Australia: Residential Focus - Breach of statutory warranties - out of time?

Last Updated: 30 September 2019
Article by Christine Jones and Divya Chaddha
Most Read Contributor in Australia, September 2019

Builder claims an owners corporation commenced breach of statutory warranties proceedings out of time – when does completion occur?

In the recent decision of Dyldam Developments Pty Ltd v The Owners – Strata Plan No 85305, the Appeal Panel considered whether an owners corporation had commenced proceedings outside the limitation period specified in section 18E of the Home Building Act 1989 (HB Act). In the case, the owners corporation would be barred from enforcing a statutory warranty under the HB Act.

The facts

Dyldam Developments Pty Ltd (Dyldam) carried out the construction of a three storey residential building (Development) between 2010 and 2011. On 5 and 9 September 2011, two interim occupation certification (Interim OCs) were issued by a certifier engaged by Dyldam with respect to the Development. The Interim OCs permitted the occupation of the 'whole' of the building, however identified that they excluded certification of various conditions required under the development consent, for instance for the on-site stormwater detention system to be registered on title. The certifier issued a final occupation certificate (Final OC) on 12 October 2011, which did not identify any excluded conditions.

The owners corporation commenced proceedings against Dyldam for breach of the statutory warranties under the HB Act on 4 October 2018.

The relevant limitation period

The relevant limitation period is contained in s 18E of the HB Act, which required, as it was before February 2012, that proceedings for breach of statutory warranty be commenced within seven years after, relevantly: "the completion of the work to which it relates". The meaning of "completion of the work" is found in s 3C(2) of the HB Act, which in such circumstances provides that completion occurs on "the date of issue of an occupation certificate that authorises the occupation and use of the whole of the building."

In that regard, Dyldam alleged that the owners commenced proceedings out of time on 4 October 2018 as the Interims OCs were issued in September 2011, thereby beyond seven years ago, and had authorised occupation of the whole of the Development.

The decision of the Tribunal

The Tribunal disagreed with Dyldam's allegations.

In particular, the Tribunal construed section 3C(2) as requiring an occupation certificate that is validly issued under the Environmental Planning and Assessment Act 1979 (EP&A Act). In that regard, the Tribunal held that the Interims OCs had not been validly issued by the certifier pursuant to section 109H(2) of the EP&A Act as they both identified mandatory conditions of the development consent that had not yet been satisfied.

On that basis, the Tribunal held that the Development the subject of the proceedings was completed on 12 October 2011, being the date of the Final OC, and the proceedings commenced by the owners corporation were in time.

The Appeal

Dyldam sought to appeal the decision of the Tribunal. Dyldam alleged that the Tribunal had made an error in finding that the reference to 'occupation certificate' in section 3C(2) of the HB Act does not apply to the Interim OCs on the basis they were issued in breach of section 109H(2) of the EP&A Act and therefore not validly issued. Dyldam also submitted that section 3C(2) of the HB Act should be understood as referring to any occupation certificate that, on its face, authorises occupation of the whole of the building.

The Appeal Panel notwithstanding maintained the decision of the Tribunal and held that neither of the Interim OCs had been validly issued, and as a consequence, the reference to "occupation certificate" in section 3C(2) of the HB Act did not apply to the Interim OCs.

New amendments to the EP&A Act

The Interim OCs in this case were issued under the legislation as in effect in 2011.

Significant amendments to the EP&A Act are due to take effect from September 2019 with respect to the issuing of an occupation certificate. In the amended provisions, the restriction remains on the issuing of an occupation certificate unless all preconditions to the issue of the certificate that are specified in a development consent have been complied with according to s 6.10(1). However, there is no equivalent of s 109M(1) and s 6.4(c) now provides that when issued, an occupation certificate is taken to be part of the development consent to which it relates. Further, there is no longer a distinction between an "interim" and a "final" occupation certificate.

In that regard, there is more certainty under the new regime that 'completion of work' for the purposes of s 3C(2) of the HB Act would accrue from date of the Final OC. As such, in certain circumstances, the new regime could have the effect of extending the warranty periods owed by builders and developers under the HB Act.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.

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