Brirek Industries Pty Ltd v McKenzie Group Consulting (Vic) Pty Ltd

SUPREME COURT OF VICTORIA
COURT OF APPEAL

S APCI 2011 0031

BRIREK INDUSTRIES PTY LTD (ACN 005 807 090)	Appellant
	v
McKENZIE GROUP CONSULTING (VIC) PTY LTD (ACN 093 211 977)	Respondent

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JUDGES	REDLICH, WHELAN and SANTAMARIA JJA
WHERE HELD	MELBOURNE
DATE OF HEARING	28 October 2013
DATE OF JUDGMENT	6 August 2014
MEDIUM NEUTRAL CITATION	[2014] VSCA 165
JUDGMENT APPEALED FROM	[2011] VCC 294 (Judge Shelton)

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CONTRACT – Building contract – Owner – Building surveyor – Building surveyor appointed by builder – Whether Building Act 1993 (Vic) creates contract between owner and building surveyor – No consensus ad idem – Building Act 1993 (Vic) ss 17, 24, 70, 78 – Building Regulations 1994 (Vic) r 2.6 – PremierBuilding and Consulting Pty Ltd (rec apptd) v Spotless Group Ltd [2007] VSC 377 – Oceanic Sun Line Special Shipping Company Inc v Fay (1988) 165 CLR 197.

CONTRACT – Building contract – Contract between owner and building surveyor – Issue of building permits by building surveyor under Building Act 1993 (Vic) – Whether validity of building permit depends upon existence of planning permit – Implied terms in building contract – Whether building surveyor under an obligation to inform owner that planning permit has expired – BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266.

LIMITATION OF ACTIONS – Building Act 1993 (Vic) – Interpretation of legislation - Building actions – Limitation of actions – Whether ‘long-stop’ or ‘absolute cap’ – Building Act 1993 (Vic) ss 129, 130, 134 – Limitation of Actions Act 1958 (Vic) ss 5, 33 – Accident Compensation Act 1985 (Vic) s 135AC – Wrongs and Limitation of Actions Act (Insurance Reform) Act 2003 (Vic) – Moorabool Shire Council v Taitapanui (2006) 14 VR 55.

NEGLIGENCE – Duty of care – Economic loss – Vulnerability – Building surveyor and owner – Delay in completion of commercial project – Loss in the form of financial loss – Liability of building surveyor to owner – Whether assumption of responsibility by building surveyor – Perre v Apand Pty Ltd (1999) 198 CLR 180 – Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515.

PRACTICE AND PROCEDURE – Pleadings – Amendment – Amendment after close of evidence – Whether amendment relates back to date of writ – Abolition – Whether court has a discretion to order that amendment operate from date of amendment – Rule in Weldon v Neal (1887) 19 QBD 394 – Limitation of Actions Act 1958 s 34 – Supreme Court (General Civil Procedure) Rules 2005 r 36.01(6) – Agtrack (NT) Pty Ltd v Hatfield (2003) 7 VR 63.

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Appearances:	Counsel	Solicitors
For the Appellant	Mr M H Whitten with Mr A Archer	Just Law
For the Respondent	Mr D S Levin QC with Mr G F Hellyer	Tresscox Lawyers

Introduction and Overview

By writ filed on 5 December 2008 Brirek Industries Pty Ltd (‘Brirek’) commenced a proceeding in the County Court against McKenzie Group Consulting (Vic) Pty Ltd (‘McKenzie’). Brirek was the owner of a property situated at lot 3, 13-21 Meaden Street, Southbank (the ‘property’). Brirek constructed a two-storey office block with ground level parking underneath on the property and then sold it. McKenzie carries on business as a private building surveyor as defined by s 3 of the Building Act 1993 (Vic) (‘the Building Act’).

In its statement of claim Brirek alleged that in late 2002 it had retained McKenzie to provide building surveying services to it in respect of the construction of the then proposed building. The agreement was described in the statement of claim as the ‘building surveyor agreement’. We will refer to it as the ‘2002 contract’. Brirek said that McKenzie had agreed, among other things, to issue building permits pursuant to the Building Act, the Building Regulations1994 (Vic) (‘the Building Regulations’) and local authority requirements. Brirek alleged there were implied terms requiring McKenzie to exercise all due care and skill, and to comply with all relevant statutory obligations. In purported compliance with these obligations, McKenzie issued seven building permits between November 2002 and May 2004, the final two being issued after the planning permit had expired in October 2003.

Brirek alleged that the permits had been issued in breach of McKenzie’s contractual obligation under the 2002 contract. During the course of the trial, Brirek alleged that McKenzie owed it a duty to advise it if any building permit had been issued otherwise than in compliance with the Act. It further alleged that, in carrying out the services it had agreed to provide, McKenzie had breached a duty of care in tort to exercise due care, skill and diligence.

Very late in the trial, on 2 September 2010, Brirek was given leave to amend its statement of claim to allege, in the alternative, that it had retained McKenzie in April 2004 to provide building surveying services on the same terms as the 2002 contract (the ‘2004 contract’).

McKenzie denied that it had entered into any agreement with Brirek in 2002. McKenzie said that it had entered into an agreement in 2002 to provide building surveying services with Bailey Heights Pty Ltd (‘Bailey Heights’) and not with Brirek. It said further that, even if it had entered into a contract with Brirek in 2002, Brirek’s claims were barred by the Limitation of Actions Act 1958 (Vic) (‘the Limitation of Actions Act’). It admitted an agreement with Brirek in 2004 but said that any claim under that agreement was also barred by limitation. McKenzie denied any duty of care in tort to Brirek.

The trial judge held that there was no contract between McKenzie and Brirek in 2002.

In respect of claims arising under the 2004 contract, the judge and counsel for both parties assumed, for the purposes of the applicable limitation period, that the amendment to introduce that claim was to be analysed as if it had been issued on the date of the amendment. No submission was made that the amendment would ‘relate back’ to the date of the original pleading. The trial judge concluded that the limitation period was six years as provided in s 5(1)(a) the Limitation of Actions Act and rejected Brirek’s contention that s 134 of the Building Act altered the limitation period. On the assumption that the amendment took effect on the date of amendment, the trial judge held that any claim against McKenzie for breach of the 2004 contract accruing before 2 September 2004, being the date six years prior to the date of the amendment of the pleading, was statute-barred. The last permit issued by McKenzie was on 27 May 2004, so all the contractual claims founded on the issuing of the permits were held to be statute-barred.

At the hearing of the appeal Brirek foreshadowed that it wished to argue the trial judge should have applied the doctrine of ‘relation back’ to the amendment to the pleading and applied to amend its notice of appeal to add a new ground (ground 6A) in order to do so. McKenzie submits that this new issue ought not to be raised for the first time on appeal.

Because the trial judge found that the alleged breaches of the 2004 contract were barred by limitation, he made no findings as to whether there were implied terms in the April 2004 contract that McKenzie carry out its services as a building surveyor with due skill and care, and comply with its statutory obligations in the period prior to the expiration of the limitation period. If such terms were to be implied, the trial judge also made no findings as to whether McKenzie was in breach of the implied terms, or as to any loss or damage as a result. The aspect of Brirek’s claims which was particularly relevant to the implied terms was an allegation McKenzie had issued building permits after the planning permit had expired and had then failed to inform Brirek of that fact. The trial judge did find that there was no implied term of an ongoing obligation by McKenzie to advise Brirek between 2 September 2004 and September 2005 (when Brirek terminated the services of McKenzie) that there was no longer a valid planning permit on foot.

Finally, the judge held that McKenzie did not owe Brirek a duty of care in tort with respect to the particular loss and damage for which Brirek claimed damages.

Brirek appeals from the trial judge’s rejection of its claims.

The issues which arise as a result of the submissions made on the appeal are as follows:

(a) whether s 17 of the Building Act gave rise to a statutory contract in 2002 between Brirek as owner and McKenzie as building surveyor (notice of appeal — ground 1);

(b) whether any of the claims in contract were barred by the applicable statutory limitation period and, in particular, whether the period of limitation applicable for contractual or tortious claims is that provided for in the Limitation of Actions Act (six years) or that provided for at s 134 of the Building Act (10 years after the date of issue of the occupancy permit) (notice of appeal — grounds 2 and 3);

(c) if s 134 of the Building Act is not applicable —

(i) whether any amendment to the statement of claim to introduce the claim in respect of the 2004 contract would relate back to the date of the original pleading; and

(ii) if the amendment does ‘relate back’ — whether the trial judge should have refused leave to allow the amendment or granted leave only on the basis that the amendment did not ‘relate back’;

(notice of appeal — proposed added ground 6A)

(d) whether there were implied terms in the April 2004 contract that McKenzie carry out its services as a building surveyor with due skill and care, and comply with its statutory obligations pursuant to the Building Act and the Building Regulations, which included a duty:

(i) not to issue building permits when it ought to have known that a planning permit was not in force;

(ii) to inform Brirek that there was no valid planning permit in force at the time of issuing the permits;

(iii) to inform Brirek after the issuing of the permits that there was no planning permit in force and, if so, whether McKenzie was in breach of that duty; and

(notice of appeal — grounds 4, 5, 6 and 7)

(e) whether, under the law of negligence, McKenzie owed Brirek, in respect of the issue of each of the seven building permits, a duty to exercise reasonable care to avoid the kind of damage that Brirek says that it suffered (notice of appeal — grounds 7–11).

For the reasons that follow, we have concluded that:

(a) the trial judge was right to conclude that there was no 2002 contract;

(b) the existence of the 2004 contract not being in issue, Brirek should have leave to amend its notice of appeal to permit it to contend that its amendment to its statement of claim, adding ‘the 2004 contract’ related back to the date of the writ and that this ground should be upheld;

(c) the trial judge should have held that the applicable limitation period is that provided for by s 134 of the Building Act, and accordingly that the time limit for bringing the action in contract and in tort is 10 years from the issue of the occupancy permit;

(d) the trial judge was wrong to conclude that claims under the 2004 contract were statute-barred;

(e) the trial judge erred in his approach to the question whether there was an implied term that McKenzie was obliged to inform Brirek after 2 September 2004 that the planning permit had expired; and

(f) the trial judge was right to conclude that McKenzie did not owe Brirek a duty of care in negligence.

The relevant facts

The relevant facts were set out by the trial judge in some detail.[1] For the purposes of the appeal they may be summarised as follows.
[1]Brirek Industries Pty Ltd v McKenzie Group Consulting (Vic) Pty Ltd [2011] VCC 294, [7]–[63] (‘Reasons’).

On 12 November 2001, Brirek entered into a contract of sale for the purchase of the property. The property was lot 3 on a proposed plan of subdivision of four lots. The vendors were J L and J Pitt Pty Ltd and Bandow Pty Ltd (‘Bandow’). John Counsel was a director of Bandow. The contract of sale included a special condition pursuant to which the sale was subject to and conditional upon the vendor providing before settlement an approved plan of subdivision and a town planning permit to develop each of the four lots in the subdivision (that is, including lot 3) as illustrated on specified plans. The plans, which were annexed to the contract, had been prepared by an organisation associated with Mr Counsel’s brother and were entitled ‘Proposed Development for Mr J Counsel at Meaden Street’. The parties to the contract subsequently agreed to a variation pursuant to which the vendors undertook to provide a building permit as well as the planning permit.

The planning permit for the four unit development was issued by the City of Port Phillip on 21 March 2002. One of the provisions of the permit was that it would expire if the development was not completed within one year of the date of commencement of the works, subject to a power to extend if a request was made in writing before the permit expired or within three months afterwards. The period of one year was unusually short. The usual period was two years.

