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Limitations and time bars abound in construction
arrangements. The application of the 'ultimate
limitation period' of ten years has recently expanded,
but a lot of work done before 1 August 2008 will still slip
through the cracks.
Contractor claims are often expressly barred unless they are
made within a specified period and defects must be notified
within 3, 6 or 12‑months, depending on the contract.
The Home Building Act 1989 requires builders to give
statutory warranties for seven years, but limits home warranty
insurance indemnity to two years for non‑structural
and six years for structural issues. The Limitations Act
1969 bars claims six years after the 'cause of
action accrues'.
Despite the raft of bars and limitations, claims relating to
building issues, brought many years after the structure is
occupied, remain common place.
Building claims based on breach of a duty of care are
subject to a six year limitation period, but the six year
period does not commence to run until the defect becomes
apparent (unless expressly prohibited under the contract). A
fundamental defect may take years or even decades to reveal
itself.
Section 109ZK of the Environmental Planning and
Assessment Act attempted to manage this long tail of
construction liability by barring claims made more than 10
years after the date on which the final occupation certificate
was issued. The difficulty is that history has recorded many
instances where an occupation certificate has never been
issued. If there is no occupation certificate, there is no 10
year 'ultimate limitation period'.
On 1 August 2008, s109ZK was amended to provide that where
no occupation certificate has been issued, a building action
may not be brought more than 10 years after:
the last date the building work was inspected by a
certifying authority; or
if no such inspection has been conducted, the date on
which that part of the building, where the building work was
carried out, is first occupied or used.
The change to the application of the 'ultimate
limitation period' was made to ensure that the period
during which an action for loss or damage may be brought in
relation to defective building work is consistent with the
period for which accredited certifiers are required to be
covered by insurance under the Building Professionals
Act 2005.
For reasons apparently only known to the New South Wales
Government, the change does not apply to building work
commenced before 1 August 2008. If the building work was
commenced before that date and there is no occupation
certificate issued, there will be no 'ultimate
limitation period' and exposure to potential claims
can, in theory, last for forever.
The content of this article is intended to provide a
general guide to the subject matter. Specialist advice should
be sought about your specific circumstances.
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In June 2018 we provided an overview of the Australian Law Reform Commission's (ALRC) interim discussion paper on class actions and litigation funders.
The basis for the Inquiry was the increased prevalence of class action proceedings, and the role of litigation funders.
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