ACCREDITED CERTIFIERS AND THE LAW IN NSW: THE RISK AND LIABILITY LANDSCAPE
By Justin Cotton, Partner, Construction and Practitioner Advocacy, Lovegrove Smith & Cotton, Construction and Commercial Lawyers
This article is a reproduction of a presentation given by webinar recently to accredited certifiers, based in part on questions that had been forwarded by the attendees before the presentation. Several topics are covered that touch on the matters of risk and liability, insurance, and the nature of certifier contracts with an Owner or Developer.
Certifier Contracts of Engagement
- These were made compulsory in NSW (Section 73A of the Building Professionals Act 2005), but does not apply to certification work started prior to 1 March 2013.
- Clause 19A of the Building Professionals Regulation 2007 sets out what these contracts of engagement must contain.
- It is intended that the contract be between the person who has the benefit of the Development Consent (generally the Owner/Developer) and the accredited certifier (“AC”) carrying out the functions or the company that employs the AC.
- The certification work to be covered includes issuing a ‘development certificate’ or carrying out inspections as a PCA or AC.
- The advantage for certifiers is that the regulations provide that the contract should call for payment up front before the services start. This is to protect the AC from undue influence from a Developer/Owner.
- However, the AC contract can say that any variations to the services or contingencies can be charged at an hourly rate, eg additional inspections, issuing a s109L notice of intention to give an order.
- The Board has been concerned to ensure that an Owner is less remote from the certification process and knows the identity of the party providing the certification service.
- For this reason and unless such contracts are no longer mandatory, we do not consider it is appropriate for these contracts to be novated from the Owner to the Builder, so that the Builder is contracting with the AC.
Third Party Certificates (eg from installing contractors)
- The Certificate on its face needs to refer to the appropriate Australian Standard or Clause of the Building Code etc.
- The statutory immunity in Section 109P of the EP&A Act 1979 is not available (as it is with Part 4A Compliance Certificates from accredited professionals).
- Ideally the Certificate will be from a licensed construction practitioner, eg an engineer for structural engineering matters.
- Based on case law, eg the ADT case of Dix v BPB, relevant principles are that:
- It is acceptable sometimes for the certifier to rely on certificates from installing contractors in specialist areas, eg plumbing, electrical, fire engineering;
- This may be instead of a visual inspection by the PCA or even instead of a formal Compliance Certificate by an accredited practitioner;
- However, there must be proper and precise reference to the correct standards and some evidence of inquiry on the part of the PCA;
- It may not be applicable to rely on certification if items can be inspected on a visual inspection, eg the style of door handles on fire egress stairs.
- The legislation allows for proportionate liability in NSW (as with other Australian jurisdictions) in building defect cases.
- Therefore a third party installation contractor issuing a certificate upon which a PCA relied could be joined to a case and end up at the end of the liability chain. Though they could be a ‘man of straw’ without insurance.
- This cannot be excluded by contractual provisions, eg your contract of engagement as PCA with an Owner/Developer.
- If you did have a contract provision that sought to exclude liability, it could not exclude common law actions for negligence (eg breach of a duty of care).
- It is accepted that although a PCA’s ultimate ‘client’ is the NSW community (for maintenance of safe building standards), there is still some duty of care to an Owner/Developer.
- Ultimately this may be less than the duty on the contracted builder, because case law suggests that the PCA / building surveyor is not a clerk of works, site supervisor, designer or project manager ‘looking over the builder’s shoulder’.
- Refer to the Victorian case of Lewis v Threadwell  VCAT 547. Although a Victorian decision, the same principles apply in other States.
- The Tribunal said in that case:
“With respect to carrying out mandatory inspections and the issue of the Occupancy Permit, it is appropriate for an RBS to rely on the design practitioners and the builder or owner/builder to ensure that the building is constructed in accordance with the BCA.”
And further: “It is also reasonable and common practice to rely on Certificates of Compliance in order to issue an Occupancy Permit.”
- While the Toomey v Scolaro decision hints at some higher standard of the building surveyor having to ‘condescend to the minitiuae’ of the plans, it is also true that:
- The facts in Toomey involved the height of a balustrade, a clear health and safety issue;
- The Court accepted that in principle the building surveyor could have relied on a Compliance Certificate, but under the legislation it had to be ‘good faith’ reliance and here the Certificate was in an incorrect form and only a $10 fee had been charged for the inspection.
- In the case of Building Professionals Board v Cohen  NSWADT 62 the ADT said at page 28:
“We accept that it was, and remains, customary practice for certifiers to rely on credible, specialist certifications in specialist areas of building work” (eg geotech engineering or specialist electrical work).