The vendors provided a copy of the planning permit to Brirek in May 2002.

Brirek itself is a builder as well as a developer. Its directors are Giuseppe Paolo Finocchiaro and his wife, Nola Finocchiaro. Mr Finocchiaro has worked in the building industry since 1965 and has been registered himself as a commercial building practitioner since 1990. He has been involved in many commercial building projects.

In May 2002 Mr Finocchiaro had a discussion with Mr Counsel. Mr Counsel indicated that he had a contract to build the other three units in the development, units 1, 2 and 4, and that he could build unit 3 for Brirek at the same time. According to Mr Finocchiaro, Mr Counsel told him that he was a registered commercial builder. After obtaining an estimate of the cost of construction to lock-up stage Brirek engaged Mr Counsel’s company, Bailey Heights, as builder on the unit 3 part of the development.

The plan of subdivision was approved in September 2002 and the contract of sale settled on 25 September 2002. The vendors had not by then obtained a building permit. Mr Finocchiaro said that Mr Counsel had told him that he needed funds desperately and that the building permit was only a few days away and accordingly he (Mr Finocchiaro) agreed to settle notwithstanding the absence of the building permit.

Bailey Heights, Mr Counsel’s company, commenced construction work in October 2002. Bailey Heights was constructing all four units on the development. The contractual arrangements between Bailey Heights and Brirek were, as the judge described it, ‘somewhat casual’.[2] In substance, the arrangements were what is referred to as ‘cost plus’. Brirek was seeking funds from a financier, Perpetual Investments. Perpetual Investments required a copy of a building permit before it would approve the loan.
[2]Reasons [23].

Bailey Heights issued its first tax invoice for construction work to Brirek on 31 October 2002. By letter of 6 November 2002 Bailey Heights advised Brirek that the building permit should be available from McKenzie by 8 November 2002. Bailey Heights had engaged McKenzie as building surveyor.

On 19 November 2002, McKenzie issued a building permit described as ‘Stage No. 1’, which permitted works specified as: ‘Carry out new structural works. Ground slabs only’. The permit named as owner ‘Bundow Pty Ltd’ (a reference to Bandow) was referable to all four lots (1, 2, 3 and 4), named Bailey Heights as the builder, and named Mr Counsel as the building practitioner (specifying a registration number in relation to him). Melissa Chandler, an employee of McKenzie, was named as the building surveyor. The next day, Brirek made a formal application to Perpetual Investments for a construction loan.

Bailey Heights continued work on the project and issued tax invoices to Brirek in November and December 2002, and in January and February 2003.

On 25 March 2003, McKenzie issued a building permit described as ‘Stage No. 2’, which permitted work specified as: ‘Construction of 4 new buildings – Structural works only’. Like the earlier permit, the owner was named as Bandow, the permit related to all four lots, the builder was named as Bailey Heights, the building practitioner was named as Mr Counsel, and the building surveyor was Ms Chandler.

On 31 March 2003, Brirek received an invoice from Bailey Heights. Attached to that invoice was a facsimile from McKenzie to Mr Counsel which listed the items that needed to be attended to before a full building permit could be issued. In response to that invoice and attachment, Mr Finocchiaro on behalf of Brirek wrote to Mr Counsel at Bailey Heights advising, amongst other things, that he did not accept any obligation to pay for works undertaken in the absence of the necessary building permit, requesting that further works associated with internal structural steel columns and the roof cease, and asserting that it was not his responsibility to provide the information requested by ‘the Building Consultant’. Mr Finocchiaro reminded Mr Counsel of the obligation to obtain a building permit prior to commencing works and suggested that it was ‘imperative’ that he obtain a permit immediately so that Mr Finocchiaro could provide it to ‘my lender’. Mr Finocchiaro concluded by requiring that all internal work cease immediately as well as all external work from the first floor up.

Mr Finocchiaro then had direct dealings with officers at McKenzie. He was told that a building permit could be issued to him within a few days if he required it, in response to which he indicated that Brirek would only seek a transfer of the building permit when there was a full permit with a full set of stamped plans.

Bailey Heights issued two invoices to Brirek in April and another one in May 2003.

On 3 June 2003, McKenzie issued a building permit designated as ‘Stage No. 3’. The owner was still named as Bandow. The two earlier permits had been incorrect in naming Bandow as owner of all four lots, but it was the owner of three of them. This permit was, however, confined to unit 3, Brirek’s property. Brirek itself was named as the builder and the building practitioner was named as Mr Finocchiaro. The works permitted were described as: ‘Variation - new builder for Unit 3’. The cost of works in this certificate was $0. The building surveyor was again Ms Chandler. Clearly, the new certificate’s sole purpose was to alter the named builder and building practitioner.

Mr Finocchiaro would not accept this Stage 3 permit. On 5 June 2003 he wrote to McKenzie. Referring to the portions of the permit describing Brirek as builder and Bandow as owner, his letter stated that this was totally incorrect and that Brirek had not authorised this permit change. The letter advised that Brirek did intend to make application as owner to complete the works from the present stage and asserted that Brirek was not responsible for works carried out by the previous owner.

In June 2003, Mr Finocchiaro spoke to a person at McKenzie named Stephen Moloney and was told that a full building permit was available, subject to one minor outstanding matter.

On 5 August 2003, McKenzie issued a building permit designated as ‘Stage No. 4’. This permit named Bandow as owner, Bailey Heights as builder, Mr Counsel as building practitioner and Ms Chandler as building surveyor. The works permitted were described as: ‘Construction of building as per approved documentation’. The permit related to all four lots. The trial judge observed that this permit ‘appears on its face to be a full permit’.[3]
[3]Reasons [36].

In August 2003, Mr Finocchiaro engaged Bailes & Co, building surveyors and consultants. On 5 August 2003, Mr Graham Bailes of Bailes & Co wrote to McKenzie advising that Mr Finocchiaro intended completing all of the building works and formally advising ‘of the change of Builder and owner’. Copies of all relevant documentation were requested. The letter concluded:

Could you also please advise what is require [sic] from our client in the way of issuing a permit to him for the full completion of the building from its present status.

After further dealings between Bailes & Co and McKenzie, Bailes & Co requested from McKenzie ‘a copy of the Building Permit Stage 5’.

A Stage 5 building permit for lots 1, 2 and 4 was issued on 7 October 2003 and on the same day McKenzie wrote to Bailes & Co enclosing an application for a building permit and indicating that upon receipt of a completed application a Stage 5 building permit would be issued in relation to lot 3.

On 14 October 2003, Mr Finocchiaro wrote to McKenzie advising that prior to completing the application for a building permit he needed a copy of ‘the full building permit issued to the original applicant for Lots 1, 2, 3 & 4, and approved plans including all modifications.’.

In October 2003, a year elapsed from the commencement of the works and as a consequence the planning permit expired. No-one appears to have noticed this at the time.

In November 2003, Bailey Heights sued Brirek, Mr Finocchiaro and his wife for money allegedly due for the building work. The proceeding was settled in April 2004 on terms which, in substance, required Brirek to pay Bailey Heights the amount claimed.

In April 2004, McKenzie wrote to Brirek’s then solicitors reminding them that McKenzie was awaiting an application in relation to lot 3. Brirek completed the application on 7 April 2004, although the application was incorrectly dated 7 May 2004.

On 29 April 2004, McKenzie issued a building permit designated as ‘Stage No. 6’. Brirek was named as both the owner and the builder, Mr Finocchiaro was named as the building practitioner and Ms Chandler the building surveyor. The works permitted were: ‘Variation to building permit for new builder to Unit 3 including all works and structural engineers instructions dated 14 March 2003 and 26 May 2003. Excludes fire services only.’

On 27 May 2004, McKenzie issued a building permit designated as ‘Stage No. 7’ which also named Brirek as owner and builder, and Mr Finocchiaro as the building practitioner. Ms Chandler was named building surveyor. The works permitted were described in the same terms as in the previous permit except that fire services were this time included. The permit specified that the work was to be completed by 19 November 2005.

In relation to the last two permits the judge said:

In issuing the Stage 6 and Stage 7 Building Permits, the defendant had overlooked the fact that the Planning Permit for the project had expired in October 2003, one year after the date of commencement of the works. Pursuant to s.24(1)(c) of the Act, the defendant was only able to issue a building permit if satisfied that “any relevant planning permit … has been obtained” and so breached this provision.[4]

[4]Reasons [50].

Little then happened until July 2004 when Brirek wrote to McKenzie thanking it for the full building permit and seeking an extension of six months for completion of the works. The judge observed:

No reason was stated for the request which would have allowed an inordinately long period for the completion of the project given that Finocchiaro said that the project was simple and could have been wholly completed within three months.[5]

[5]Reasons [52].

McKenzie extended the date for completion to 19 May 2006.

On 21 October 2004 Brirek applied for a construction loan from National Australia Bank. Enquiries undertaken in relation to that loan revealed that Mr Counsel had never been registered as a commercial builder. The permits in relation to Stages 1, 2, 4 and 5 had named Mr Counsel as the building practitioner. The judge observed:

Therefore, in issuing these stage Building Permits, the defendant was in breach of s.24A(1)(a) of the Act. This error caused some delay. However, as White Cleland advised the plaintiff by letter of 27 April 2005, the plaintiff was adequately covered by a Certification of Compliance issued by the defendant, together with confirmatory independent certification by Bailes & Co.[6]

[6]Reasons [53].

In May 2005, Brirek requested a further extension for completion of the works to November 2006.

In July 2005, Brirek wrote to the City of Port Phillip requesting a 12 month extension to the planning permit. Even if the planning permit had provided for the usual two-year period after commencement of works, Brirek would have been out of time for making this request. Brirek explained the reason for the delay to the City of Port Phillip as being the result of the dispute between it and Bailey Heights.

In August 2005, National Australia Bank approved a loan for the project. In the same month Brirek was advised by the City of Port Phillip that the planning permit had expired and could not be extended. It recommended to Brirek that it seek an amendment to the permit.

In September 2005, after making complaints about Ms Chandler’s work, Brirek arranged for Building Services Victoria (the building surveyor arm of the City of Port Phillip) to take over the role of building surveyor for the project.

Brirek applied for and obtained a new planning permit in November 2006 and in February 2007 entered into a contract to complete construction with Pace Construction Group Pty Ltd (‘Pace’). Building Services Victoria issued a building permit in March 2007 and Pace completed the project in October 2007. The property was sold by Brirek in March 2008 for the sum of $1.8 million. That sale settled in July 2008, more than six-and-a-half years after Brirek had purchased the property. Lots 2 and 4, which were developments similar to lot 3, had been sold in July 2004 and June 2005 for $1.55 million and $1.65 million respectively.

The seven building permits McKenzie issued are set out in this table:

1	19 November 2002	Stage 1
2	25 March 2003	Stage 2
3	3 June 2003	Stage 3
4	5 August 2003	Stage 4
5	7 October 2003	Stage 5
6	29 April 2004	Stage 6
7	27 May 2004	Stage 7

We will refer to them by their respective stage numbers.

Brirek’s claims and McKenzie’s defences

In its amended statement of claim, Brirek made the following allegations:

[14]The building surveying services to be provided by the defendant pursuant to the building surveyor agreement (“building surveying services”) included the following:
(a)appraisal of the submitted documentation and architectural and engineering drawings and designs to verify that the development complied with all aspects of the Building Act 1993, the Building Regulations 1994 and the local authority requirements;
(b)the proper issue of building permits pursuant to the Building Act 1993 and the Building Regulations 1994;
(c)monitoring construction of the works on lot 3 so that it complied with the planning permit;
(d)inspections of the mandatory stages of the building works pursuant to s 34 of the Building Act 1993;
(e)the issuing of relevant certificates of compliance upon satisfactory completion of the works on lot 3 pursuant to s 38 of the Building Act 1993.

