Statutory Limitation Periods: a timely reminder provided in Calibre Construction Corp Pty Limited v Bayside Council  NSWSC 758
A recent decision in the NSW Supreme Court provides a timely reminder that parties to construction developments, including local councils, must be aware of the statutory limitation periods in which to bring claims or otherwise risk extinguishing their entitlements.
It is essential to understand limitation periods (the maximum time within which a legal action can be brought) as once the right to bring a claim is lost, it is lost forever.
In NSW, the maximum period for a party to bring a claim in contract or tort is six years from the date on which the cause of action first accrued. While simple in principle, the below decision shows that calculating the relevant limitation period can be difficult, and parties should err on the side of caution when bringing claims.
Local councils and, more broadly, principals of construction developments should prioritise and inform themselves of the duration, and expiration, of limitation periods for claims – including liability for unpaid money or non-performance of rectification works to avoid extinguishing its ability to recoup costs. Practical tips include:
- implementing adequate internal processes to monitor and manage key dates such as end of defect liability periods and statutory liability periods. For example, a ‘bring-up’ or notification system;
- when engaging in alternative dispute resolution processes or litigation be mindful of expiry of claim entitlements; and
- seek advice on limitation periods if you are unsure.
In 2009, Bayside Council (Council), as principal and consent authority, entered into a construction contract for the construction of 182 residential units with Calibre Constructions Corp Pty Limited as contractor (Calibre). As part of the development consent, Calibre was required to make certain contributions under the then section 94 (now 7.11) of the Environmental Planning and Assessment Act 1979 (NSW) (the Act).
In 2012, Calibre entered into a further agreement with Council to perform specified works as ‘payment in kind’ towards those contributions (Agreement). The dispute related to roadworks (Works) undertaken under the Agreement which were completed in October 2012. Following completion of the Works, the parties fell into dispute about the value of the Works for the purpose of calculating Calibre’s contribution under the Act. The Agreement provided for the resolution of disputes by way of expert determination.
In 2015, Calibre was successful in having the first expert determination set aside. In 2016, the second expert determination was given. However, Council took no steps to enforce the second expert determination. Calibre was also not informed by Council of the outcome of the second expert determination. The reasons for this were not covered in the judgment.
Calibre did not seek the return of its bank guarantees at this time.
It was over two years before Calibre commenced proceedings against Council in October 2019, seeking the return of the bank guarantees provided as security under the Agreement. Calibre contended that it had no further enforceable liability under the Agreement, largely due to the expiration of the relevant statutory limitation period.
In defending Calibre’s claims, Council raised two main contentions:
- that it was entitled to retain the bank guarantees plus payment of the remaining value of the contributions not paid by Calibre arising out of the 2016 expert determination procedure (described below); and
- Calibre’s non-compliance with a 2013 defect notice.
Ground 1: Expert Determination gave Council a right to the bank guarantees
This related to payment of the remaining cash component of the contributions referred to above. The Agreement stipulated the amount was to be fixed by a quantity surveyor (QS) retained by Council via an expert determination procedure. The shortfall between the QS’ determined value of the Works and the remaining value of the contributions was to be paid in cash by Calibre to Council. Council cross-claimed for the shortfall of the cash contribution (about $650,000).
In 2013, Council appointed a QS to determine the value of the Works. On the basis of this valuation, Council commenced proceedings against Calibre in the NSW Supreme Court to recover this amount from Calibre. However, the Court held the determination had no contractual effect. Council then re-commenced the expert determination process with another determination produced in August 2016. For reasons not explained, Council did not take any steps to require payment of the shortfall by Calibre until Calibre commenced the proceedings the subject of this article.
While Calibre did not dispute that it once had a liability to pay the shortfall, it contended that its liability to pay arose when the works were completed in 2012 and that, by 2019, this claim was statute barred as more than six years had elapsed since the relevant cause of action accrued. Conversely, Council argued that Calibre’s liability to pay arose when Council issued its formal notice under the Agreement in November 2019. Council contended that Calibre’s interpretation of the Agreement would mean that the liability to pay would have arisen before the QS’ determination of the value of the Works in 2016. Council argued this would give rise to a result which was capricious or otherwise contrary to business sense. The Court gave short shrift to this argument, rejecting it on the basis that Council’s construction would mean the accrual of the cause of action could be deferred indefinitely by Council failing to issue the notice.
Ground 2: Defect Notice
Council’s second ground related to a defect notice served by Council on 10 October 2013 (Notice). Calibre disputed the Notice with Council over 2 years through correspondence. Ultimately, Calibre failed to comply with the Notice. It was reported that Council did not take any further action to enforce Calibre’s compliance. Calibre once again argued that any liability it may have had was now statute barred as its liability arose upon its failure to comply with the Notice by 10 November 2013 (the time period stipulated in the Agreement for compliance).
The Court held that both of Council’s claims were statute barred and Calibre was entitled the return of the bank guarantees held by Council. Calibre was also released from any liability in respect of the Defect Notice. The Court accepted that Calibre was required to pay the contribution shortfall on the earlier of the date of issue of the occupation certificate or when Council’s notice for payment was served. As the time between service of the occupation certificate (12 October 2012) and Council’s cross-claim (October 2019) was almost 7 years, the claim was statute barred.
Calibre’s position in relation to the Defect Notice claim was accepted by the Court in finding that it was also statute barred. Although, the Court noted that if Council had brought a separate cross-claim on this issue, it would likely have been within the limitation period per s 74 of Limitation Act.
It is worth noting that the order for the return of the bank guarantees is provisional as Council has commenced separate proceedings in the NSW Land and Environment Court. In these proceedings, Council contended that it may enforce compliance with the development condition requiring s 94 contributions under the Act, even if there is no entitlement under the Agreement. At the date of this article, these proceedings are ongoing, the result of which will ultimately determine the fate of the bank guarantees.
 Rockdale City Council v Calibre Construction Corp Pty Ltd  NSWSC 1980.
 This is because s 74 provides that the date of a cross-claim is the earlier of the date on which the person becomes a party to the principal action and the date on which the person becomes a party to the claim.
This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.