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The Victorian 10-Year Liability Cap – The 10 Years from When the Occupancy Permit Is Issued Test

• The French Napoleonic Code inspired ‘decennial liability’ Section 134 of the Victorian Building Act 1993 was introduced to bring certainty to the legal process and the limitation period for legal proceedings.
• Before Section 134, there was confusion about when the clock for initiating legal proceedings started to tick over.
• There were two conflicting tests:

– The Infinity Plus 6 test: Once a defect was discovered, you had 6 years to issue legal proceedings.

– From When The Damage Occurred test: You had 6 years from when the damage occurred to issue legal proceedings.

• This uncertainty meant plaintiffs and defendants often didn’t know whether they were still within the time limit or not and had to run the gauntlet of litigation to find and answer to this question.
• The result was risky litigation, where you had to rely on sometimes shaky, after-the-event evidence to figure out when the limitation period was triggered.
• Attempts to navigate the confusion is seen in recent New Zealand cases, where litigation revolves around trying to divine the cryptic trigger point for when the limitation period begins.

The Wording of Section 134

Limitation on time when building action may be brought

1. Despite any thing to the contrary in the Limitation of Actions Act 1958 or in any other Act or law, a building action cannot be brought more than 10 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.

Why 10 Years?

• The 10-year liability cap follows the French system, inspired by the Napoleonic Code.
• The decennial liability rule in French law allows for a 10-year period to bring building claims.
• The statutory precedent provided clear guidance, offering certainty to both plaintiffs and defendants.
• A policy decision in Victoria by the then law reformers was made that the likelihood of a defect taking more than 10 years to evolve from latent to apparent was infinitesimally small.
• This policy reduced the risk of plaintiffs being shut out from bringing claims.

How Does It Operate?

• In Victoria, building surveyors are required by law to issue an Occupancy Permit (OP) when a building is fit for occupation.
• For renovations, a Certificate of Final Inspection is issued instead of an OP.
• Once either instrument is issued, the parties involved have 10 years to initiate legal proceedings from the date of the OP or final inspection.
• To use French terminology, the right to issue legal proceedings is then “guillottinéd” (cut off after the 10-year period).

Section 393 of the Building Act 2004 – The 10 Years from the Act or Omission Test

• Section 393 of the Building Act 2004 (New Zealand) also imposes a 10-year limitation period for bringing legal actions related to compromised building work. This test is based on the date of the act or omission that caused the problem.
• Unlike in Victoria, where the clock starts ticking from the issuance of an Occupancy Permit or Certificate of Final Inspection, in New Zealand, the limitation period starts from the actual date when the problematic work was done or when the omission occurred.

Section 393 of the Building Act 2004:

393 Limitation defences

(1) The Limitation Act 2010 applies to civil proceedings against any person if those proceedings arise from—

(a) building work associated with the design, construction, alteration, demolition, or removal of any building or the manufacture of a modular component manufactured by a registered MCM who is certified to manufacture it; or

(b) the performance of a function under this Act or a previous enactment relating to the construction, alteration, demolition, or removal of the building or the modular component.

(2) However, no relief may be granted in respect of civil proceedings relating to building work if those proceedings are brought against a person after 10 years or more from the date of the act or omission on which the proceedings are based.

(3) For the purposes of subsection (2), the date of the act or omission is,—

(a) in the case of civil proceedings that are brought against a territorial authority, a building consent authority, a regional authority, or the chief executive in relation to the issue of a building consent or a code compliance certificate under Part 2 or a determination under Part 3 the date of issue of the consent, certificate, or determination, as the case may be; and

(b) in the case of civil proceedings that are brought against a person in relation to the issue of an energy work certificate, the date of the issue of the certificate.

Compare Section 134 with Section 393

Section 134 – 10 Years from the Issuance of the Occupancy Permit

• Section 134 of the Building Act 1993 (Victoria) establishes that legal proceedings must be initiated within 10 years after the date of issue of the occupancy permit or, if an occupancy permit is not issued, 10 years after the date of issue of the certificate of final inspection.
• This means that the limitation period is based on the officials’ approval of the building’s completion or renovation.
• The relevant building surveyor is required by law to issue an occupancy permit when the building is fit for occupation, and a copy of that OP must be filed with the local council. This makes the evidence crystal clear in terms of verifying the start date, as there is a specific and documented issuance date. This creates a ‘slam-dunk’ evidential clarity mechanism.