[15]There were terms of the building surveyor agreement, amongst others, as follows:
(a)the defendant and its agents, representatives and employees would exercise all due care, skill and diligence in providing the building surveying services to the plaintiff;
(b)the defendant and its agents, representatives and employees would comply with its statutory duties and obligations pursuant to the Building Act 1993 and the Building Regulations 1994.

In its particulars, Brirek said that the terms were to be implied by operation of law.

At the trial, Brirek contended that McKenzie had breached its duty in both contract and in tort to deal properly with the building permit applications by, among other things:

(a)issuing building permits when the builder (Mr Counsel) was not a registered commercial builder contrary to s 24(3) of the Building Act;[7]
(b)contrary to its obligations under ss 17 and 78 of the Building Act, issuing building permits 1, 2 and 4 to the builder on the project (Mr Counsel) and dealing exclusively with the builder and not the owner;[8]
(c)contrary to its obligations under ss 24, and 70 and 71 of the Building Act, issuing building permits 6 and 7 as purported amendments without the power to do so under the Building Act;[9]
(d)failing to warn Brirek of the expiry of the planning permit, which occurred in October 2003;
(e)contrary to its obligations under ss 24(1)(c) and 24(1)(d) of the Building Act, issuing building permits 6 and 7 and an extension thereto when there were no planning permits in place;
(f) issuing building permits when McKenzie ought to have required further information to be shown on the plans so they would comply with the Building Act, the Building Regulations and the Building Code of Australia;[10]
(g)issuing the building permit for Stage 3 which described Brirek as builder without its consent to be the builder on the project by a person who was not a registered building surveyor; and
(h)contrary to its obligations under r 2.6 of the Building Regulations, issuing building permits 1, 4, 6 and 7 by authority of a person who was not the designated Relevant Building Surveyor.[11]

[7]As at 1 January 2002, s 24 of the Building Act (Version No 45) provided:

Refusal of building permit

(1)Subject to Division 4, the relevant building surveyor must not issue a building permit unless he or she is satisfied that —

(a)the building work and the building permit will comply with this Act and the building regulations; and

(b)any consent of a reporting authority required under this Act or the regulations or under any other Act or regulations is obtained or deemed to have been obtained in accordance with Schedule 2; and

(c) any relevant planning permit or other prescribed approval has been obtained; and

(d) the building permit will be consistent with that planning permit or other prescribed approval.

(2)Subject to Division 4, the relevant building surveyor must not issue a building permit that imposes on the applicant lesser or greater standards or requirements than those prescribed by this Act or the building regulations, unless permitted to do so by this Act or the building regulations.

(3)The relevant building surveyor may consider an application for a building permit but must not issue the permit unless he or she is satisfied that —

(a)each building practitioner to be engaged in the building work holds a building practitioner’s certificate issued under Part 11 or is an architect registered under the Architects Act 1991; and

(b)in the case of domestic building work, each builder to be engaged in the work is covered by the required insurance.

(4)If a building permit has been issued in respect of building work and subsequently a new building practitioner is engaged for the building work, then within 14 days after that engagement is entered into, the owner of the building or land in respect of which the permit is issued must give the relevant building surveyor written notice of that engagement including details of any building practitioner’s certificate issued to the building practitioner under Part 11.

(4A)As soon as practicable after a new builder has been engaged for domestic building work for which a building permit has been issued, the new builder must notify the relevant building surveyor giving written details of the required insurance by which the builder is covered.

(4B)A builder must comply with sub-section (4A) within 14 days after being engaged for the domestic building work.

Penalty: 50 penalty units.

(5)If an amount of community infrastructure levy is payable under Part 3B of the Planning and Environment Act 1987 in respect of a development for which building work is required, the relevant building surveyor must not issue a building permit in respect of that building work unless he or she is satisfied that—

(a)that amount of levy has been paid to the relevant municipal council under that Part; or

(b)an agreement to pay that amount of levy has been entered into under that Part.

[8]As at 1 January 2002, s 17 of the Building Act (Version No 45) provided:

Applications for building permits

An application for a building permit may be made to a municipal building surveyor or to a private building surveyor appointed under Part 6—

(a)by or on behalf of the owner of the building or the owner of the land, in or on which the building work is to be carried out; or

(b)if the land in or on which the building work is to be carried out is a lot of a kind referred to in section 9AA(1) of the Sale of Land Act 1962, by the purchaser under a contract for the sale of that lot.

Section 78 of the Building Act provided:

When may a private building surveyor be appointed?

(1)Subject to this Part, a person who is entitled to apply for a building permit, occupancy permit or temporary approval under this Act in respect of a building or building work, may appoint a private building surveyor to carry out the functions set out in section 76 in respect of that building or building work.

(2)Except as provided in this Part, a person must not appoint a private building surveyor to complete any functions set out in section 76 in respect of a building or building work if another private building surveyor or a municipal building surveyor has already commenced to carry out functions set out in that section in respect of that building or building work.

Penalty: 100 penalty units, in the case of a natural person.

500 penalty units, in the case of a body corporate.

(3)Subject to this Part, on and from the acceptance of an appointment under this Part in respect of a building or building work, a private building surveyor is responsible for carrying out the functions set out in section 76 in respect of that building or building work.

(4)Despite the terms of an appointment under this section, a private building surveyor, in carrying out any functions set out in section 76, must comply with this Act and the regulations.

[9]As to s 24, see above n 7. As at 1 January 2002, s 70 of the Building Act (Version No 45) provided:

Amendment of permit or approval

(1)A municipal building surveyor may amend a permit or approval issued under this Part—

(a)on an application by or on behalf of the owner of the building or land concerned; or

(b) in any other case, if the amendment is necessary in the public interest.

(2)Sections 42 to 48 apply (with any necessary modifications) in relation to an application to amend an occupancy permit issued under Division 1 as if it were an application for an occupancy permit under that Division.

(3)Sections 54 to 62 apply (with any necessary modifications) in relation to an application to amend an occupancy permit issued under Division 2 as if it were an application for an occupancy permit under that Division.

(4)Sections 66 to 69 apply (with any necessary modifications) in relation to an application to amend an approval given under Division 3 as if it were an application for approval under that Division.

Section 71 of the Building Act provided:

Cancellation of occupancy permit on other grounds

The relevant building surveyor may cancel a permit or approval issued by the relevant building surveyor under this Part if the permit or approval was obtained by fraud or misrepresentation.

[10]The Building Code of Australia was adopted by, and formed part of, the Building Regulations by r 1.7 of those Regulations.

[11]As at 10 April 2002, r 2.6 of the Building Regulations (Version No 56) provided:

Brirek claimed that, by reason of the breaches of contract and of the duty of care, it had suffered loss and damage.

Originally, Brirek’s particulars of loss and damage set out calculated amounts under the following headings:

A Investigative and consultancy work of Bailes & Co in August and September 2003;

B         Rectification costs;
C        Costs of obtaining a valid building permit;
D        Costs associated with design of support for the fascia;
E         Loss of rental;
F         Increase in building costs; and
GAdditional interest charges on borrowings.

During the trial Brirek amended its particulars (with leave) by crossing out all the existing particulars and inserting ‘IN ACCORDANCE WITH B PAYNE REPORT 23/8/10.’

Bryan A Payne is a chartered accountant with JSP Partners Pty Ltd. The report by that firm, signed by Mr Payne, relevantly begins:

[W]e submit this report detailing our findings from assessing the financial loss caused through the delays in completing the construction of the offices situated at 9 Meaden Street South Melbourne.

In the report, Mr Payne estimated the loss suffered by Brirek in so far as the project was not able to be completed and sold in December 2003. The report assumed that the project was to be financed by debt capital. It provided an analysis based upon three scenarios. The first scenario assumed that the project had been completed on the basis of the original estimates and that the office building on lot 3 was sold in December 2003 for $1.25 million, which was an amount independently estimated by a valuer. The second scenario assumed that the project had been completed on the basis of the original estimates and that the office building on lot 3 had been rented out by Brirek as an investment for four–and–a–half years, after which it would be sold for $1.8 million. The third scenario was said to relate to ‘what has actually happened’ which was described as being:

The construction was started by Bailey Heights until it was found that there was no valid building permit and the builder was not registered. Therefore changes to the design were required in order to obtain the building permit and a new builder was found (Pace).

The report set out the average interest rates prevailing at different times between 2003 and July 2008. The three scenarios result in flows of money taking place at different times. In scenario one, a profit would be fully realised in December 2003. In scenario two, rental income would be gathered during the four-and-a-half-years of tenancies, followed by the realisation of the property by sale. In the third scenario, the profit is fully realised in July 2008. To allow a comparison of these figures, Mr Payne also provided two additional calculations of loss incorporating an ‘opportunity rate’ component. One utilised the average Reserve Bank cash rates for the applicable years, and the other second mortgage rates obtained from a finance broking company.

Amendment of pleadings during trial

Late in the trial, on 2 September 2010, the trial judge allowed Brirek to amend its statement of claim. The amendment was the marked-up portions of the following allegation:

In about late 2002 alternatively April 2004 the plaintiff retained the defendant for reward to provide building surveying services pursuant to the Building Act 1993 in respect of the ~~proposed~~ construction of a commercial building on lot 3 (“building surveyor agreement”).

As can be seen, the effect of the amendment was to plead, as an alternative to the 2002 contract, that a contract arose between Brirek and McKenzie in April 2004 which had the same content as that of the 2002 contract. As it could only operate prospectively, this alleged contract related only to the following permits:

6	29 April 2004	Stage 6
7	27 May 2004	Stage 7

Brirek did not amend its pleading in relation to breach of duty of care in tort.

In its defence to the amended statement of claim McKenzie maintained its denial of the 2002 contract but admitted that it had been retained by Brirek in April 2004. It denied any breach of the 2004 contract, and maintained its denial of any breach of a duty of care in tort. Paragraph 13 of its amended defence was in the following form:

Save that:
(a)by agreement in writing dated 23 October 2002 the defendant entered into an agreement with Bailey Heights Pty Ltd to provide certain building surveying services for building works to be constructed on Lots 1, 2, 3 and 4, 13 Meaden Street, South Melbourne;
(b)in or about the month of April 2004 the plaintiff retained the defendant to provide certain building surveying services in respect of the construction of a commercial building on Lot 3, 13 Meaden Street, South Melbourne,

the defendant denies the allegations contained in paragraph 13 and avers that any claim raised by the plaintiff against the defendant in contract is statute-barred by reason of the provisions of s 5 of the Limitations of Actions Act 1958 (Vic).

At the trial Brirek contended that s 134 of the Building Act applied to all its claims, both in contract and in tort, such that none was barred by limitation. Section 134 of the Building Act provides:

Limitation on time when building action may be brought
Despite anything to the contrary in the Limitation of Actions Act 1958 or in any other Act or law, a building action cannot be brought more than 10 years after the date of issue of the occupancy permit in respect of the building work (whether or not the occupancy permit is subsequently cancelled or varied) or, if an occupancy permit is not issued, the date of issue under Part 4 of the certificate of final inspection of the building work.

The trial judge rejected Brirek’s contention on s 134 of the Building Act, holding that s 134 had no application to claims in contract. He assumed that the amendment adding the 2004 contract ‘spoke’ from the date that leave to make it was granted. As that leave was granted on 2 September 2010, he held that any claim in contract that had accrued before 2 September 2004 was statute-barred.

