Limitation periods for water law claims down the drain

What you need to know

• Recent authority suggests that limitation periods do not apply to water flow claims under s 157(1) of the Water Act 1989 (Vic). 
• There are inconsistent Supreme Court decisions as to whether the Limitation of Actions Act 1958 (Vic) applies to VCAT proceedings. 
• We anticipate that this inconsistency will be resolved in the near future, either by a subsequent Supreme Court case, or through legislative amendment to the Limitations Act.

What you need to do

• If you may have a claim for damages resulting from the flow of water onto your land, you should bring your claim within 6 years, even though there remains uncertainty as to whether the Limitations Act applies to such claims under the Water Act. 
• As a defendant to a flow of water claim under the Water Act, even if you are served with a claim after more than 6 years, you should ensure you are prepared to engage with the merits of the case, in addition to advancing limitations arguments. 

Liability for water flows under the Water Act 

The Water Act 1989 (Vic) imposes liability on Authorities in certain circumstances where a flow of water occurs from an Authority's works onto any land and causes injury, damage to property or economic loss: s 157.  

The recent decision of the Victorian Civil and Administrative Tribunal (VCAT) in Steedman v Greater Western Water Corporation [2023] VCAT 128 has cast doubt on whether limitation periods in the Limitation of Actions Act 1958 (Vic) apply to: 

a. proceedings brought in VCAT; or

b. claims made pursuant to s 157 of the Water Act. 

Steedman – Does the Limitations Act apply to proceedings in VCAT?

Steedman involved a claim that the Applicant had suffered loss and damage as a result of a flow of water from the Respondent's sewerage infrastructure on or around 18 February 2015.  On 21 April 2021, the Applicant commenced proceedings in VCAT under s 157(1) of the Water Act, seeking damages.  The Respondent raised a limitations defence, arguing the claim was statute barred by reason of the 6-year limitation period in ss 5(1)(a) or (d) of the Limitations Act. 

VCAT was required to determine whether the action brought under s 157(1) of the Water Act was statute barred, while considering the potentially conflicting views expressed in two recent judgments of the Supreme Court of Victoria concerning the applicability of the Limitations Act in VCAT proceedings: 

• In Lanigan v Circus Oz [2022] VSC 35, McDonald J found that the Limitations Act does not apply to proceedings brought under VCAT's original jurisdiction to enforce a claim under the Equal Opportunity Act 2010 (Vic).  It was held that the proceeding was not one which met the definition of 'action' in the Limitations Act on the basis that VCAT is not a 'court of law' for the purposes of that definition. 
• In Ajaimi v Giswick Pty Ltd [2022] VSC 131, M Osborne J held that a contractual claim under the Retail Leases Act 2003 (Vic) brought in VCAT by a tenant for damages arising from water and sewerage ingress to leased property was subject to s 5(1)(a) of the Limitations Act.  The Court held that the definition of 'action' was an inclusive one and was not limited to proceedings brought in court – the Limitations Act applies to a court "or equivalent". 

In Steedman, VCAT held that it was bound by the decision of McDonald J in Lanigan, despite the alternative view subsequently expressed in Ajaimi. 

This was because, applying the doctrine of precedent, VCAT found Lanigan to be indistinguishable from to the facts arising in the case before it, as Lanigan also dealt with a statutory cause of action.  Ajaimi, on the other hand, was distinguishable in that it dealt with a claim founded in contract.  

If VCAT was not bound by the decision in Lanigan, their Honours stated that they would be inclined to apply s 5 of the Limitations Act to legal proceedings brought in VCAT for causes of action that fall within the ambit of that section. 

Ultimately, VCAT stated that the apparent conflict between Lanigan and Ajaimi is a question that can only be resolved by the Supreme Court, or through legislative amendment. 

Steedman - Could s 157(1) of the Water Act attract s 5(1) of the Limitations Act?

Despite finding that it was bound by Lanigan (ie limitation periods do not apply), VCAT nevertheless considered whether an action under s 157(1) of the Water Act could attract s 5(1) of the Limitations Act.  Their Honours ultimately concluded that s 157(1) does not fall within ss 5(1)(a) or (d) of the Limitations Act, because: 

• it is not an action founded on tort or one for damages for breach of a statutory duty (s 5(1)(a)); and 
• it is not an action to recover a 'sum' recoverable by virtue of an enactment (s 5(1)(d)). 

In making this finding, VCAT noted that s 157 provides a freestanding statutory cause of action, which is "very different from any cause of action available at common law". 

VCAT then analysed the history of s 157 of the Water Act, concluding that the Water Act had abolished common law claims, and as a result, s 157 was not an action "founded on tort".  Therefore, s 5(1)(a) was not enlivened. 

The Tribunal was also of the view that a proceeding under s 157(1) is not an action "to recover any sum recoverable by virtue of enactment" for the purposes of s 5(1)(d) of the Limitations Act.  Section 157 does not provide for the recovery of a sum which is certain or calculable under the provision of the enactment itself or ascertainable by reference to some stipulated standard or measure.

Was Steedman correctly decided?

Interestingly, the finding that s 157(1) does not fall within ss 5(1)(a) or (d) of the Limitations Act is arguably inconsistent with an earlier VCAT decision in Body Corporate 18236 v Body Corporate 25805 [2003] VCAT 1342 (Body Corporate 18236).  

Body Corporate 18236 involved a cause of action brought under s 16 of the Water Act (an equivalent provision to s 157, imposing liability on individuals rather than authorities).  In Body Corporate 18236, Macnamara DP found that s 16 of the Water Act was subject to s 5(1)(a) of the Limitations Act.  In finding that s 16 was an action "founded on tort", VCAT stated that, like the common law torts of nuisance and negligence, an inherent component of the cause of action in s 16 is damage suffered by the applicant.  As such, "the terms of Section 16(1) make damage the gist of the action", rendering s 16 an action "founded on tort". 

Body Corporate 18236 was not referred to in Steedman.  However, this alone does not mean Steedman was incorrectly decided, as VCAT is not bound by its earlier decisions. 

Implications of the Steedman decision

Steedman raises doubts about the correctness of the analysis in Lanigan. Although VCAT felt bound to apply Lanigan, the line of authority that the Limitations Act does not apply to proceedings in VCAT is open to scrutiny. The current situation, where there is uncertainty as to which types of proceedings may attract limitation periods in VCAT, is not ideal, and we therefore anticipate further judicial consideration or legislative amendment in the near future. 

Authors: Jane Hall, Partner; James Clarke, Partner; and Ben Kilbride, Lawyer.