- In the Dix case the ADT preferred the Investigator’s view that installation certificates did not go far enough in referencing specific systems or standards.
- In that case, the Investigator lamented that the certificates relied on at OC stage did not refer to the building occupant warning system for the carpark or refer to the relevant Australian Standard.
- This was even though the PCA called an expert who advised that the ‘automatic fire suppression system’ had been correctly identified and the building occupant warning system was a subset of that.
Insurance & Defending Civil Claims
- In relation to civil claims (eg for building defects), an accredited certifier could potentially be joined as a secondary defendant in multi-party proceedings.
- This may be in regard to the issue of a Construction Certificate but perhaps more commonly, in regard to the issue of an Occupation Certificate.
- If this occurs, the certifier does have the option to then claim indemnity from their PI insurer, who will then take on the defence of the claim using a panel lawyer.
- Alternatively the certifier may choose to defend the case themselves, and not to claim indemnity on the insurance. They will obviously have to pay legal fees to their own lawyer but would have more control over the way the defence is run.
- If the certifier claims indemnity, the downside could be that their premiums will go up in future and they would pay a large excess, eg perhaps the first $40,000 of the legal fees in a large legal proceeding.
- A common source of such legal proceedings are cases involving multi storey apartment buildings with basement carparking.
- For defences of such claims, we consider it is feasible to argue that the OC is a certification limited to those matters recited in the OC itself.
- Primarily, it is a certification that the subject building is compliant in an overall and holistic sense, and that it is fit for occupation or use in accordance with its classification under the Building Code.
- The approval of an OC can rely on Compliance Certificates (under Clause 138 of the Regulation) or if appropriate third party certificates, and a visual inspection by the PCA (final inspection).
- The accredited certifier is not responsible for building defects that are matters of workmanship by the Builder (eg works inconsistent with the plans or specs).
- The accredited certifier is not responsible for design defects unless it is something that affects the matters certified in the OC – if it is merely a matter of design or a workmanship error liability is more correctly aimed at the Architect and/or Builder.
- If the defects do not relate to matters that would or should be included in mandatory inspections, there is a good argument it is the Builder or other practitioner’s responsibility.
- Care should be taken in approving ‘alternative solutions’ as this is a risky course, and is based on performance requirements under the BCA rather than the ‘deemed to satisfy’ prescriptive requirements.
- For example, in fire engineering matters there is the need to obtain peer approval of the alternative solution form a second fire engineer.
- Where at all possible, a Compliance Certificate should be obtained in order to afford the certifier the s109P immunity.
Run Off Insurance Coverage
- The BPB information sheet (no 9) refers to Section 109ZK of the EP&A Act 1979.
- Section 109ZK says in part that a “building action” may not be brought in relation to any building work more than 10 years after the date on which the relevant final OC is issued.
- Or if no final OC is issued, more than 10 years after:
- the last date on which the building work was inspected by a certifying authority; or
- if no such inspection has occurred, the date on which the building works are first occupied or used.
- It is agreed that ‘run off’ insurance coverage would be a wise course for this 10 year period after the accredited certifier ceases to act (for retirement or other reasons).
- The run off insurance coverage should be in the individual certifier’s name unless the certifier company has run off coverage to protect the individual certifier for that period of time.
- This would need to involve an annual premium that is paid to the Insurer to renew the run off coverage for each 12 month period for that 10 year ‘run off’ period.
- If the insurance is not renewed then the policy would lapse and it is possible that the certifier could be subjected to a building action after they have ceased to work and during that 10 year limitation period.
- We do not consider it is necessarily important that Section 109ZK does not precisely state whether it relates specifically to certifiers who certify under Part 4A of the Act or not.
- The term ‘building action’ is widely defined in the legislation, it is not a narrow compass.
- Even though a certifier has not issued a Part 4A certificate, they could still potentially be joined to a building action if there has been a lapse in their duty of care to an Owner/Developer in some way, and if this has led to loss and damage that was foreseeable.
- It is good practice to have detailed inspection records of every inspection carried out, rather than just a note that you attended at a certain site on a specific date.
- Where possible, it is better to be specific about what was actually inspected and approved or not approved at the inspection.
- For example, use of the words: “SL82 mesh on membrane satisfactory”.
- On the other hand, if the record said: “reinforcement is in accordance with the engineer’s details” then this implies that all aspects of the reinforcement are in accordance with the engineer’s details.
- Refer to specific Australian Standards or provisions of the Building Code where possible.
- With words in inspection records, where you are not referring to specific items of work, it is arguably better to use words such as “generally in accordance with” or “substantially in accordance with”.