Extended limitation periods and negligence claims for structural defects
Melisavon Pty Ltd v Springfield Development Corporation Pty Ltd  QCA 233
A majority of the Queensland Court of Appeal recently refused to strike out a negligence claim relating to latent structural defects which was brought 10 years after the work was performed and more than 6 years after cracks first started appearing in the slab.
The decision should serve as a reminder to those involved in construction projects to carefully consider the level of liability they are insured for and the length of time for which policies are maintained.
Limitation periods serve the important function of allowing people and businesses involved in activities which may carry liability risk (such as professional advisers, medical practitioners and builders amongst others) to determine what level of insurance they need to hold at any point in time to protect against legal liability.
The limitation period for most causes of action (not involving personal injury) is 6 years in all States and Territories, except for the Northern Territory where it is 3 years. The period begins to run from the time loss is suffered, which will usually coincide with the time work is performed. However, in negligence claims arising from latent structural defects, the limitation period commences from the time the defect becomes apparent or discoverable with reasonable diligence.
This case turned on the question of whether a defect was discoverable with reasonable diligence at the time damage first started to appear, or later when the damage could be traced back to the underlying defect.
Springfield Land Development Corporation Pty Ltd (Springfield) engaged Melisavon Pty Ltd (Melisavon), a civil and structural engineering firm, in January 2000 to design a clubhouse and surrounds. The work was completed in mid-2003.
By November 2003 cracking was identified in the ground floor slab. Ground heave relating to problematic soil conditions was at that time identified as the cause of the cracking, rather than any underlying defect in the structure. Springfield continued to view the cracking as a maintenance issue related to irrigation and watering of nearby gardens until 2006.
In June 2011, Springfield commenced proceedings against Melisavon, alleging that Melisavon had carried out its design work negligently. Melisavon sought to have the matter dismissed summarily, arguing that the proceedings were commenced after the six-year limitation period had expired. The primary judge dismissed the application and Melisavon appealed.
The Court of Appeal’s ruling
A majority of the Queensland Court of Appeal found that the primary judge was correct in not dismissing the matter summarily, as it was open on the pleaded case for the cause of action not to have arisen until after 2006, within six years of Springfield commencing the action. The leading judgment of President Margaret McMurdo took the view that in this case it was open for the loss not to have been suffered at the time of the cracks appearing if the cracks could not then be linked to an underlying defect. By contrast, Holmes J (in a dissenting judgment) thought that the defect will be manifest and the loss will have occurred when the damage first becomes visible regardless of whether it is known to relate to an underlying defect.
As the matter could not be dismissed summarily, it will need to proceed to a hearing of the evidence to determine precisely when the visible damage could first be linked to the underlying defect.
The decision represents an incremental development of the law in this area and will lend support to claimants who do not discover underlying defects at the first sign of damage. It also suggests that a claim will only be struck out summarily on the basis of a limitation period in the clearest of cases. Where the facts are disputed, the matter will need to be determined at a final hearing of all the evidence.
It is therefore important for participants in the building industry to ensure they are adequately indemnified against potential claims. Relying on a six year limitation period from the date of completion may not be enough. Insurance policies will need to be maintained in the event defects become apparent a long time after work is complete.
Tony Mylne, Partner
Joshua Liddle, Solicitor