On the appeal, for the first time, Brirek addressed the question: when did the amendment ‘speak’ from? On 9 October 2013, some two weeks before the hearing of the appeal, Brirek gave notice of an application to amend its notice of appeal in order ‘to give more prominence to the issue of “relation back” of the statement of claim amendment’.

In its original form, paragraph 6 of the notice of appeal was in the following form:

The Trial Judge should have concluded, in any event, that contractual breaches arose after 2 September, 2004, and the Appellant was not statute barred from bring [sic] an action against the Respondent for breach of contract in relation to the issue of the Stage Building Permits.

The proposed amendment (proposed added ground 6A) seeks to add the following paragraph to the notice of appeal:

The Trial Judge should have concluded, in any event, that the Appellant was not statute barred from a breach of contract action because the Statement of Claim amendment “relates back” to the date the Writ was issued being 5 December 2008, so the start of a 6 year limitation period is 4 December 2002, which would catch all the impugned conduct of the Respondent.

McKenzie opposed leave being granted to Brirek to amend its notice of appeal.

Notice of contention

On 7 November 2011, McKenzie filed a notice of contention. In its notice, McKenzie contended that the decision below should be affirmed on various grounds, including that there was no evidence that any breach by McKenzie caused Brirek any loss or damage, and that any loss or damage suffered by Brirek was caused by its own acts or omissions. McKenzie developed these contentions in its written outline dated 14 May 2013. First, it said that there was no causal link between any of the alleged breaches on the part of McKenzie and any delay, loss or damage claimed by Brirek. Second, it said that Brirek did not in fact suffer any loss or damage by reason of the delay in the construction of lot 3. The increase in the value of lot 3 during the period between purchase and sale resulted in the development being more profitable to Brirek than it would otherwise have been. Finally, it said that, on the evidence, the delay and any consequent loss or damage suffered by Brirek was caused by its own acts or omissions.

Sequence of issues on the appeal

The issue of the amendment and ‘relation back’ will only materially affect the outcome of the appeal if Brirek’s contention that s 134 of the Building Act provides for the applicable limitation period is rejected. We have already set out our conclusions, including a conclusion that s 134 does provide for the applicable limitation period. Accordingly, we will address the following issues first:

·Was there a contract between Brirek and McKenzie in 2002?
·Does s 134 of the Building Act provide for the applicable limitation period?
·Was a duty of care owed by McKenzie to Brirek in relation to the loss claimed?

We will then address the issue of implied terms in the 2004 contract. Finally we will address the issue of the amendment and ‘relation back’ and the question of what course ought to be taken given our conclusions.

Was there a contract between Brirek and McKenzie in 2002?

On appeal, Brirek submitted that the trial judge erred in concluding there was no contract between itself and McKenzie for the provision of building surveying services in late 2002.

In its amended statement of claim, Brirek alleged that it had retained McKenzie for reward to provide building surveying services pursuant to the Building Act in respect of the construction of a commercial building on lot 3. In its particulars to that allegation it said that the agreement was partly oral and partly to be implied. Insofar as it was oral, it was allegedly contained in conversations between Mr Finocchiaro for and on behalf of Brirek and representatives of McKenzie. Insofar as it was to be implied, it was allegedly implied by operation of fact and law.

In its defence to the amended pleading, McKenzie denied the alleged agreement and said that on 23 October 2002 it had entered into an agreement with Bailey Heights to provide building surveying services for building works to be constructed on lots 1, 2, 3 and 4 of 13 Meaden Street South Melbourne.

At trial, no evidence was adduced of there having been any relevant conversations between Mr Finocchiaro and representatives of McKenzie as alleged. At the hearing of the appeal, Brirek did not submit that it had led any evidence of any discussions between Mr Finocchiaro and any representatives of McKenzie during 2002. It was accepted that the pleaded oral contract had not been established at trial. At trial there was a suggestion, which was abandoned in final submissions, that a contract with McKenzie had been formed through the agency of Mr Counsel or Bailey Heights. That suggestion was untenable and was rightly abandoned.

On appeal, Brirek advanced a new argument for the existence of the 2002 contract.

Section 17(a) of the Building Act relevantly provides that an application for a building permit may be made ‘by or on behalf of the owner of the building or the owner of the land’.[12]
[12]The full terms of s 17 are set out in n 8.

Brirek argued that either the statutory scheme compels there to be a contract between building surveyor and the land owner upon the appointment of the building surveyor because the surveyor can only be appointed by the owner or on their behalf, or the building permits were invalid because the statutory scheme does not permit a building permit to be issued to a builder unless the builder is acting for the owner. Brirek submitted that the words of s 17(a) the Building Act had the consequence of establishing a contract between the owner and the building surveyor notwithstanding that the owner never intended to authorise the surveyor to be its agent and notwithstanding that the surveyor never intended to act as the owner’s agent. Brirek pointed to several other sections of the Building Act which it submitted involved direct obligations between the owner and the surveyor.[13]
[13]Counsel referred to ss 25A, 41, 78, 84, 106, 109, 116, 140, 142 and 150.

In our opinion, the terms of s 17(a) of the Building Act do not create or impute a contract between the owner and the surveyor. Section s 17(a) does not address the question of contract let alone purport to dispense with the requirements for the establishment of a legally enforceable agreement.[14] To establish a contract, a party must establish that there was a consensus ad idem between it and the other party.[15] No attempt was made at trial by Brirek to establish any such consensus.
[14]PremierBuilding and Consulting Pty Ltd (rec apptd) v Spotless Group Ltd [2007] VSC 377, [627]–[630].
[15]See, eg, Oceanic Sun Line Special Shipping Company Inc v Fay (1988) 165 CLR 197, 225: ‘The question whether a contract has been made depends on whether there has been aconsensus ad idem and the terms of the contract, if made, are the subject of that consensus. At all events, those are the issues which an Australian court necessarily addresses when it seeks to determine the existence of what the municipal law of this country classifies as a contract.’ (Brennan J). See also Dennis v Dennis (1971) 124 CLR 317, 332 (Walsh J); Whitlock v Brew (1968) 118 CLR 445, 456 (Kitto J); Scammel and Nephew Ltd v Ouston [1941] AC 251, 254 (Viscount Simon LC), 255 (Viscount Maugham).

The trial judge was correct in finding there was no 2002 contract.

Does s 134 of the Building Act provide for the applicable limitation period?

At the trial McKenzie submitted that the contractual claims made by Brirek under the 2004 contract were statute-barred. It relied upon s 5(1)(a) of the Limitation of Actions Act which provides that claims in contract ‘shall not be brought after the expiration of six years from the date on which the cause of action accrued’. Claims on a simple contract accrue on the date of breach. The alleged breaches concerned the issuing of the building permits. If the contractual claim under the 2004 contract was assessed for these purposes as at the date of the amendment, 2 September 2010, then claims accruing before 2 September 2004 were statute-barred. The Stage 6 and 7 permits were the only ones issued under the 2004 contract and both of them were issued before 2 September 2004.

Brirek submitted that s 134 of the Building Act created a separate limitation regime in respect of ‘building actions’ of which the present case was an instance. It submitted s 134 displaced or replaced the limitation regime contained in the Limitation of Actions Act. Notwithstanding s 5 of the Limitation of Actions Act, Brirek submitted that s 134 applied to its claims as they were in a ‘building action’ and consequently they were not barred until 10 years after the issue of the occupancy permit or the issue of the certificate of final inspection. Section 134 applied to claims in contract and in tort. In the present case, the occupancy permit had been issued on 11 October 2007. Thus, none of the claims were statute-barred.

For its part, McKenzie submitted that s 134 of the Building Act has a more limited operation. McKenzie submitted that the purpose of the section is to provide ‘a long stop’ of 10 years from the date of the issue of the occupancy permit ‘for claims in negligence to address situations where a plaintiff does not become aware that it has suffered damage, by reason of negligence, until considerably later than the time when the breach was committed’.

The relevant provisions

Part 1 of the Building Act is entitled ‘Preliminary’. Section 1, in its current form, provides:

Purposes
The main purposes of this Act are—
…
(h)to limit the periods within which building actions and plumbing actions may be brought.

Part 9 of the Building Act is entitled ‘Liability’. Division 2 of Part 9 is entitled ‘Limitation of actions’. The following provisions are found in Division 2. Section 129 provides:

Definitions
In this Division—
building action means an action (including a counter-claim) for damages for loss or damage arising out of or concerning defective building work;
building work includes the design, inspection and issuing of a permit in respect of building work.

These definitions build on other definitions in s 3(1) of the Building Act. Section 3(1) defines ‘building work’ to mean ‘work for or in connection with the construction, demolition or removal of a building’. It also defines ‘permit’ to mean ‘building permit or occupancy permit’.

Section 130 provides:

Division not to affect certain matters
Nothing in this Division—
(a)applies to or affects any right to recover damages for death or personal injury arising out of or concerning defective building work; or

(b) affects the operation of any immunity given by Division 1.

Section 134 addresses the limitation on time within which a building action may be brought and has been set out in these reasons at [66] above.

The trial judge accepted the argument of McKenzie, and held that the 10-year limitation period in s 134 should be interpreted as being confined to actions involving negligence only and as operating exclusively as a long-stop. The judge concluded:

[Section] 134 of the Building Act only applies to claims in negligence with respect to defective work and does not extend the six-year contractual limitation period. It therefore does not apply to the claim for breach of the April 2004 contract.[16]

[16]Reasons [88].

The judge went directly to the second reading speech of the Minister for Planning on the Building Bill 1993 (the ‘Building Bill’) on 11 November 1993 which introduced s 134. In that second reading speech, the Minister for Planning said:

The Building Bill will introduce a clear trigger date for consideration of construction liability claims. Under the current statute of limitations there is a great deal of confusion over when the existing six-year limitation period starts and ends. One test is from when damage occurs; another test is from when a fault is discernible. The result is confusion and increased litigation risk.
If one follows the first test it can be difficult to ascertain when damage actually occurred. It is conceivable that damage may have occurred during construction. If this were the case, the plaintiff — that is, the property owner — would be able to claim only for significantly less than six years after the issue of an occupancy permit. On the other hand, if the alternative test is followed, namely, from when the damage is discernible or infinity plus six, the liability duration is absurdly open-ended, which in turn makes it impossible for insurers to quantify risk.
In the words of the Honourable John A. R. Dowd, a previous Attorney-General of New South Wales, who in 1989 commissioned an inquiry into limitation periods in the construction industry on the basis that the construction industry warranted special attention:
The present law is unsatisfactory for the victim of a negligent act or omission. The starting date for the reckoning of the period of limitation is the date when the damage actually occurs, and time will start to run even if the damage is not discoverable. Potential plaintiffs may find themselves barred from taking legal action before they knew, or could even be in a position to know, they had suffered damage.

In introducing this reform the government is mindful of the possibility that a more widespread review of liability issues may be undertaken in future, which may lead to further changes.
The Building Bill defines a clear starting date — the date of issue of an occupancy permit — and a clear conclusion date of 10 years from the date of issue. This will remove the existing ambiguity surrounding the time during which the building owner retains the right to issue legal proceedings. This will provide property owners with additional protection in terms of years beyond the very short number of years that now exists.
The 10-year cap reflects international trends and laws that have been promulgated in the Northern Territory, South Australia and New Zealand over the past 18 months. It is based upon local, national and international research, which has shown a very low incidence of claims at or beyond year 10. It also represents a logical and responsible solution to a profoundly deficient and uncertain area of the law in a manner which protects the interests of all parties.
The 10-year cap applies to property damage resulting from defects in the design, construction approval and inspection of buildings. It does not, however, extend to claims for personal injury or death which may result from the damage.[17]

[17]Victoria, Parliamentary Debates, Legislative Assembly, 11 November 1993, 1692 (Robert Maclellan) (emphasis added).

