Directions to Builders to Rectify Work: The Supreme Court Enforces a Time Limit on the Victorian Building Authority

Directions to Builders to Rectify Work: The Supreme Court Enforces a Time Limit on the Victorian Building Authority

26 Feb 2018

By Justin Cotton, Director, Lovegrove & Cotton – Construction and Planning Lawyers

In a recent Supreme Court of Victoria decision about directions to fix given to a builder, the Supreme Court has rejected arguments on behalf of the regulator that directions can be given at any time after the building work was completed.

Instead the Court has opted to confine the period when directions can be made to the time when the works are actually being performed, and prior to the issue of an Occupancy Permit or Certificate of Final Inspection.  The new power of the Victorian Building Authority (“the VBA”) to issue written directions to a Builder is therefore not open ended, as the VBA had tried to argue.

The relevant case is LU Simon Builders Pty Ltd v Victorian Building Authority [2017] VSC 805 (22 December 2017).  It concerned 6 apartment buildings in Melbourne where there was alleged non-compliance with the Building Act 1993, the building regulations and/or the requirements of the Building Permits. These matters were subject to a civil dispute already with the Builder denying the allegations made.

Completion had occurred some time in the past, with Occupancy Permits issued up to 9 years previously.  However the primary submission for the VBA was that pursuant to the new section 37B of the Building Act 1993 (“the Act”) there is the ability to give a Builder a direction to rectify / fix works under section 37B at any time at all, even 50 or 100 years after the works are completed and the final approval has been given.

As an alternative submission, Counsel for the Defendant argued that the power of the Authority to serve a direction to fix on a Builder was by implication limited to “a reasonable time”.

Section 37B of the Act was introduced as part of Division 2 of Part 4, which was introduced by the Building Legislation Amendment (Consumer Protection) Act 2016.  The section reads, in its first two sub-sections:

“(1)   This section applies if, after the inspection of building work, an authorised person believes on reasonable grounds that the building work fails to comply with this Act, the building regulations or the building permit issued in relation to the building work.

(2)    The authorised person may give a direction to fix the building work to a relevant person in accordance with this division.”

Pursuant to section 37 of the Act, “authorised person” is defined to mean amongst other things “the Authority” (meaning the VBA) or “a person authorised by the Authority under section 228(2)”.   Whereas the definition of “relevant person” means “a person referred to in section 37C who can be, or has been, given a direction to fix building work.”

Under section 37C of the Act it is said that a direction to fix building work can be given as an oral direction to either or both of “the builder” or “the person who is apparently in charge of the site on which the building work is being carried out”, or it can be given as a written direction to the Builder.

In the end the Supreme Court accepted the main submissions from the Builder to the effect that the legal power to issue the direction to fix under s37B is confined to a specific period or phase.  This finite phase is the building period commencing from when the Building Permit is approved and up until the issue of an Occupancy Permit or Certificate of Final Inspection.

In effect the Builder argued successfully that all of Part 4 of the Act (entitled “Inspection of Building Work”) is confined to this period of time.  This Part 4 includes in Division 2 the power of the Authority to give a direction to fix to the Builder.

The judgment of the Court states in part (paragraph 6) that:  “…as the plaintiffs submit, the indications in the text and context of s37B that the power is unavailable after a certificate of final inspection or an occupancy permit has been issued are overwhelming.”

Some of the key reasons for the Court’s findings are set out as follows:

(i)     Generally speaking any Act of Parliament should be read in the ordinary way in which a document is read, that is from the beginning and on towards the end.  Reading the Act in this way strengthens the Builder’s case that Part 4 of the Act is confined to the building period up until the final approval.  On the other hand, Part 8 which deals with “Enforcement of Safety and Building Standards”, and refers to Building Notices and Building Orders and so on can relate to already completed works.  In the Act the most directly relevant segments are sequenced in a way that generally corresponds to the chronology of a building project.

(ii)    There are already some regulatory enforcement actions that can be taken after an Occupancy Permit is issued, namely those steps described in Part 8.  The difference being that those Notices and Orders are served on the Owner of the land, and not the Builder.

(iii)   Any provision in an Act of parliament should be read and construed according to the plain and natural meaning of the words, but read in the context of the Act as a whole and its objectives and purposes.  An interpretation that does not lead to absurd or capricious results is to be preferred.

(iv)   An unworkable or capricious result or consequence could arise if the power to issue a direction to fix on the Builder was open ended, continuing for many years after final approval of the works by the Building Surveyor.

(v)    As argued on behalf of the Builder, this “open ended” power would be unworkable if many years had passed and the natural person registered builder had disappeared, ceased working, or if the building company was no longer trading.  In addition, if the building contract had long since been completed then the Builder would probably no longer be able to get access to the relevant property where the works were performed in order to rectify.

(vi)   In other words, under the “open ended” interpretation a direction to fix could be served long after the relevant works were done to a person who was no longer a builder or who bore absolutely no responsibility or blame for the alleged defects, or could no longer enforce contribution rights against third parties who did bear some blame.

(vii)  The language used in Part 4 Division 2 tends to use the present tense (supporting the notion that these provisions relate to works currently underway), while the language in Part 8 often uses past tense suggesting enforcement of standards for works that have already been carried out.  Refer for example to the language in section 106(a) for Building Notices.

Under section 4 of the Act the first “objective” listed is “to protect the safety and health of people who use buildings and places of public entertainment”.  Furthermore the enabling legislation that introduced section 37B specifically refers to “consumer protection” in its title.

While the interpretation followed by the Supreme Court seems correct based on a more literal approach to statutory interpretation, the Authority and consumer advocates may feel aggrieved at this more restrictive approach to timing.  The beauty of a direction under section 37B is that it can be served on the entity that actually carried out the works, rather than the owner, and because the standard of workmanship in residential apartment complexes is such a topical matter of concern for many in the community.

There could also be an argument mounted that the new legislation specifically makes clear that a Building Notice or Building Order under Part 8 should where possible be used as a ‘last resort’ after a direction under Part 4 has been given to the Builder.

Regardless of contrary arguments the decision has now been made by the Supreme Court.  It remains to be seen whether this will herald further legislative change to bolster the power of the Authority to give directions to Builders in Victoria.

For further advice or assistance in relation to building law matters including construction disputes and building regulation, do not hesitate to contact a legal team with expertise in this area.

Lovegrove & Cotton Lawyers to the building industry

For thirty years, Lovegrove & Cotton have represented builders, building surveyors and building practitioners in Melbourne, Canberra, Sydney and Queensland. Doyles Guide ranks Kim Lovegrove as one of the leading construction lawyers in Australia. Justin Cotton, likewise, is a leading Australian construction lawyer and widely respected in the building fraternity as evidenced by his recent elevation to Chairperson of the HIA Industrial Relations and Legal Services Committee, and member of the Regional Executive Committee, for HIA Victorian Chapter. Lovegrove & Cotton can help practitioners resolve any type of building dispute and are preeminent in the area of building practitioner advocacy. If you wish to engage the firm, feel free to contact us via our website or by emailing