“Cladding Building Action” – There May be More Time to Sue Under the Victorian Building Act 1993

“Cladding Building Action” – There May be More Time to Sue Under the Victorian Building Act 1993

3 Feb 2021

By Lovegrove & Cotton – Construction and Planning Lawyers

Since December 2020, there has been a narrow exception to the Building Act 1993’s 10 year liability cap thanks to a new Section 134(2) which, for certain cladding building action, allows an extension of the standard building action limitation period from 10 years to 12 years. A “limitation period” refers to the period in which a law suit may be brought, so the change means that in certain instances claimants will have more time to sue.

The change relates to cladding building actions barred within the period between 16 July 2019 and 1 December 2021. The latter of those dates is 12 months after the commencement of Section 53 the new Cladding Safety Victoria Act 2020 (VIC) which, amongst other things, amended the Building Act 1993 (VIC).

Section 134(1) provides that the limitation period for a “building action” is 10 years from the date of the occupancy permit (see an article on point HERE). However, now the rather substantial amendment that is Section 134(2) provides that:

(2) Despite subsection (1), a building action may be brought more than 10 years but less than 12 years after the date of issue of the occupancy permit in respect of the building work (whether or not the occupancy permit is subsequently cancelled or varied) or, if an occupancy permit is not issued, the date of issue under Part 4 of the certificate of final inspection of the building work if

(a) the building action is a cladding building action; and

(b) the building action has become or becomes prohibited on or after 16 July 2019, but before 12 months after the commencement of section 53 of the Cladding Safety Victoria Act 2020, by this section as in force immediately before the commencement of that section of that Act.

Subsection (2)(b) contains reference to “building action” which has become “prohibited” (and context would dictate ‘prohibited’ refers to the operation of the 10 year liability cap) during the period 16 July 2019 through to a date 12 months after the commencement of Section 53 of the Cladding Safety Victoria Act 2020 (VIC).

According to the Endnotes of the Building Act 1993 (VIC), the amendment made by Section 53 of the Cladding Safety Victoria Act 2020 (VIC) came into effect on 1 December 2020. This means that the latest date by which claimants intending on taking a cladding building action must commence proceedings, if they intend to avail themselves of the longer 12 year limitation period, is 1 December 2021.

What is a “Cladding Building Action”?

Section 134(3) provides that:-

cladding building action means 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.

CSV’s Subrogation of Claims – Section 137F of the Building Act 1993

Under changes brought about by the Cladding Safety Victoria Act 2020, and other earlier amendments from 2019, Cladding Safety Victoria has a right of subrogation in circumstances where it funds cladding rectification to an owner of a building pursuant to Section 137F(2) of the Building Act 1993.

According to the Cladding Safety Victoria Act 2020‘s Explanatory Memorandum, the amendment to Section 134 of the Building Act 1993provides the State and building owners additional time to conduct due diligence activities to identify relevant building work and building practitioners against whom to bring legal proceedings. It is intended that these activities will have a deterrent effect on the building industry and assist the State to recoup costs associated with the cladding rectification program.

It is therefore clear that this 2020 amendment has been inserted to ensure that Cladding Safety Victoria has additional time to sue to recover costs associated with its cladding rectification funding program, by allowing the State to use its right of subrogation under Section 137F to sue parties deemed to be at fault for non-complaint cladding use where there is a valid cause of action.

Notably, however, the wording of the amendment is not drafted so as to deny building owners the capacity to take cladding building action in their own right. In fact, the definition of cladding building action is incredibly broad.

Conclusion – The Significance of Section 134(2)(b)

In light of the looming 1 December 2021 deadline for the commencement of cladding building action eligible for the 12 year extended limitation period, there may be an increase in cladding building actions initiated by CSV through its right of subrogation under Section 137F(2) throughout the remainder of 2021. There may also be an increase in building owners taking cladding building actions in their own right.

Cladding Building Action that was barred by the 10 year liability period from 16 July 2019 to 1 December 2021 may now be unencumbered by that limitation period if proceedings are commenced within 12 years of the occupancy permit or certificate of final inspection. In this regard, there is a mild retrospective effect in that potentially those claimants who were barred in late 2019 or early 2020 may now have more time to sue.

Of course, the viability of such action will be contingent upon whether respondents are sufficiently solvent or whether there is a pathway to make a claim on a builder’s Domestic Builder Insurance, which may be doubtful if one requires an extension to the 10 year limitation period. Domestic Builder Insurance covers rightful claimants only for 2 years after the completion date of building work, or termination of building contract in regards to non-structural defects, or 6 years in regards to structural defects. Also, Domestic Builder Insurance is not mandatory for buildings over 3 storeys.

Building owners and building practitioners should be aware of this reality and consider their potential rights or, contrastingly, their potential liability exposure in light of Section 134(2) as inserted in December 2020.

It is one of the first questions any construction lawyer should ask a prospective claimant or defendant: “when was the occupancy permit or certificate of final inspection issued?” In light of the December 2020 changes for a cladding building action, building owners along with building practitioners involved with building work where there have been concerns regarding cladding removal should be considering this question themselves.

In any event, if one is considering taking a cladding building action, it is essential one consults a lawyer to ensure that one’s right to claim has not expired by operation of any limitation period “guillotine”. It should also be emphasised that, as there is no case law that provides a direct interpretation guide to the new amendments, it is not possible to be definitive with regards to the legal import of the amending provisions. This further reinforces the importance of obtaining seasoned legal advice on one’s causes of action and the likely scenarios.

The above analysis regarding the interpretation of the new cladding  provision in section 134 is a product of the deliberations of Justin Cotton, Donna Abu-Elias, Kim Lovegrove and our senior paralegal Jordan Davies. It was a joint brainstorm of the significance of the amendments and possible impacts.