Bradbury Legal’s Back to Basics: Limitation Period

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Part 1: Defects and Contracts – Which Limitation Period Applies?

Limitation periods are a foundational element of construction law claims, for all parties involved. In essence, a limitation period prescribes the time frame within which legal action must be initiated, such as a claim for defective work.

While the limitation periods applicable to various defects are clearly outlined in legislation (as detailed in the table below), complexities can arise in the context of construction contracts, particularly where multiple pieces of legislation may apply. This article examines several cases that help clarify these nuances.

To begin, it is useful to consider the basic limitation periods in New South Wales:

Limitation Act 1969 (NSW) For a breach of contract 6 years from the breach
For a breach of deed 12 years from the breach
Home Building Act 1989 (NSW) (HBA) For breach of statutory warranty resulting in a major defect 6 years from the date of completion
For breach of statutory warranty resulting in a minor defect 2 years from the date of completion
Design and Building Practitioners Act 2020 (NSW) For a breach of statutory duty of care 6 years from the discovery of the defect

A more complex issue arises in cases involving both a breach of statutory warranty and a breach of contract. The Supreme Court of NSW provided guidance on the appropriate limitation period to apply in such circumstances in Onslow v Cullen [2022] NSWSC 1257.

In January 2016, the builder (Onslow) entered into a contract with the owner (Cullen) to carry out residential building work under an HIA contract. Clause 39 of the contract expressly incorporated the statutory warranties prescribed by the HBA. In April 2017, Onslow ceased work prior to completion, and proceedings were subsequently commenced in August 2019 for a breach of contract, alleging both incomplete and defective works. Onslow contended that the defects in the completed works were minor defects, and therefore the two year limitation period was applicable. Conversely, Cullen maintained that the claim was in relation to breach of contract, meaning the 6 year limitation period should be applied.

The question posed to the Supreme Court was whether the breach of contract or the breach of statutory warranties applied, as the statutory warranties were incorporated into the contract. Justice Adamson drew attention to section 7(a) of the Limitation Act 1969 (NSW), which states:

Nothing in this Act (a) applies to an action or arbitration for which a limitation period is fixed by or under an enactment other than this Act or by an Imperial enactment (not being an enactment or an Imperial enactment repealed or omitted by this Act)…

This section clearly establishes that where legislation prescribes a different limitation period to that defined in the Limitation Act, this new limitation period will prevail. Accordingly, in the present case, it was determined that the claim would be for minor defects and so the two year limitation period displaced the six year limitation period for a breach of contract. Importantly, the incorporation of statutory warranties into the contract did not alter the fundamental nature of the owner’s claim.

The key takeaway from this decision is that, when dealing with limitation periods, one cannot rely solely on provisions of the Limitation Act in circumstances where new legislation has been enacted which dictates a differing limitation period.

For further analysis of limitation periods, the next Back to Basics article will examine the treatment of ‘tacked on’ defects and the relevant limitation rules that apply.

Bradbury Legal is a specialist building and construction law firm. Contact us on (02) 9030 7400, or at info@bradburylegal.com.au.

The Prevention Principle – A Balancing Act in Construction Law

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The Prevention Principle – A Balancing Act in Construction Law

The prevention principle most commonly arises in delay disputes where a principal seeks to claim liquidated damages for late completion, but has itself caused, or contributed to, the its simplest form, the prevention principle prevents a party from taking advantage of its own wrong.[i]  This maxim was established Holme v Guppy (Ex) (1838) 3 M & W 387, where the English Exchequer Court refused to let a party enforce a completion date it had made impossible to meet.[ii]  However, whilst seemingly straightforward, modern Australian courts have both refined its scope and clarified its reach, reshaping its application to present-day projects.

How EOT clauses affect the prevention principle

The conventional position, reflected in Gaymark Investments Pty Ltd v Walter Construction Group Ltd [1999] NTSC 143 (Gaymark), is that if a principal delays the works and the contract does not provide for an extension of time (EOT), time becomes “at large.”[iii]  An EOT clause is a contractual provision that allows a project completion date to be extended where certain events occur, such as variations to the works, unforeseen site conditions, or delays caused by the acts or omissions of third parties. When invoked, the contractor is then obliged only to complete within a reasonable period, and the principal loses the right to claim liquidated damages. Properly drafted, an EOT clause should adjust completion dates to reflect delays caused by the principal, potentially shielding the contractor from claims for liquidated damages.

