Australia: Limitation of time to commence proceedings for building defects

Commercial Directions
Last Updated: 25 July 2011
Article by Belinda Crosbie

The NSW Court of Appeal handed down an important judgment last week in relation to the time to commence proceedings for damages arising from building defects. The judgment clarifies previous case law on the point and serves as a reminder to investigate the extent of building defects and identify all of the parties potentially responsible for the defects as early as possible after defects are noticed.

Limitation Act 1969 (NSW)

The time for commencing proceedings in any matter is limited under various pieces of legislation. The limitation period for taking action on any particular claim ranges from as little as 21 days and up to 12 years, depending on the nature of the claim. Pursuant to the Limitation Act, proceedings for breach of contract or negligence must be commenced within six years 'running from the date on which the cause of action first accrues'.1

The right to commence proceedings for debt or damages after the expiry of the limitation period is extinguished.2

The question in relation to the discovery of building defects is when does the 'cause of action' first accrue. For an action in negligence, a cause of action accrues on the first occurrence of damage or loss as a result of a breach of duty of care. However the answer can be particularly complicated when superficial defects appear months or years before the full extent of a latent building defect becomes apparent.

Previous case law has expressed the first accrual of such loss in different ways:

  • When defects become manifest or are otherwise discovered3
  • As soon as more than negligible damage is sustained4
  • When the link between the physical manifestation and the underlying latent defect first becomes known or ought to be known5
  • When the latent defect, and not merely the physical damage, is known or manifest.6

Depending upon the way in which building defects become apparent in any case, application of the tests outlined above can result in very different points in time from which a cause of action starts to run. In its most recent judgment, the Court of Appeal has sought to clarify the relevant test.

Cyril Smith & Associates Pty Limited v The Owners-Strata Plan 64970 [2011] NSWCA 181 (6 July 2011)

The case concerned an eight storey residential building at The Entrance on the NSW Central Coast. Construction of the building was completed and a strata plan registered in early 2001. By the end of 2001 water penetration had regularly caused damage to a number of units and the steel structure supporting the roof was rusting.

In 2005 the Owners Corporation commenced proceedings for damages against the builder. On 8 February 2008 the Owners Corporation was granted leave to join the architects, Cyril Smith & Associates Pty Limited ('CSA'). The primary issue for determination by the Court of Appeal was whether the six year limitation period had expired before proceedings were commenced against CSA. The relevant date for accrual of the cause of action was therefore 8 February 2002. 

If the building defects were sufficiently apparent before that date, the owners' right to proceed against CSA was extinguished. It was not in dispute that both water penetration and rusting of the steel roof structure were patent and known to the owners prior to 8 February 2002. However at first instance, Chief Justice Bergin of the Supreme Court adopted a referee's report which drew a distinction between the visible signs of the physical defects and the cause of the defects. In that regard Chief Justice Bergin found:

'In this case the physical defect, the cracking in the walls and ingress of water was observable, but the latent defects, the faulty design of the windows ... were not identified until after 8 February 2002.'7

On appeal, the Court of Appeal held that at most, the previous case law was authority for the proposition that it is the physical defect and not that the cause of the defect, which must be identifiable for the limitation period to start running.

In this case, the Court of Appeal found that the relevant defect was not the ingress of water or the design, installation or inspection of the windows, but the windows themselves. Once the owners appreciated that the windows themselves were defective, in that they were not adequately watertight, the defect was known and the time for commencing proceedings had begun to run.

The Court of Appeal confirmed that it was not necessary for the owners to identify the cause of the defect, being the design by CSA. In fact the Court of Appeal accepted that knowing that the windows were defective did not mean that the owners knew who was responsible. However the time within which the owners needed to ascertain who was responsible and if necessary, commence proceedings, had started to run. Because the owners did not commence proceedings against CSA within six years from that time, the claim against CSA was statute barred.

The result

The Court of Appeal have determined that knowledge of the existence of a physical defect is sufficient to start the limitation period running.

This issue appears to have been quite straight forward in the facts of the case before the Court Appeal, as it was accepted by the parties that the relevant defects were patent after a relatively short period of time.The Court expressly distinguished the facts of the case from matters involving latent defects which are not easily discoverable.

Unfortunately the decision does not clarify the extent to which a latent defect is required to be known for the limitation period to commence.

Where the nature of a building defect and the time of its discovery is in dispute, the start of the limitation period for commencing proceedings is still less than certain. What is certain is that it is not necessary to know the full extent or cause of a defect, or the parties responsible for the defect, for the time for commencing proceedings to start running. Given that investigations to discover the extent, causes and parties responsible for building defects can sometimes develop over years, it will be imperative for potential plaintiffs to start those investigations as soon as physical signs of damage are apparent.


1 Section 14(1) Limitation Act 1969 (NSW)

2 Section 63(1) Limitation Act 1969 (NSW)

3 Scarletta v Lettice [2000] NSWCA 289

4 Sherson & Associates Pty Limited v Bailey &

Ors [2000] NSWCA 275

5 Pullen v Gutteridge Haskins & Davey Pty

Limited [1993] 1 VR 27

6 Eko Investments Pty Limited v Austruc

Constructions Limited & Ors; The Owners Strata

Plan No 64970 v Austruc Constructions Limited &

Ors [2009] NSWSC 208

7 At [73]

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.