Insights

Building owners given two more years to pursue cladding claims

Insurance Law & Litigation

On 3 September 2020, the Victorian Government introduced into the Victorian Legislative Assembly a suite of cladding related reforms, including giving building owners more time to take legal action for cladding claims.

The Cladding Safety Victoria Bill 2020 introduces significant changes in the cladding litigation space. The most significant change is that owners will be given an extra two years to pursue legal action against builders, building professionals or others to recover the cost of any "cladding building action". The bill will increase the current 10-year time limit to 12 years. A "cladding building action" means an action "in connection with or otherwise related to" a non-compliant or non-conforming external wall cladding product.

The change will apply to owners whose claims have either become time barred or will become time barred sometime between 16 July 2019 and 12 months after the new bill commences. The extension will give owners more time to pursue claims and allow the State to recoup costs associated with the cladding rectification program.

We have three key concerns about the extension of the limitation period:

  1. Firstly, the definition is not limited to flammable or combustible cladding claims, but rather "cladding building actions". Accordingly, the change has the potential to apply to other sorts of cladding related problems (such as waterproofing non-compliance) and may enliven all manner of previously statute barred claims.
  2. A "cladding building action" includes claims "in connection with or otherwise related to [cladding products]". The breadth of this definition may operate as a trojan horse to allow owners to bring claims about non-cladding related defects, but which are "in connection with or otherwise related to" cladding products.
  3. Many practitioners have prepared bulk notifications to their insurers based on the 10-year limitation period applying and may not have notified older projects. With cladding exclusions now rife within the industry, there is an appreciable risk that many practitioners will be uninsured for any such claims.

We will be following the progress of the bill closely and provide a further update once it is passed.

The full text of the bill and the explanatory memorandum can be accessed here.

Authors: Charles Thornley, Partner; Natasha Stojanovich, Partner; Simone Karmis, Lawyer

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