Modern view – time at large persists

Courts have recently emphasised that the mere presence of an EOT clause does not automatically protect against time becoming “at large”. Gaymark illustrates the risk: if an EOT mechanism is too narrow or impractical to cover certain principal-caused delays, time could still be held to be “at large”.[iv]  Conversely, Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd confirmed that when the EOT clause explicitly allowed extensions for principal-caused variations, the contractor remained obliged to complete by the extended date, and the principal could thereafter enforce liquidated damages.[v]  These cases highlight that the practical effect of an EOT clause depends on its drafting and scope.

Balancing perspectives – containment and middle ground

The tension between broad and narrow applications of the prevention principle can be distilled to scope versus equity. In many standard-form contracts, the principle is effectively displaced where EOT clauses already cover principal delays, as seen in Multiplex Constructions Pty Ltd v Abgarus Pty Ltd (1992) 33 NSWLR 504. Too generous an application undermines carefully negotiated risk allocation; too narrow, and principals avoid accountability. A balanced approach tests not just whether an EOT clause exists, but whether it grants time for principal-caused delays. If it doesn’t, the principle from Gaymark may still apply.

Conclusion

The prevention principle illustrates the dynamic nature of construction law. It shows how the traditional English-derived principles of equity continue to shape modern contracts while demonstrating flexibility in balancing fairness and risk allocation. Whether courts favour a “function over form” approach or a “contained to the gaps” view, the takeaway is clear: the prevention principle remains relevant, but its practical impact depends on careful drafting.

Practical implications

The following practical considerations may help both principals and contractors navigate potential disputes:

  • Principals should ensure EOT clauses are broad enough to capture all principal-caused delays and are operable in practice.
  • Contractors should assess whether the EOT regime also functions effectively from a contract administration perspective – if not, there may be grounds to argue time at large.
  • Both sides should remember that the prevention principle remains a live doctrine: Multiplex shows it can be displaced, but Gaymark shows it has not been extinguished.

For practitioners, understanding how the prevention principle interacts with EOT clauses can inform risk management and contract administration. For guidance on navigating its application, managing EOTs, or mitigating delay – related risks contact us on (02) 9030 7400, or email us at info@bradburylegal.com.au.

 

[i]  Alghussein Establishment v Eton College [1988] 1 WLR 587.

[ii] Holme v Guppy (Ex) (1838) 3 M & W 387, 389 (Parke B).

[iii] Beckhaus v Brewarrina No 2 [2004] NSWSC 1160, [47].

[iv] Gaymark Investments Pty Ltd v Walter Construction Group Ltd (1999) 16 BCL 449, [456–458].

[v] Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd [2017] NSWCA 151, [115].

Timing is everything (until it isn’t): navigating the timeline for bringing home building proceedings

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The Background

The dispute arose from a multi-unit residential development in Meadowbank completed on 15 July 2014 by Wekan Pty Ltd (Developer) and Raysons Constructions Pty Ltd (Builder).

The Owners Corporation (OC) commenced proceedings in NCAT on 26 November 2020, over four months after the expiry of the six-year limitation period under the Home Building Act 1989 (NSW) (HBA). The claim was a statutory warranty claim for damages and included general building defects and structural defects.

Prior to the hearing, the Developer went into administration and the proceedings against the Developer were stayed under the Corporations Act 2001 (Cth). The claim proceeded against the Builder only.

NCAT proceedings

The OC claimed that it was entitled to an extension of the warranty period and relied upon the limited six-month extension allowed when the defect only becomes “apparent” in the final six months of the warranty period per s 18E(1)(e)-(f) of the HBA, which says in summary:

If a breach of warranty becomes apparent within the last six months of the warranty period, proceedings may be commenced within a further six months after the end of the warranty period; and a breach of warranty becomes apparent when any person entitled to the benefit of the warranty first becomes aware (or ought reasonably to have become aware) of the breach.

The Builder ran a limitation defence that the proceedings were out of time.

The Tribunal found in the OC’s favour and determined:

  1. that the OC was aware of the defects as early as 2014 but was not aware the defects amounted to breaches of statutory warranties until later when the OC obtained expert evidence; and
  2. that the OC was entitled to the extension of the warranty period, and the Builder was ordered to rectify the defects.

Internal NCAT appeal proceedings

The Builder appealed the determination based on seven grounds, the first ground being whether the Tribunal had made an error of law by finding that the OC could rely on the six-month extension of the warranty period.