On the basis of the Minister’s speech the trial judge said that ‘it appears clear to me that the mischief which s.134 addresses is open-ended potential liability in negligence in respect of defective workmanship. It is not concerned with breach of contract where the cause of action arises upon the breach.’[18] He said, further, that ‘I am of the view that the “long stop” or “an absolute cap” approach is the proper interpretation of the Second Reading Speech.’[19]
[18]Reasons [78].
[19]Reasons [87].

In its written submissions on the appeal, Brirek submitted that the effect of s 134 is to create a 10-year limitation period from the date of the occupancy permit or certificate of final inspection within which to issue proceedings founded in contract or tort. It said that the words in s 134, ‘[d]espite anything to the contrary in the Limitation of Actions Act 1958’, only have use and relevance if they are directed at an alteration to the limitation periods contained in the Limitation of Actions Act. It relied upon the interpretation of other statutory provisions which commence with the words: ‘[d]espite anything to the contrary in’.[20] Brirek also said that, to the extent that courts have addressed the issue, s 134 has been understood as creating a separate limitation regime for building actions.[21] Brirek suggested that the 10-year limitation period compared to a six-year limitation period would be a more beneficial interpretation to consumers dealing with latent defects which might develop over an extended period.
[20]Brirek referred to: Godfrey Spowers (Victoria) Pty Ltd v Lincolne Scott Australia Pty Ltd (2008) 21 VR 84, 86 [3] (Nettle JA), 79 [59] Ashley JA (Wrongs Act 1958 (Vic) s 24AJ); RDM v Director of Public Prosecutions [1999] 2 VR 270, 275 [26]–[27] (Winneke P) (Intellectually Disabled Persons’ Services Act 1986(Vic) sch 3 cl 4(1)); Slaveski v Smith (2012) 34 VR 206, 210 [6]–[7] (Warren CJ, Nettle and Redlich JJA) (Criminal Procedure Act 2009 (Vic) ss 197(5), 197(7)); Manderson M & F Consulting v Incitec Pivot Ltd (2011) 35 VR 98, 106–8 [29]–[30], [34] (Redlich JA and Judd AJA) (Civil Procedure Act 2010 (Vic) s 64); Clifford v The Queen [2011] VSCA 199 [29]–[39] (Lasry AJA, with whom Maxwell P agreed) (Sentencing Act 1991 (Vic) s 5(2AA)(a)); R v Roussety (2008) 24 VR 253, 263 [14] (Nettle JA) (Sentencing Act 1991 (Vic) s 61(2)); R v Duncan (2007) 172 A Crim R 111, 115–8 [14]–[25] (Nettle JA) (Sentencing Act 1991 (Vic) s 113A).
[21]Brirek referred to: McAskell v Cavendish Properties Ltd (No 2) [2008] VSC 563, [39] (Hansen J); McAskell v Timelink Pacific Pty Ltd (2010) 30 VR 134–6 [9] (to the effect there is a 10-year limitation from the time of the issue of the occupancy permit); Australian Rail Track Corporation Ltd v Leighton Contractors Pty Ltd [2003] VSC 189, [24] (Bongiorno J); Moorabool Shire Council v Taitapanui (2006) 14 VR 55, 86–8 [141], [146] (Ormiston and Ashley JJA); Moorabool Shire Council v Taitapanui [2004] VSC 239, [121a] (Smith J).

Brirek submitted at the hearing of the appeal that in enacting s 134 Parliament had intended to remedy the problems that arise from latent defects or defects that do not manifest themselves. Briek’s submissions can be summarised as follows. On the one hand, in contract, the fact that a defect was unrecognised because it was latent did not prevent time running against the owner whose cause of action accrued on the date of the breach. So, if a defect became apparent after, say, five years, the owner would have only one remaining year to bring a claim in contract. On the other hand, in tort, the cause of action did not accrue until the defect became manifest. If, say, a latent defect became manifest after seven years, a claim in negligence was not barred until the expiry of another six years from that date. Indeed, if it became manifest after 20 years, the claim in negligence was not barred until the expiry of another six years. Time limits in contract could be very hard on owners; time limits in tort could be very hard on building professionals.[22] In enacting s 134, Parliament had struck a balance: it had extended the time for bringing claims in contract; but it had placed a bar on all claims in tort, notwithstanding that they may not have become manifest until after the expiry of 10 years.[23]
[22]Counsel for Brirek referred to the statement by Doogue AJ in Deeming v Eig-Ansvar Limited [2013] NZHC 955, [25] where he said, of the background to s 393 of the Building Act 2004 (NZ): ‘The objective of the legislation was to attempt to establish a balance between two competing considerations. First, it is inherent in the nature of building defects that a latent problem will not manifest itself for many years after the defective construction which gave rise to the problem took place. If too short a limitation period is established, property owners will find that they lost their right to sue at a time when they were not even aware of problems with the building. But in the second place, building contractors and the like ought not to be exposed to potential litigation for unjustifiably long periods after the original construction took place. It is for these reasons that the legislature intervened to enact the reform provisions now under discussion’.
[23]Counsel for Brirek compared s 134 with s 109Zk of the Environmental Planning and Assessment Act 1979 (NSW). Section 109ZK provides:
Limitation on time when building action or subdivision action may be brought:
(1) Despite any Act or law to the contrary, a building action may not be brought in relation to any building work:
(a) more than 10 years after the date on which the relevant final occupation certificate is issued, or
(b) in a case where no final occupation certificate is issued, more than 10 years after:
(i) the last date on which the building work was inspected by a certifying authority, or
(ii) if no such inspection has been conducted, the date on which that part of the building in relation to which the building work was carried out is first occupied or used.
(1A) Despite any Act or law to the contrary, a subdivision action may not be brought in relation to any subdivision work more than 10 years after:
(a) in the case of work completed before the relevant subdivision certificate is issued, the date on which the relevant subdivision certificate is issued, or
(b) in the case of work completed after the relevant subdivision certificate is issued, the date on which the compliance certificate that certifies that the work has been completed is issued.
(2) This section does not operate to extend any period of limitation under the Limitation Act 1969.’ (emphasis added).
Counsel said that s 109ZK(2) made it clear that s 109ZK(1) was a ‘long stop’, and not a ‘replacement’ provision.

In its oral submissions on the appeal, Brirek also referred to s 33 of the Limitation of Actions Act. Section 33 had not been relied upon at the trial. It provides:

The periods of limitation prescribed by this Act shall not apply to any action or arbitration for which a period of limitation is prescribed by any other enactment including, without affecting the generality of the foregoing, and except as provided in Part IIA, the provisions of section twenty-nine of the Administration and Probate Act 1958 and section twenty of the Wrongs Act 1958.

Brirek submitted that s 134 prescribed another ‘period of limitation’ for ‘building actions’ so that, by operation of s 33, s 5 of the Limitation of Actions Act did not apply to them.

On the appeal, McKenzie submitted in its written submissions that s 134 restricts the final date by which a building action may be lawfully commenced by reference to a date certain. It does not state that the Limitations of Actions Act does not apply to building actions. It does not extend any period of limitation which has already expired by operation of that Act. Only those provisions in the Limitations of Actions Act which could otherwise be used to permit the commencement of proceedings after the expiry of the 10-year period defined in the Building Act are affected by the operation of s 134. It argued that the judge had correctly construed s 134 as providing a ‘long-stop’ limitation in building actions.

McKenzie submitted that none of the authorities relied upon by Brirek had held that s 134 replaces the usual limitation of six years from the date of the accrual of the cause of action with a limitation period of 10 years from the date of issue of the occupancy permit or the certificate of final inspection.

McKenzie submitted that the second reading speech helped identify the mischief that s 134 was directed at remedying. Parliament, it was said, was concerned about the open-ended nature of negligence actions for defective construction works causing loss which was not manifest for many years after the work was undertaken. The insurance industry was baulking at open-ended liability and threatening not to provide cover for such indeterminate losses. The 10-year limitation period was an attempt to satisfy most persons who might suffer from defective construction works while providing a fixed liability limit. The application of s 134 only imposed a 10-year limitation period where otherwise the Limitation of Actions Act might allow for a longer period. McKenzie said that s 134 does not revive an expired contractual limitation period.

McKenzie submitted that the trial judge’s interpretation of the legislation accords with the decision in Paget v JLT Workers Compensation Services Pty Ltd (‘Paget’) where the Court of Appeal interpreted s 135AC(b) of the Accident Compensation Act1985 (the ‘Accident Compensation Act’).[24] It was submitted that this provision is relevantly the same as s 134 of the Building Act. McKenzie submitted that this Court should not come to a different conclusion on a like question of statutory interpretation unless it concludes that the Court in Paget made a ‘manifest error’.[25]
[24](2005) 12 VR 692, 698 [24]–[27] (Callaway JA, with whom Winneke ACJ and Charles JA agreed).
[25]McKenzie referred to: Nguyen v Nguyen (1990) 169 CLR 245, 269; Dupas v R (2012) 218 A Crim R 507, 570–1 [224]; R v Roussety (2008) 24 VR 253, 279 [57] (Ashley JA).

The background to the introduction of s 134 of the Building Act is well known and not controversial.

Under the Limitation of Actions Act, causes of action are barred at a given time after they accrue. Claims arising from breach of contract accrue at the time of the breach.[26] Proof of damage is not an element of a claim for breach of contract.[27] Negligence is only actionable on proof of damage. Claims arising from breach of a duty of care accrue when damage caused by the breach is sustained.[28]
[26]Lynn v Bamber [1930] 2 KB 72, 74; Peter R Handford, Limitation of Actions: The Laws of Australia (Thomson and Lawbook Co, 3^rd ed, 2012) 5.10.630.
[27]Handford, above n 26.
[28]Ibid 5.10.810.

In building actions it can be unclear when the damage is sustained. For many years there was controversy as to when time ran for claims arising out of the negligent design and construction of buildings.[29] Concealed or latent defects may not be discovered for some time. Further, the loss and damage sustained may not be physical so much as ‘pure economic loss’.[30] Those involved in designing, surveying and building found that their ability to get insurance was affected by the spectre of long-tail claims. In Woolcock Street Investments Pty Ltd v CDG Pty Ltd (‘Woolcock’), McHugh J said:

The now accepted doctrine is that, in the case of defective premises, damage does not occur until the defect manifests itself. No cause of action arises in tort until the plaintiff suffers damage. Consequently, those concerned with the design and construction of a building may be required to defend themselves against an action in tort many years after completing the task that now gives rise to the claims against them. On the other hand, a cause of action in contract arises when the contract is breached. Time runs from the breach, not the sustaining of damage. This creates the paradox that those involved in the design or construction of a building may be sued in tort years after the time has expired for suing on the contract that gave rise to the duty. Of course, since Donoghue v Stevenson, a similar anomaly arises in the case of goods and chattels. But in that area, the time lag between breach of contract and sustaining damage will ordinarily not be as long as in the case of defective buildings. Goods and chattels are usually consumed or used before the expiration of the contractual limitation period.[31]

[29]Pirelli General Cable Works Ltd v Oscar Faber and Partners [1983] 2 AC 1; Pullen v Gutteridge Haskins & Davey Pty Ltd [1993] 1 VR 27 (‘Pullen’).

[30]In Pullen (1993) 1 VR 27, the Full Court decided that in cases of pure economic loss due to a latent defect in design time begins to run when the latent defect first becomes known or manifest.

