Out-Law / Your Daily Need-To-Know

Building owners and Victorian government given more time to take legal action on cladding

Out-Law Analysis | 08 Nov 2021 | 11:30 am | 2 min. read

Building owners in Victoria now have 15 years to commence taking legal action for cladding claims, after changes to the Building Act 1993 (Vic) passed by the Legislative Council received Royal Assent on 19 October 2021.

Where funding has been provided to a building owner by the state government for cladding rectification, the government will likewise have 15 years to commence taking legal action by operation of its rights of subrogation under section 137F of the Building Act 1993 (Vic).

The further extension to the limitation period marks the latest in a series of regulatory changes in Victoria and Australia more broadly relating to the approval and use of combustible cladding since the fire at the Lacrosse tower in Docklands in 2014.

Whilst the importance of ensuring safety and consumer protection in the context of unsafe building products is widely accepted, lengthening the time to take action will not necessarily prove an effective answer given the clear issues that will continue to present in respect of the availability of evidence and the regulatory regimes relating to the approval and use of combustible cladding which operated at the relevant times.

The extra time is aimed at recognising the complexity of beginning cladding-related legal action and the impacts of the Covid-19 pandemic, as well as providing the state government with further time to recover costs associated with rectification

The practical application of subrogated recovery actions by the state government remains to be seen and the further extension continues to give rise to uncertainty and increased risk to builders and building professionals.

Builders and other building professionals should continue to consider the implications of the extended limitation period with respect to any required insurance notifications, renewals of professional indemnity policies and maintain appropriate document management practices.

Why has the limitation period changed?

The Victorian government’s amendments to the Building Act 1993 (Vic), through the Building Amendment (Registration and Other Matters) Act 2021 (Vic), came into effect on 20 October 2021 and give building owners 15 years to take legal action to recover costs associated with a ‘cladding building action’. This is defined as a building action “in connection with, or otherwise related to, a product or material that is, or could be, a non-compliant or non-conforming external wall cladding product”.

The changes extend the limitation period for cladding building actions which would have otherwise expired on or after 16 July 2019 but before 1 December 2023.

A ‘limitation period’ is the period of time in which a party must bring a claim and take legal action.  In relation to cladding building actions, limitation periods typically run from the date when the occupancy permit was issued. They are often relevant to defect or breach of statutory warranty claims brought against builders and related claims against other building professionals.

The changes are further to amendments made to the Building Act 1993 (Vic) in December 2020 which extended the limitation period to 12 years for cladding building actions which would have expired between 16 July 2019 and 1 December 2021.

The extra time is aimed at recognising the complexity of beginning cladding-related legal action and the impacts of the Covid-19 pandemic, as well as providing the state government, through Cladding Safety Victoria, with further time to recover costs associated with the cladding rectification program.

The further extension of the limitation period for cladding building actions is an extraordinary legislative development.  Builders, including directors of registered companies, and other building professionals continue to face issues relating to their professional indemnity policies due to the continued changes and, for some, the continued risk of personal exposure.

Cladding building actions are now distinctly separate from other types of claims that owners may have and there does not appear to a valid justification to single out and significantly extend the time allowed for owners to make cladding related claims (as opposed to other types of claims) and expose builders and building professionals to a previously unforeseen extended period of claim litigation and potential liability exposure. These types of changes should be supported by a sound policy basis and strong evidence of the need for such a change, which seem absent here.

Additional input from Elsie Richardson of Pinsent Masons.