The Appeal Panel only addressed the first ground and found that the proceedings were commenced after the six-year time period for major defects expired and therefore, the Tribunal did not have jurisdiction to hear and determine the issues between the parties and therefore, the application must be dismissed.

The Builder was successful, and the Appeal Panel upheld the appeal.

Supreme Court appeal proceedings

The Supreme Court upheld the appeal and found that the OC could rely on the six-month extension of the statutory warranty period.

Key takeaways of this decision:

The Court’s decision has ultimately provided us with more guidance in relation to the following:

  1. on what “becomes aware or ought reasonably to become aware”

The Court held that there are two limbs to the test. On its face, it asks whether “any” person entitled to the benefit of the warranty has either:

a) become aware; or

b) ought reasonably to have become aware of the breach.

The Court drew a distinction that just because an owner is aware of a defect, this does not mean that they should be aware that the defect is a breach of the statutory warranties as they are very different things.

The OC argued it only became aware of the true seriousness of the defects in the final six months of the limitation period when they received the expert reports. The Court agreed and said that whether defects are a breach of the statutory warranties is a legal conclusion which will usually involve further expert investigation to confirm.

  1. an awareness of the defect by owners is not sufficient grounds to bar the whole claim as each defect must be assessed separately along with its link to a breach of the warranties;
  1. the owner bears the onus of proof to demonstrate that they did not know about the defects. The Court found that where there is an issue of whether an owner has commenced action within the further 6 months, the onus rests with the owners to establish the facts that entitle it to rely on the extended time;
  2. owners can rely on the 6-month extension, but they must prove that they only became aware of the “breach” in the last 6 months of the warranty period;
  3. the Appeal Panel made an error in the way they interpreted the original NCAT determination (that the OC knew about the defects years earlier) and suggested that the errors could have been clarified by the parties via the slip rule; and
  4. given that the Appeal Panel of NCAT did not address all of the appeal grounds, the matter was referred back to NCAT.

Where do builders and developers go from here?

This decision has created significant implications for key players within the building and construction industry. Therefore,  builders and developers should note that:

  1. knowing when the warranty period for your residential building projects expire is beneficial;
  2. running a limitation defence can be difficult to defend as well as costly and time consuming (this case took four years to reach the Supreme Court and is still ongoing);
  3. considering commercial resolutions early on before proceedings are commenced as the Tribunal will likely make a work order for rectification in any event so any genuine defects should be addressed. This may avoid the risk of defending contested proceedings in the District Court or Supreme Court where the Court can only award damages not rectification; and
  4. seek legal advice well in advance of warranty periods lapsing if you are on notice of defective work by owners.

 

If you or anyone you know needs any assistance in relation to this, please contact Bradbury Legal who are specialists in this area, on (02) 9030 7400 or at info@bradburylegal.com.au.

Locked Out by Time: NSW Supreme Court Clarifies Long Stop Limits in Home Warranty Claims

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In a decision that will resonate across the construction, insurance and strata management sectors, the Supreme Court of New South Wales has delivered a clear message: when it comes to statutory home warranty insurance, timing is everything.

The recent case of The Owners – Strata Plan No. 81376 v Dyldam Developments Pty Ltd [2025] NSWSC 438 (Dyldam Developments), decided by Justice Stevenson on 8 May 2025, underscores the unforgiving nature of statutory limitation periods under the Home Building Act 1989 (NSW)(HBA). This ruling has reinforced the strict limits of what can be claimed, when and how – particularly in relation to latent defects and historical correspondence.

Understanding the Framework

Home warranty insurance plays a vital role in protecting homeowners and strata schemes from defective residential building work in New South Wales. Under the HBA, builders and developers are required to obtain statutory warranty insurance for residential projects valued over a certain threshold ($20,000). This insurance provides cover to property owners in cases where the builder is insolvent, dead or has disappeared, and there are defective and/or incomplete works.

Within this statutory framework, two key provisions of the HBA govern the timing and scope of insurance claims:

  • Section 92(5) provides that a contract of insurance is in force for residential building work (the “original work”) extends to any further work carried out by the same builder by way of rectification of the original work. Accordingly, a separate insurance contract is not required in relation to the rectification work.
  • Section 103BC, often referred to as the “long stop” provision, imposes a strict limit of 10 years from the date of completion of the building work. After this period, no claim can be brought under the policy – regardless of when a defect is discovered or how serious it may be.