[31](2004) 216 CLR 515, 555 [103] (citations omitted).

Legislation has since been enacted in various jurisdictions to provide some relief from the problem.[32] The terms of the legislation varies between jurisdictions.
[32]Apart from s 134 of the Building Act, see Building Act 2004 (ACT) s 142; Environmental Planning and Assessment Act 1979 (NSW) s 109ZK; Building Act 1993 (NT) ss 159–160; Development Act 1993 (SA) s 73; Building Act 2000 (TAS) s 255. See also Craig Harrison and James Greentree, ‘Limitation Periods — Building Act 1993 (Vic), S 134’ (2006) 22 Building and Construction Law Journal 243.

In CIC Insurance Ltd v Bankstown Football Club Ltd, Brennan CJ, Dawson, Toohey and Gummow JJ spoke of the significance of context in the interpretation of a statutory provision:

It is well settled that at common law, apart from any reliance upon s 15AB of the Acts Interpretation Act 1901 (Cth), the court may have regard to reports of law reform bodies to ascertain the mischief which a statute is intended to cure. Moreover, the modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses “context” in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as those just mentioned, one may discern the statute was intended to remedy. Instances of general words in a statute being so constrained by their context are numerous. In particular, as McHugh JA pointed out in Isherwood v Butler Pollnow Pty Ltd, if the apparently plain words of a provision are read in the light of the mischief which the statute was designed to overcome and of the objects of the legislation, they may wear a very different appearance. Further, inconvenience or improbability of result may assist the court in preferring to the literal meaning an alternative construction which, by the steps identified above, is reasonably open and more closely conforms to the legislative intent.[33]

[33](1997) 187 CLR 384, 408 (citations omitted).

A solution is best understood with reference to the problem it was designed to solve; an answer with reference to the question that prompted it. However, although ‘context’ may reveal the mischief which gave rise to the enactment of a particular statutory provision and, possessed of an understanding of that context, a court will be assisted in the interpretation of that provision, care must be taken not to exaggerate the significance of ‘context’. Once the mischief or the problem is identified, various solutions to it may become apparent. The task of the court is to identify the solution that recommended itself to Parliament. To that end, it must strive to understand the meaning of the words and phrases in the provision to hand. The task is to construe the statutory provision, not the second reading speech.[34] The court must be astute not to bend the words of the statute to accommodate some other solution to the problem that it may think the more desirable,[35] or which some other jurisdiction has adopted.
[34]For an analysis of recent High Court judgments on statutory interpretation, see S M v The Queen [2013] VSCA 342, [41]–[56] (Weinberg JA).
[35]See Certain Lloyd’s Underwriters v Cross (2012) 248 CLR 378, 390 [26] (French CJ and Hayne J), quoting J J Spigelman, ‘The Intolerable Wrestle: Developments in Statutory Interpretation’ (2010) 84 Australian Law Journal 822, 826.

Section 35 of the Interpretation of Legislation Act 1984 (Vic) (the ‘Interpretation of Legislation Act’) empowered the trial judge to have regard to the second reading speech of the Bill for the Building Act.[36] Section 4(2) of the Interpretation of Legislation Act provides:

Nothing in this Act excludes the application to an Act or subordinate instrument of a rule of construction applicable thereto and not inconsistent with this Act.[37]

[36]Section 35 of the Interpretation of Legislation Act provides:

[37]Emphasis added.

In Catlow v Accident CompensationCommission,[38] the High Court discussed the operation of s 35 and held that it is erroneous to look at extrinsic materials before exhausting the application of the ordinary rules of statutory construction. Brennan and Gaudron JJ said:

This provision is extremely broad. Unlike s 15AB of the Acts Interpretation Act 1901 (Cth), s 35 does not restrict the purposes for which it is permissible to consider the extrinsic materials referred to in that section. Whether or not extrinsic material is considered in interpreting a statutory provision, it is clear that the meaning attributed to the statute must be consistent with the statutory text. If the meaning which would otherwise be attributed to the statutory text is plain, extrinsic material cannot alter it. It is only when the meaning of the text is doubtful (to use a neutral term rather than those to be found in s 15AB(1) of the Acts Interpretation Act), that consideration of extrinsic material might be of assistance. It follows that it would be erroneous to look to the extrinsic material before exhausting the application of the ordinary rules of statutory construction.[39]

[38](1989) 167 CLR 543.

[39]Ibid 549–50.

More recently, in Saaed v Minister for Immigration and Citizenship,[40] the High Court said that in the construction of statutes, extrinsic materials such as second reading speeches are not to precede the plain language of the statutory provision. In their judgment, French CJ, Gummow, Hayne, Crennan and Kiefel JJ said:

As Gummow J observed in Wik Peoples v Queensland, it is necessary to keep in mind that when it is said the legislative “intention” is to be ascertained, “what is involved is the ‘intention manifested’ by the legislation.” Statements as to legislative intention made in explanatory memoranda or by Ministers, however clear or emphatic, cannot overcome the need to carefully consider the words of the statute to ascertain its meaning.[41]

[40](2010) 241 CLR 252.

[41](2010) 241 CLR 252, 264–5 [31] (citation omitted). See also DPP (Vic) v Le (2007) 232 CLR 562, 586 [85] (Kirby and Crennan JJ).

In our opinion, the interpretation of the provision adopted by the trial judge places an artificial constraint on the plain meaning of the words of s 134 of the Building Act.

Section 134 addresses ‘a building action’. Section 129 of the Building Act defines that term to mean ‘an action (including a counter-claim) for damages for loss or damage arising out of or concerning defective building work’. Actions for breach of contract and actions for negligence in tort are both actions for damages for loss or damage. Section 129 defines ‘building work’ to include the ‘issuing of a permit in respect of building work.’ Section 3(1) of the Building Act defines ‘a permit’ as including a building permit.

Section 134 does not contain any express limitation that confines its application to cases in contract or in tort. It does not contain any reference to some distinction between limitation periods for actions in negligence as opposed to those in contract. It does not contain any reference to patent or latent faults. It does not contain any suggestion that its operation is limited to physical loss and damage. What it does is to limit the period within which ‘building actions’ may be brought generally.

The words ‘[d]espite any thing to the contrary in the Limitation of Actions Act 1958 or in any other Act or law’ have work to do in s 134.[42] The Limitation of Actions Act and other Acts provide for different periods of limitation. The period provided for in s 134 operates despite those different periods.
[42]The bolding is in the original.

The contention that s 33 of the Limitation of Actions Act prevents s 5 of that Act operating with respect to ‘building actions’ should also be accepted. Section 134 of the Building Act is ‘a period of limitation … prescribed by any other enactment’ within the meaning of s 33.

We turn then to the second reading speech and to the authorities relied upon.

In the second reading speech, the Minister referred to some of the liability issues stemming from latent faults and insurance which informed the inclusion of the limitation of liability provisions in the Building Bill. He did not suggest that other faults or causes of action would not be encompassed by the 10-year period provided for, except for those relating to injury and death. In fact, the speech contains statements which in our view support the construction we consider to be the correct one on the provision’s plain words. We have highlighted those passages when quoting the speech earlier. The second reading speech is entirely consistent with a legislative intent to address the unsatisfactory consequences for property owners flowing from the limitation period for contract breaches. In particular, it seems to us that the Minister must have been referring to contract claims when he said that property owners would have ‘additional protection in terms of years beyond the very short number of years that now exist.’

As indicated above, s 134 forms part of Division 2 (‘Limitation of actions’) of Part 9 (‘Liability’) of the Building Act. Apart from ss 129, 130 and 134, Division 2 contained provisions in relation to proportionate liability. They were in the following form:

131. Limitations on liability of persons jointly or severally liable
(1)After determining an award of damages in a building action, the court must give judgment against each defendant to that action who is found to be jointly or severally liable for damages for such proportion of the total amount of damages as the court considers to be just and equitable having regard to the extent of that defendant’s responsibility for the loss or damage.

McHugh J, for his part, listed first among the factors pointing to the existence of a duty of care –
... the extensive powers of the Council [and] its entry into the field of inspection on this occasion.

The significance of the observations in Heyman and Pyrenees to which we have referred is not that the Taitapanuis sought to equate Mellis with a public authority in arguing that he owed them a duty of care, albeit that he was an employee of Moorabool, and albeit that Moorabool might itself have assumed the task — though acting through Mellis. The significance of the observations is simply that in some cases the common law discerns in one or more statutes the foundation for the erection of a cause of action.[91]

[91](2006) 14 VR 55, 73–5 [71], [74]–[81] (citations omitted).

In Heyman,[92] the purpose of the statutory scheme was ‘to ensure that buildings are properly constructed in the interests of health and safety’ and ‘in the interest of achieving or maintaining a standard of building appropriate to the municipality or area of the municipality concerned.’ In Pyrenees,[93] the statute gave the Council ‘significant and special measure of control over the safety from fire of persons and property in [the claimant’s] street’.
[92](1985) 157 CLR 424.
[93](1998) 192 CLR 330.

In the present case, the claim for damages does not arise out of any frustration or violation of the purposes of the Building Act so far as it regulates the conduct of building surveyors. There is no suggestion that Brirek suffered loss by reason of the construction of premises that proved to be defective. In our opinion, the trial judge was correct in adopting what Bell J had identified in Ariss v Building Practitioners Board as the relevant statutory purposes,[94] and he was correct in considering that those purposes are irrelevant in a case ‘where there is no defective workmanship in issue’.[95]
[94][2010] VSC 295, [44].
[95]Reasons [100].

In Bryan v Maloney, Brennan J said:

If liability were to be imposed for the doing of anything which caused pure economic loss that was foreseeable, the tort of negligence would destroy commercial competition sterilise many contracts and, in the well-known dictum of Chief Judge Cardozo, expose defendants to potential liability ‘in an indeterminate amount for an indeterminate time to an indeterminate class’.[96]

[96](1995) 182 CLR 609, 632.

In Caltex Oil,[97] Gibbs J gave an example of a situation in which the imposition of liability may have given rise to such indeterminacy of liability. He contrasted the particular pipeline that had been fractured with one serving the public generally.

In the present case the persons interested in the dredge and the employees of Decca … knew that the pipeline led directly from the refinery to Caltex’s terminal. They should have known that, whatever the contractual or other relationship between Caltex and A.O.R. might have been, the pipeline was the physical means by which the products flowed from the refinery to the terminal. Moreover, the pipeline appeared to be designed to serve the terminal particularly (although no doubt it would have been possible for it to serve other persons as well) and was not like a water main or electric cable serving the public generally. In these circumstances the persons interested in the dredge, and Decca, should have had Caltex in contemplation as a person who would probably suffer economic loss if the pipes were broken.[98]

[97](1976) 136 CLR 529.

[98]Ibid 555–6.

In Woolcock, McHugh J said that ‘[i]ndeterminacy of liability is a factor that will ordinarily defeat a claim that the defendant owed a duty of care to persons such as the plaintiff.’[99] In our opinion, ‘indeterminacy of liability’ should not be a barrier to Brirek succeeding in this case. The imposition of liability on a building surveyor for the loss of the type for which Brirek seeks compensation would not in any relevant sense impose indeterminate liability to an indeterminate class. Its ambit would be analogous to the duty owed by a building surveyor where physical damage is caused, or indeed to the duty owed by professionals to their clients generally.
[99](2004) 216 CLR 515, 548.

In Woolcock, McHugh J addressed the issue of ‘disproportionate liability’ as follows:

In some cases concerned with pure economic loss, it may be necessary in determining whether a defendant should owe a duty of care to consider whether any potential liability of the defendant would be disproportionate to its fault. Claims against auditors by investors or creditors are examples of cases where disproportionate liability has played a role in rejecting plaintiffs’ claims that the auditors owed them a duty of care.[100]

[100]Ibid 553–4 [98] (citations omitted).