A legal instrument that provides clear evidence of the 10 year limitation period start date-section 134 Victorian Building Act 1993

Section 393 – 10 Years from the Act or Omission

• Section 393 of the Building Act 2004 (New Zealand) sets the limitation period as 10 years or more after the date of the act or omission on which the proceedings are based.
• This means the time starts running from the actual act or omission that caused the problem, rather than from an official approval like an occupancy permit.

However, the date of the act or omission in New Zealand raises several evidentiary challenges:

The challenge is to find the evidence of an act or admission-section 393 New Zealand Building Act 2004

• What was the act? Determining the exact nature of the problematic act can often be unclear.
• What was the omission? Identifying whether a failure to act (omission) contributed to the issue can be subject to dispute.
• By whom? Multiple parties may have been involved in the building work, making it hard to pinpoint responsibility.
• Years after the event, is the evidence still available? After 10 years, evidence may be lost, damaged, or unavailable.
• Is it contestable? Even if evidence is available, its quality may be challenged in court due to the time elapsed.
• Are the key witnesses still alive or in the country? Witnesses may have passed away or moved abroad, affecting their availability for testimony.
• Can they recall? After 10 years, the reliability of witness memory can be a significant issue, leading to discrepancies in their testimonies.

6. How to Fix NZ’s 10-Year Confusion: A Clearer Path Forward

• One possible solution to this issue in New Zealand could be amending the Building Act 2004 to clarify the start date for the 10-year limitation period.
• The 10-year litigation period could commence upon the date that a Code Compliance Certificate (CCC) is issued by the relevant territorial authority.
• If a CCC is not issued, the start date could be triggered by another form of completion certificate, such as an Occupancy Permit, to bring clarity and alignment with the Victorian system.
• Additionally, there would need to be a regulation that mandates the filing of a copy of the completion instrument with the local territorial authority, ensuring that a clear, documented start date is available as evidentiary proof.

Footnote: Cladding Exclusion (Section 134A)

Section 134A provides an exception to the general 10-year liability cap for cladding-related defects. This section allows for legal proceedings to be brought even after the normal 10-year period has expired, specifically for claims relating to non-compliant cladding. The key provisions are:

1. A cladding building action may be brought in respect of any building work relating to non-compliant or non-conforming external wall cladding product within the period ending on the later of—

1. (a) 10 years after the date of issue of the occupancy permit in respect of the building work or, if an occupancy permit is not issued, 10 years after the date of issue of the certificate of final inspection of the building work; or
2. (b) 10 years after 16 July 2019.
3. This section applies to any cladding building action, whether the right to bring the action accrued before, on, or after 16 July 2019.

About the Author

Adjunct professor Kim Lovegrove MSE RML is the founder of Lovegrove & Cotton Lawyers is the Founding Chairman of the International Building Quality Centre (IBQC). Kim has been a senior law reform consultant to the World Bank in which capacity he was part of a team that provided advice to the Chinese Government on best practice approaches to building regulatory reform. He was also retained by the World Bank to review the first-ever Malawian Building Act and was the project director of the Australian National Model Building Act team, which served as the law reform template for several Australian jurisdictions in the mid-nineties. 

Some other related articles on law reform ideas and liability reform 

Presentation by Adjunct Professor Kim Lovegrove MSE, RML of Lovegrove and
Cotton Lawyers for the Society of Construction Law New Zealand, February
2023.

Rethinking Liability: Fairer Solutions for New Zealand’s Local Councils and Building Defects

Some Musings on Reform Ideas for the New Zealand Building Regulatory Framework

Disclaimer:
The information provided in this article is for general informational purposes only. It does not constitute legal advice. For specific legal advice related to building regulations and compliance, please consult a qualified construction lawyer.