These provisions aim to balance consumer protection with commercial certainty for insurers and builders. However, in practice, they can have  consequences for owners who discover structural issues or latent defects years after completion.

Background – The Facts

The dispute in Dyldam Developments arose from a multi-unit residential development completed in 2012. Following the collapse of the builder and developer – both of whom entered administration in 2022 – the only active defendant remaining was Lumley Insurance (part of Insurance Australia Limited), which had issued the residential building insurance policy in 2006.

After discovering building defects, the Plaintiff, (the Owners Corporation), claimed that correspondence with Lumley Insurance in both 2012 and again in 2022 constituted formal insurance claims. They argued that the insurer remained liable for the defective works, despite the significant passage of time.

Lumley Insurance denied liability, asserting that the correspondence in question did not constitute valid claims under the policy and that any entitlement had been extinguished by the operation of the 10-year statutory limitation period – specifically, section 103BC of the HBA.

This case gave the NSW Supreme Court an opportunity to clarify the scope and operation of statutory limitation provisions in relation to home building insurance – particularly whether informal communications satisfy the requirements of a formal insurance claim, and how long stop limitation is to be applied.

The Dispute: What Constitutes a “Claim”?

At the heart of the case was whether the correspondence – letters sent in 2012 and again in 2022 – constituted valid claims under the home warranty insurance policy issued by Lumley Insurance. The Owners Corporation argued that the insurer’s obligations were triggered by these letters, as they related to building defects from work carried out by Dyldam Developments.

The insurer maintained that the communications did not meet the policy’s requirements for a formal claim – and, in any case, that the time limit for bringing a claim had long since expired.

Legal Terrain: A Matter of Interpretation

The case required careful consideration of statutory interpretation and the construction of the insurance policy. Key provisions of the Home Building Act examined by the Court included:

  • Section 92(5), which addresses how insurance policies apply to rectification work performed by the same builder;
  • Section 103BC, the so-called “long stop” provision, which caps liability at 10 years from the completion of work, regardless of when defects become known.

Justice Stevenson also considered foundational High Court authorities such as McCann v Switzerland Insurance Australia Ltd (2000)[1] and Project Blue Sky Inc v Australian Broadcasting Authority (1998),[2] along with recent guidance from the NSW Court of Appeal in Drummond v Gordian Runoff Limited CAN 052 179 647 [2024].[3]

The Decision: A Firm “No”

The Court was asked to determine several key questions, including:

  • Did the 2012 letter constitute a valid claim under the insurance policy?
  • Were the 2022 letters submitted within time to qualify as valid claims?
  • Could any statutory interpretation operate to circumvent the 10-year long stop?

The Court’s answer to all three questions was a resounding “no.”

Justice Stevenson held that the correspondence did not meet the policy’s definition of a claim. Even if it had, the 10-year long stop limitation period under section 103BC had expired. Section 92(5) did not operate to extend or reset the limitation period – the insurer’s liability was extinguished.

Why It Matters

This decision is a clear reminder to owners’ corporations, strata managers and construction professionals: the statutory protections afforded by home warranty insurance are strictly time-bound.  The clock starts ticking at the date of completion, not when a defect is discovered or discussed.

Insurers will welcome the certainty provided by the Court’s interpretation. Builders and developers should also consider the implications for rectification work and insurance coverage. Most importantly, property owners and strata committees must take early and formal steps when pursuing defect claims – delays can be fatal.

A Turning Point for Policyholders?

This judgment may prompt calls for legislative reform, particularly from strata and consumer advocacy groups. Given that many building defects are latent and may not be discovered until well after completion, the strict application of the 10-year long stop can leave property owners without recourse.

Whether Parliament will revisit the timeframes under the HBA remains to be seen. For now, however, the position is clear: home warranty claims must be made strictly within the timeframes prescribed by statute and the policy. Anything less will likely be dismissed – regardless of merit.

If you’re involved in construction disputes, strata law or insurance litigation, this case is essential reading. Feel free to reach out or connect for further discussion on its implications.

 

Bradbury Legal is a specialist building and construction law firm. If you or anyone you know requires advice or assistance, reach out to us on (02) 9030 7400, or email us at info@bradburylegal.com.au to see how we can assist you.

[1] 203 CLR 579; [2000] HCA 65.

[2] 194 CLR 355; [1988] HCA 28.

[3] NSWCA 239.