Given the many cases in which it has been held that a building surveyor owes a duty of care in negligence to an owner or even a subsequent owner of a building, it seems counter intuitive to hold that McKenzie did not owe a duty of care to Brirek in this case. However, in those other cases, the claim related to defective workmanship causing ‘diminution loss’; walls had cracked, buildings had collapsed. But, that is not the type of loss of which Brirek complains. It complains of financial loss in the nature of its holding costs as it awaited completion of the building, and of its inability to lease or sell it sooner than might otherwise have been the case.

Brirek’s loss may have been reasonably foreseeable and the imposition of a duty here would not cause indeterminate liability to an indeterminate class. But the statutory scheme does not constitute a foundation for a duty of care in relation to the kind of loss Brirek claims. More importantly, the trial judge was right to identify vulnerability as the key consideration here. In that context the importance of parties’ capacity to regulate their relationships and allocate risk amongst themselves is significant.

Gleeson CJ, Gummow, Hayne and Heydon JJ said in Woolcock that ‘vulnerability’ is to be understood as a reference to ‘the plaintiff’s inability to protect itself from the consequences of a defendant’s want of reasonable care’.[101] And McHugh J made it plain in the same case that whether there is vulnerability depends not so much upon how the plaintiff actually came to be damaged by the conduct of the defendant as it does on the availability of steps open to the plaintiff to allocate risk between itself and the defendant.[102]
[101]Ibid 530 [23].
[102]Ibid 550 [86].

Here, Brirek was well able contractually to allocate the relevant risk between itself and the other parties. It did in fact do so in the contract of sale, although it then chose not to avail itself of the contractual protection it had negotiated. For its own commercial reasons, it resisted any contractual relationship with McKenzie before 2004. It was sued by Bailey Heights and it determined to settle with it. It then contracted with Bailes & Co and Pace to complete the project. All of these contracts could have directly or indirectly addressed the loss by reason of delay which Brirek seeks to claim.

Brirek’s claim that McKenzie owed it a duty of care to avoid the ‘pure economic loss’ that Brirek sought to recover was rightly rejected by the trial judge.

Implied terms in the 2004 contract

The notice of appeal contains the following grounds:

4.The Trial Judge erred in concluding that whether there was a breach of the April, 2004 Contract depended on whether it was appropriate to imply a term in the Contract that there was an obligation imposed on the Respondent to advise the Appellant that a planning permit was not in force.
5.The Trial Judge should have concluded that it was appropriate to imply a term in the Contract that there was an obligation imposed on the Respondent to carry out its services as a building surveyor with reasonable skill and care, which included a duty:
(a)not to issue Building Permits when it ought to have known that a Planning Permit was not in force;
(b)and/or to advise the Appellant that a Planning Permit was not in force.

What the trial judge said about implied terms in the April 2004 contract was premised on his conclusions on the statute of limitation issues. He held that Brirek could only rely on contractual claims accruing after 2 September 2004. Thus, the only alleged breaches of contract which he addressed were those allegedly occurring between September 2004 (when the claim would not be statute-barred) and September 2005 (when he found Brirek terminated McKenzie). The last permit issued was the Stage 7 permit on 27 May 2004.

As to the period September 2004 to September 2005 the trial judge said:

It is clear that over this period there was little activity on [McKenzie]’s part with respect to [Brirek]. In final submissions, the only potential breach referred to during this period was an alleged breach of an ongoing obligation on the part of [McKenzie] to advise [Brirek] that there was no planning permit in force. Clearly, the planning permit had lapsed prior to the April 2004 contract being entered into.
The terms of the April 2004 contract, which was admitted by [McKenzie], are far from clear. I agree with the submission of [counsel for McKenzie] that the April 2004 contract was constituted by the lodging of the application for a building permit in April 2004 by [Brirek] with [McKenzie], and the acceptance by [McKenzie] of the obligation to issue a permit which it did in issuing Stage 6 and Stage 7 Building Permits before the period under review. It is a question then whether it is appropriate to imply a term that there was an obligation imposed upon [McKenzie] to advise [Brirek] that a planning permit was not in force. In my view, on the basis of the principles outlined in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 16 ALR 363, at 365 and particularly whether ‘it must be necessary to give business efficacy to the contract’ and ‘it must be so obvious that “it goes without saying”‘, it would be inappropriate to imply such a term. [Brirek] had a copy of the Planning Permit — see extract above from letter of 6 October 2003 from Abbott Stillman & Wilson to Bailey Heights. Finocchiaro was an experienced builder and developer, and as such aware of the need for a planning permit and accustomed to dealing with planning issues. Further, Bayles had a copy of all relevant documentation and could have brought the provisions of the Planning Permit to Finocchiaro’s attention when doing his exhaustive review of [McKenzie]’s documentation.[103]

[103]Reasons [89]–[90].

Brirek’s amended statement of claim did not allege the implied terms which are set out in ground 5. It alleged implied terms to exercise due care and to comply with statutory obligations without reference to the specific duties in ground 5. It later alleged breaches which included issuing building permits after the planning permit had expired and failing to advise of that fact.

At the trial, Brirek did not submit that there were implied terms as set out in ground 5. It did submit that McKenzie had breached an ongoing obligation to advise [Brirek] that there was no planning permit in force.

In its written submission on the appeal, Brirek said:

The Trial Judge erred in concluding that whether there was a breach of the April, 2004 Contract depended on whether it was appropriate to imply a term in the Contract that there was an obligation imposed on the Respondent to advise the Appellant that a planning permit was not in force.

…

The Respondent was under an ongoing contractual duty from April 2004 until November 2005 when the Respondent’s appointment was terminated by permission of the Building Commission … to perform the building surveying services to the requisite standard.

…

The Trial Judge should have concluded that it was appropriate to imply a term in the Contract that there was an obligation imposed on the Respondent to carry out its services as a building surveyor with reasonable skill and care, which included a duty:
(a)not to issue Building Permits when it ought to have known that a Planning Permit was not in force;
(b) and/or to advise the Appellant that a Planning Permit was not in force.

For its part, McKenzie submitted on the appeal that ‘Brirek did not plead and does not identify any contractual breaches arising after 2 September 2004 which it contends the Judge should have found to have occurred.’ Brirek submitted that it employed McKenzie as its building surveyor until November 2005, and that it had pleaded all the terms that are usually associated with the retainer of a professional such as the duty to exercise all due care and skill and to comply with statutory duties and obligations.

McKenzie is right in saying that the matters set out in the notice of appeal were not pleaded, but it is incorrect to say they do not reflect the submissions made by Brirek at trial. As the trial judge stated in his reasons,[104] Brirek had submitted that McKenzie had breached an ‘ongoing obligation … to advise [Brirek] that there was no planning permit in force’. The grounds of appeal reflect that contention.
[104]Reasons [89].

The submissions at trial made by Brirek led the trial judge into an error. That error was treating the so-called ‘ongoing obligation’ as the implied term. The grounds of appeal continue to confuse the issue of the existence of the implied term with the issue of breach of that term.

On appeal, Brirek submitted that the trial judge had conflated the question of whether there was an implied term to exercise due care and skill and comply with statutory obligations on the one hand, with the question of whether McKenzie had been in breach of that implied term on the other. During oral argument senior counsel for McKenzie fairly conceded that the trial judge had conflated the two questions. Brirek’s own grounds of appeal conflate the two issues in the same way.

It can be seen from the relevant passage of the trial judge’s reasons, which we have quoted, that as a result of the submissions made by Brirek at trial he applied the test formulated in BP Refinery (Westernport) Pty Ltd v Shire of Hastings to ask whether McKenzie had had an ongoing implied obligation to inform Brirek that the planning permit had expired.[105] Whether McKenzie was obliged to so act was a question of breach. Given the way Brirek argued the matter, the trial judge did not ask the antecedent question as to whether there were implied terms as pleaded in the amended statement of claim, which may have been breached by the failure to so act. He erred in his approach to this question.
[105](1977) 180 CLR 266, 283.

‘Relation back’

In his reasons, the judge appears to have assumed that the amendment to the statement of claim to add the 2004 contract ‘spoke’ from the date of the amendment. He gave no consideration to the possibility that the amendment may ‘relate back’ and speak from the date of the writ. He said:
Leave to rely on breach of a contract made in April 2004 was granted to [Brirek] on 2 September 2010, the 21^st day of the hearing and near the conclusion of the hearing of evidence. [McKenzie] concedes that it was engaged by [Brirek] in April 2004 to provide building surveying services. It submits however that pursuant to s.5(1)(a) of the Limitation of Actions Act 1958, which imposes a six-year limitation period, [Brirek] is barred from relying on the April 2004 contract. A cause of action for breach of contract arises upon the breach of the contract (‘Brooking on Building Contracts’ (4^th ed.) at page 197). [Brirek] can therefore only rely on breaches of the April 2004 contract which have occurred after 2 September 2004. [McKenzie] submits that no such breach has occurred.[106]
[106]Reasons [73].
It first became evident from Brirek’s outline of argument in April 2013 that it wished to contend that, even if s 134 of the Building Act did not alter the limitation period of six years, its claims under the 2004 contract were not statute-barred because the amendment to its pleading adding the 2004 contract took effect from the date of the writ by virtue of the doctrine of ‘relation back’. Once McKenzie made plain in its written argument in May 2013 that the notice of appeal did not challenge the finding that the amendment took effect from the date of amendment, Brirek gave notice of its intention to amend its notice of appeal. Much of the argument on appeal was thus taken up with the questions whether the appellant should be given leave to amend its notice of appeal to rely upon the effect of the ‘relation back’ doctrine on the amendment of his pleading, and, if so, had the trial judge’s attention been directed to the doctrine, whether he could have refused the amendment or could have permitted the amendment on the basis that it take effect from the date of amendment.

At the trial, the trial judge and counsel for both parties proceeded on the mistaken assumption that, for the purposes of statutes of limitation, the claim introduced by the amendment made on 2 September 2010 was to be analysed as if that claim had been issued on that day. It was on the basis of this misconception that McKenzie submitted that contractual claims accruing prior to 2 September 2004 were statute-barred under the Limitation of Actions Act, submissions which the trial judge accepted.

Brirek wished to argue that the trial judge had misconceived the temporal effect of the amendment. The doctrine of ‘relation back’ meant that the amendment spoke from the date of the document that was amended, namely the date the statement of claim was filed which was 5 December 2008. The claims arising under the 2004 contract, namely those with respect to the stage 6 and the stage 7 permits, would not have been statute-barred.

In support of its application to amend its notice of appeal, Brirek said that the issue was live in the pleadings, that the two contract dates and alleged breaches thereafter were all ventilated at trial, that McKenzie had acknowledged that the trial judge ‘made findings only consistent with the proposition that he intended the amendment to have effect from the date of leave granted’, and that McKenzie, in its submissions, had not asserted that the point could possibly have been met by further evidence at the trial. Further, the issue is principally a pure question of law.

