Explaining the Long Stop Limitation Period in Building Claims
Section 6.20 of the Environmental Planning and Assessment Act 1979 (NSW)(the Act) contains a provision otherwise known as the long-stop limitation period. It provides:
6.20 Limitation on time when action for defective building or subdivision work may be brought (cf previous s 109ZK)
(1) A civil action for loss or damage arising out of or in connection with defective building work or defective subdivision work cannot be brought more than 10 years after the date of completion of the work.
(2) Building work is taken to be completed on:
(a) the date on which an occupation certificate is issued that authorises the occupation of the building or part of the building for which the work was carried out (or if an occupation certificate is not required, the date on which a compliance certificate is issued for the completed building work), or
(b) if no such certificate has been issued–the date on which a required inspection of the completed building work was carried out by a certifier, or
(c) if no such certificate has been issued and no such inspection carried out–the date on which the building or part of the building for which the work was carried out is first occupied or used.
(3) Subdivision work is taken to be completed on:
(a) if the work was completed before the issue of a subdivision certificate in respect of the subdivision for which the work was carried out–the date on which that certificate is issued, or
(b) if the work was completed after the issue of that certificate–the date on which a compliance certificate is issued that certifies the work has been completed.
While initially thought to be absolute, the operation of this provision has posed a number of questions. What exactly is meant by ‘arising out of or in connection with’? Can a claim still be brought if the damage suffered is caused by defective building work, but that building work was completed over 10 years ago? Thankfully, a recent case has given guidance on its operation.
One such matter was Bandelle Pty Ltd v Sydney Capitol Hotels Pty Ltd  NSWCA 303 (SCH No 2), which was heard on appeal from the Supreme Court of New South Wales.
On 2 January 2017, a fire broke out on the ground floor of the Capitol Square Building. Sydney Capitol Hotels Pty Ltd (SCH) had occupied level 5 of that building as a tenant since 1997. The fire caused the building’s sprinkler system to be activated which, in turn and unsurprisingly, caused SCH to suffer material loss and consequential damage.
The fire was found to have started as a result of defective work carried out on an exhaust duct system within the building by Bandelle Pty Ltd (Bandelle). The construction of the building was completed in 1997. As a result of its damage and loss, SCH brought a claim against Bandelle for negligence referable to the work carried on the exhaust duct system seeking damages.
SCH No 1
Bandelle, at first instance in Sydney Capitol Hotels Pty Ltd v Bandelle Pty Ltd  NSWSC 1825 (SCH No 1), contended that any such claim was statute-barred under the section 6.20 of the Act. Conversely, SCH submitted that section 6.20 of the Act should only be interpreted to absolve Bandelle from the party with whom it was contracted to do the relevant work (which was not SCH).
As to what constitutes ‘building work’ and a ‘claim’ for the purposes of the Act, the definitions therein are by no means exhaustive. The Court noted section 6.19 relevantly provides:
building work includes the design or inspection of building work and the issue of a complying development certificate or a certificate under this Part in respect of building work.
civil action includes a counter-claim.
Considering the plain, grammatical meaning of section 6.20 of the Act, the Court observed, at  as follows:
the damage suffered by the plaintiff arises out of or is in connection with the defective building work. That work was done pursuant to a contract and caused the fire, which in turn caused the damage suffered by the plaintiff.
However, and the Court went on to consider previous Court decisions in Australian Rail Track Corporation Ltd v Leighton Contractors Pty Ltd  VSC 189 and Dinov v Alliance Australia Insurance Limited (2017) 96 NSWLR 98. In considering those decision the Court concluded:
the plaintiff was merely an occupier of part of the building where the fire occurred, as a consequence of which it suffered damage. That loss and damage was caused by the defective building work in only an accidental, incidental or indirect sense in the meaning contemplated by Bongiorno J and the Court of Appeal. Hence, the section does not apply.
Bandelle subsequently appealed the decision in SCH No 1.
SCH No 2
In SCH No 2, the Court of Appeal allowed Bandelle’s appeal of SCH No 1. Central to the Court of Appeal’s reasoning was that section 6.20 of the Act, and the former section 109ZK, applied to all economic loss caused by defective building work. That is to say that section 6.20 will apply to all such claims, even where there is no contractual relationship between a plaintiff and the builder.
Their Honours further noted that the purpose of section 6.20 and former section 109ZK is to provide a long-stop limitation period, independently of when damage first manifested. Therefore, is does not matter when, and under what circumstances, damage is suffered; if that damage is suffered more than 10 years after the conclusion of construction work, the limitation period under section 6.20 is enlivened.
In concluding, the Court of Appeal stated as follows:
All members of the Court are agreed that the drafting which has led to this issue is unfortunately complicated. But a limitation period “represents the legislature’s judgment that the welfare of society is best served by causes of action being litigated within the limitation period, notwithstanding that the enactment of that period may often result in a good cause of action being defeated”: Brisbane South Regional Health Authority v Taylor  HCA 25; (1996) 186 CLR 541 at 553;  HCA 25. It is neither a technicality nor necessarily unmeritorious, as was observed in Abdulla v Birmingham City Council  UKSC 47;  1 All ER 649 at , but “reflects a fundamental and all but universal legal policy that the litigation of stale claims is potentially a significant injustice”. The same point was made in this Court in Moubarak by his tutor Coorey v Holt (2019) 100 NSWLR 218;  NSWCA 102 at . A corollary is that the operation of limitation provisions should be as straightforward as is reasonably possible. It is therefore regrettable that the position is as complicated as the judgments in this Court reveal. I agree in particular with the sentiments in the last two paragraphs of White JA’s reasons. (our emphasis)
The importance of the decision in SCH No 2 cannot be understated – it restored the absolute nature of the long-stop limitation period provided for under section 6.20 of the Act in circumstances where that nature had previously been questionable. Consequently, SCH No 2 provides certainty to builders and developers that any claim related to defective building work, no matter the circumstances surrounding a particular claim, will be defeated by the operation of section 6.20 if the claim arises 10 years after the date of completion of the work.