 years from the date the work was completed. The issue was a question purely of law, made surprisingly complex by the “labyrinth” of amending legislation to the Act. The Court of Appeal determined that the scope of s 6.20 extends to all defective building work but the majority (Leeming and White JJA, with Emmett AJA dissenting) further found that the scope was not confined, as the original s 109ZK was, to development applications after 1998. Accordingly, the plaintiff’s claim was statute barred.

The background

In January 2017 a fire broke out on the ground floor of a building and damaged an upper level occupied by the plaintiff. The cause of the fire was allegedly the defendant’s defective building work completed in 1997. In August 2019 the plaintiff commenced proceedings against the defendant alleging breach by the Defendant of its common law duty of care. The defendant denied liability, and pleaded the claim was statute-barred by s 6.20 of the Act. The plaintiff sought to have the limitation defence heard in advance of all other questions in the proceedings.

The decision at trial

At trial Hammerschlag J was reluctantly persuaded to conform with a previous decision of the Supreme Court of Victoria (which had received favourable treatment by the NSW Court of Appeal albeit only in obiter). The plaintiff submitted the earlier decision was authority for the proposition that the proper construction of the words ‘arising out of or in connection with defective building work’ in s 6.20 should be narrowly construed, so as only to protect a party who does the defective building work from a claim by a person with whom that party contracted (which was not the case here). Whilst stating he disagreed with the narrow approach, his Honour did not depart from the earlier decision and found the claim was not statute barred.

The decision on appeal

The plaintiff asserted that the mischief that sections 6.20 and 109ZK were designed to overcome was the indeterminable liability for a claim of economic loss for latent defects. They were not intended to apply to a case where the loss was physical damage and where there were no latent defects, and where a plaintiff was not a party to the building contract. The court unanimously disagreed.

In order to construe s 6.20 the court found it was necessary to consider its predecessor, s 109ZK. In traversing a long and complicated history of all amending legislation, the court unanimously found that the object of s 109ZK was to afford a limitation protection to those engaged in the building industry, irrespective of the nature of the claim, so long as the claim can be shown to be for loss ‘arising out of or in connection with’ or ‘arising out of or concerning’ defective building work.’ Both s 6.20 and s 109ZK applied to all claims for economic loss caused by defective building work (not the narrow approach adopted at trial), and that the purpose of those sections was to provide a long-stop limitation period, independently of when damage first manifested and regardless of whether any other limitation period had expired. Whilst the legislative history gave rise to an argument, there was a gap when neither provision applied, the court found that such an outcome was likely unintended and there was no gap.

Where each of the judges departed views was in respect of confining the scope of the operation of the provisions. Clause 34 of the 1998 regulations amended the operation of s 109ZK to confine it to development consents granted after 1998, but was repealed in 2012. Each judge formed a different view as to what effect this had on s 6.20. Emmett AJA found the repeal of clause 34 did not change how the section was confined, and the substitution of s 6.20 for s 109ZK was not intended to change the purpose or effect of s 109ZK and that both provisions were so confined. Leeming AJA found that from 2012, when clause 34 of the 1998 regulations was repealed, both s 109ZK and s 6.20 applied to all defective building work regardless of when the development consent was granted. White AJA found that s 109ZK was confined in scope, but s 6.20 was not. The appeal was ultimately allowed (by majority of Leeming JA and White JA – Emmett AJA dissenting) and the plaintiff’s claim was statute-barred.

Implications for you

The NSW Court of Appeal has provided clarity for those in the building industry as to the scope of the long-stop limitation period. Regardless of the date of development consent, the long-stop limitation will apply where an action is brought against someone who performed defective building work and claims damages more than 10 years from when the works were completed.

Bandelle Pty Ltd v Sydney Capitol Hotels Pty Ltd [2020] NSWCA 303

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