In opposing the application for leave to amend its notice of appeal, McKenzie said that Brirek was bound by the way it had conducted its case before the trial judge.[107] ‘Relation back’ had not been raised or mentioned at any time during the hearing or in the trial judge’s reasons for judgment. Brirek’s application to amend its statement of claim to introduce its allegation that there was a contract in 2004 was made after Brirek had closed its case. McKenzie had opposed that application on the basis that the cause of action was statute-barred. When it made that argument, Brirek had not suggested that any defence of limitation ‘was irrelevant by reason of any relation back argument.’ In these circumstances, McKenzie now submitted that it would be unfair and cause prejudice to McKenzie if Brirek were permitted to raise, at the appeal stage, a ‘relation back’ argument when to do so would have the effect of enabling Brirek to reactivate a claim which the trial judge had found was statute-barred. On the hearing of the appeal, McKenzie further submitted that it was not in the interests of justice to allow the amendment of the notice of appeal because, notwithstanding that it only involved a point of law, if the point sought to be raised was successful the result would be that, in effect, a new trial would have to be ordered. McKenzie referred to Whisprun v Dixon,[108] Financial Wisdom Limited v Newman[109] and Coulton v Holcombe.[110] In the event that Brirek was permitted to amend its grounds of appeal, McKenzie contended that, had ‘relation back’ been raised at the time of the application to amend the statement of claim, it would have conducted its case differently. In its written submissions, it identified three things it would have done: (a) it would have argued the matter fully and asked the Court to have given a considered decision on the issue; (b) it would have submitted that, because the proposed cause of action was statute-barred, the application for leave to amend the statement of claim should be refused; and (c) if leave to amend the statement of claim were granted, it would have argued that ‘such amendment should only be permitted to operate as and from 2 September 2010, the date of the grant of leave, to ensure that McKenzie’s entitlement to rely on the limitations defence was preserved’. This it was said was a possibility contemplated by Ormiston JA in Agtrack (NT) Pty Ltd v Hatfield (‘Agtrack’).[111]
[107]McKenzie referred to: Metwally v University of Wollongong (No 2) (1985) 59 ALJR 481, 483; Jones Lang Lasalle (Vic) Pty Ltd v Korlevski; Jones Lang Lasalle Pty Ltd v Victoria WorkCover Authority [2012] VSCA 305, [4]–[5] (Warren CJ); Wallis Nominees (Computing) Pty Ltd v Pickett [2013] VSCA 24, [74]–[76], [87], [90] (Warren CJ and Davies AJA).
[108](2003) 77 ALJR 1598. McKenzie emphasised the following: ‘It would be inimical to the due administration of justice if, on appeal, a party could raise a point that was not taken at the trial unless it could not possibly have been met by further evidence at the trial. Nothing is more likely to give rise to a sense of injustice in a litigant than to have a verdict taken away on a point that was not taken at the trial and could or might possibly have been met by rebutting evidence or cross-examination. Even when no question of further evidence is admissible, it may not be in the interests of justice to allow a new point to be raised on appeal, particularly if it will require a further trial of the action. Not only is the successful party put to expense that may not be recoverable on a party and party taxation but a new trial inevitably inflicts on the parties worry, inconvenience and an interference with their personal and business affairs’: 1608 (emphasis added) (citations omitted).
[109](2005) 12 VR 79, 110–13.
[110](1986) 162 CLR 1.
[111](2003) 7 VR 63.

It is necessary to briefly recall the development of the law in relation to the introduction of new causes of action between existing parties by amendment of an existing claim.

Before 1986 applications to amend so as to introduce new causes of action were subject to what was known as the rule in Weldon v Neal.[112] In effect, the rule in Weldon v Neal was that amendments to an existing claim would not be permitted if those amendments introduced and revived a cause of action not in the original claim and which was statute-barred because to do so would cause prejudice to the defendant which was irremediable.[113]
[112]See Weldon v Neal (1887) 19 QBD 394.
[113]Agtrack (2003) 7 VR 63, 80 [28] quoting Weldon v Neal (1887) 19 QBD 394, 395 (Lord Esher MR, with the concurrence of Lindley and Lopes LJJ).

In 1986 the rule in Weldon v Neal was abrogated in Victoria by the introduction of r 36.01(6) of the General Rules of Procedure in Civil Proceedings 1986 (the ‘1986 Rules’),[114] and of s 34 of the Limitation of Actions Act.
[114]The 1986 Rules were enacted by the Supreme Court (Rules of Procedure) Act 1986 (Vic).

Order 36 of the Supreme Court (General Civil Procedure) Rules2005 (the ‘2005 Rules’) regulates the making of amendments to pleadings. Rule 36.01(6) is the same as r 36.01(6) of the 1986 Rules. Order 36 relevantly provides:

(1) For the purpose of—
(a)determining the real question in controversy between the parties to any proceeding; or

(b) correcting any defect or error in any proceeding; or
(c) avoiding multiplicity of proceedings —
the Court may, at any stage order that any document in the proceeding be amended or that any party have leave to amend any document in the proceeding.

…
(6) The Court may, notwithstanding the expiry of any relevant limitation period after the day a proceeding is commenced, make an order under paragraph (1) where it is satisfied that any other party to the proceeding would not by reason of the order be prejudiced in the conduct of that party’s claim or defence in a way that could not be fairly met by an adjournment, an award of costs or otherwise.

All things being equal, the introduction of r 36.01(6) might have been considered only to have liberated courts from the constricting effect of the rule in Weldon v Neal. However, at the same time, Parliament amended the Limitation of Actions Act and introduced a new s 34, a provision that would appear to travel beyond repealing the rule in Weldon v Neal. Section 34 of the Limitation of ActionsAct provides:

Abrogation of rule in Weldon v. Neal (1887) 19 Q.B.D. 394
(1)If a court would, but for the expiry of any relevant period of limitation after the day a proceeding in the court has commenced, allow a party to amend a document in the proceeding, the court must allow the amendment to be made if it is satisfied that no other party to the proceeding would by reason of the amendment be prejudiced in the conduct of that party’s claim or defence in a way that could not be met by an adjournment, an award of costs or otherwise.
(2)This section does not apply to an amendment in a proceeding commenced before 1 January 1987.[115]

[115]Section 34 was inserted into the Limitation of ActionsAct by s 136 of the Supreme Court Act1986 (Vic).

Whereas r 36.01(6) permitted the Court to give leave to amend notwithstanding the expiry of any relevant limitation period, s 34 of the Limitation of Actions Act provided that where the Court would, but for the expiry of a relevant period of limitation, have allowed a party to amend, it must allow the amendment if satisfied no other party would by reason of the amendment be prejudiced in a way that could not be met by an adjournment or costs or otherwise.

The rule in Weldon v Neal and its abrogation were considered in detail by Ormiston JA in Agtrack.[116]
[116](2003) 7 VR 63.

In our opinion, despite the assumption of the trial judge, the amendment related back to the date of the original pleading. The trial judge erred in assuming that the amendment he had permitted ‘spoke’ only from the date on which it was made.

The amendment which was proposed in this case (to add the 2004 contract alternative) constituted nothing more than a different legal conclusion based upon facts already in issue in the proceeding. In submissions on the appeal, McKenzie was unable to point to any substantive prejudice that it would have been able to advance (absent the misconception) in order to resist the application to amend, other than the loss of the limitation defence itself. Both r 36.01(6) and the Limitation of Actions Act make it clear that the fact that an amendment will introduce a statute-barred claim between existing parties is not, in itself, a ground for refusing leave to make an amendment. The trial judge was correct to grant leave. He was mistaken as to the effect of doing so.

McKenzie further submitted that, at trial, it could have asked for an express order that the amendment was only to operate from the date it was made and was not to ‘relate back’ to the date of the writ. This contention rested upon observations of Ormiston JA in Agtrack in which he described some of the circumstances in which an amendment could speak from the date it was made and not ‘relate back’:

Undoubtedly, the consequence that amendment, once effected, relates back to the issue or filing of process is well accepted: see esp. per Phillips JA, with whom Brooking and Charles JJA concurred, in Anglo Irish Beef Processors International v. Federated Stevedores Geelong and the authorities therein cited. But what does that statement mean? To my way of thinking it means no more than this: amendment involves making an alteration to an existing document and that document will have come into existence at some time in the past; whoever amends such a document is not normally creating an entirely different document, but is merely effecting a change or changes to that which is already in existence, which itself has a known date upon which it came into effect. One could “substitute” a new document of the relevant kind and that might connote the creation of a document taking effect only at a later date. In fact, as a matter of practice, where some special problem has arisen, occasionally judges have directed that certain amendments to pleadings only take effect as at the date of the making of the amendment, but that ordinarily comes about by a specific order. [117]

[117]Ibid 85–6 [39] (emphasis added) (citations omitted).

We would grant Brirek leave to amend its notice of appeal to add the proposed new ground. McKenzie was unable to identify any prejudice that would warrant a refusal of leave to add the proposed new ground. The trial judge was regrettably led into error by the parties in failing to apply the doctrine of ‘relation back’ so that the amendment spoke from the date of the statement of claim, namely 5 December 2008. Had the matter been adverted to at trial, there would have been no basis for refusing the application to amend the statement of claim to plead the 2004 contract, nor would there have been any basis for granting leave to amend only on the condition that the amendment speak, not from the date of the writ, but from the time that leave to amend was granted. The claims made under the 2004 contract would not have been statute-barred even if s 134 of the Building Act had not provided for the applicable limitation period.

The added ground of appeal is made out.

Conclusions and further disposition

In its notice of contention, McKenzie asserts that the decision in its favour should be upheld even if any of the grounds of appeal are made out on the basis that, in substance, Brirek has proved no loss. The submissions made in relation to the issues raised in the notice of contention address the entire sequence of events and the claims made by Brirek in relation to all of the building permits.

It is now necessary for the parties to address the notice of contention by reference to the only claims which might now be established. Our conclusions mean that the only claims made by Brirek which remain open to be established are its contractual claims based upon alleged implied terms. These claims arise only after Brirek engaged McKenzie in April 2004. Only permits 6 and 7 were issued after that engagement.

The implied terms as pleaded were not said to be in controversy on the hearing of the appeal. The trial judge has found that permits 6 and 7 were issued in contravention of the Building Act.[118] In those circumstances, damages may be the only matter in dispute.
[118]Reasons [50].

We will hear the parties’ submissions on the further disposition of the appeal in the light of these reasons.

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(1)        A building permit must be in the form of Form 2.
(2)        A building permit must be signed by the relevant building surveyor.
(3)When a building permit is issued, the relevant building surveyor must forward to the applicant with the building permit-
(a)        a copy of the permit; and
(b)2 copies of the plans, specifications and other documents (except for computations or reports) lodged with the application (whether or not with amendments) with evidence of approval stamped and endorsed on them.
(3A)When a building permit is issued to a person other than the owner of the allotment, the relevant building surveyor must also forward a copy of the permit to the owner.
(4)The applicant must ensure that one set of the approved plans, specifications and documents and a copy of the permit is available for inspection at the allotment concerned while the building work for which the building permit was issued is in progress.
(5)        The relevant building surveyor must include on the building permit –
(a)the mandatory notification stages for that building work in accordance with regulation 7.1; and
(b)the time limits for commencement and completion of the building work in accordance with regulation 2.8.

Principles of and aids to interpretation.
In the interpretation of a provision of an Act or subordinate instrument—
(a) a construction that would promote the purpose or object underlying the Act or subordinate instrument (whether or not that purpose or object is expressly stated in the Act or subordinate instrument) shall be preferred to a construction that would not promote that purpose or object; and
(b) consideration may be given to any matter or document that is relevant including but not limited to—
(i) all indications provided by the Act or subordinate instrument as printed by authority, including punctuation;
(ii) reports of proceedings in any House of the Parliament;
(iii) explanatory memoranda or other documents laid before or otherwise presented to any House of the Parliament; and
(iv) reports of Royal Commissions, Parliamentary Committees, Law Reform Commissioners and Commissions, Boards of Inquiry or other similar bodies.’

[2014] VSCA 165

6 August 2014