By Justin Cotton, Director, and Jordan Davies, Senior Paralegal, Lovegrove & Cotton – Construction and Planning Lawyers

In essentially all Australian jurisdictions, statutory regulators as they vary from state to state or territory to territory have some form of power to compel builders or owners to carry out certain building works. In many jurisdictions, councils have the power to issue building orders or emergency orders, and sometimes even private building surveyors have this power. In the Australian Capital Territory, the Territory government, specifically the Construction Occupations Registrar also known as ‘Access Canberra’, pursuant to Part 4 of the Construction Occupations (Licensing) Act 2004 (ACT) (‘the COLA’), has the power to issue, amongst other orders and undertakings, instruments that are known as ‘rectification orders’.

 

What is a rectification order?

A rectification order is an order issued by Access Canberra against an ‘entity’ (i.e. including a body corporate or natural person) where there has been a contravention by that entity of the COLA or other operative legislation in respect of a ‘construction service’ to which the notice relates.[1] In assessing whether it is appropriate for a rectification order to be made, Access Canberra must have regard to the potential for injury, and loss and damage (whether physical or purely economic) that has been or may be caused by the contravention. Notice will be given to a builder or other construction practitioner prior to a rectification order being issued, inviting submissions from the ordered entity, unless there is need for an emergency rectification order. Notice will also be given to the land owner.

Action by Access Canberra is, like civil building action in the ACT, limited by operation of the 10 year statutory limitation period (generally applied from the date of the certificate of occupancy [although not always]).

Where a rectification order is not complied with, Access Canberra may arrange for an alternative construction practitioner to carry out the work. The ‘ordered entity’ (for our purposes, the builder) will be liable for the reasonable costs involved with this (i.e. the costs of the alternative construction practitioner). A decision to issue a rectification order is reviewable at the ACT Civil and Administrative Tribunal, and a decision to arrange for an alternative construction practitioner to carry out rectification work may not be made until the review period has elapsed.[2]

 

Against whom may a rectification order be made?

Accordingly, builders in the ACT may have rectification orders issued against them when there is severe noncompliance with building standards leading to defective building works, particularly where those defects present as a risk to occupant safety.

Unlike, for example, building orders issued in the State of Victoria, rectification orders in the ACT are issued against ‘the entity [that] provided the construction service, or part of the construction service, to which the notice relates,’[3] so it is hard to see how they would ever be issued against an owner for defective building works (which is not the case in Victoria), despite express provision for notice to be provided to the land owner.[4]

‘Construction service’ comprises the carrying out of work by a broad ambit of actors including demolition contractors, building surveyors and assessors, drainers, electricians, plumbers, and gasfitters, amongst others.[5] This means any of these actors could be subject to a rectification order. Whilst this paper focuses primarily on builders, the issues discussed in this article apply to any of these construction occupations.

Many of these construction practitioners will operate under the guise of a corporation or partnership and may have registration attached to the corporation or partnership. However, the COLA requires these corporations to have a ‘nominee’[6] who is responsible for supervising the construction services. An issue that arises out of obligations being imposed upon corporations is what happens if the corporation is “wound up” in insolvency.

 

Corporate bodies and insolvency in building matters

Corporate insolvency has plagued the building industry in numerous jurisdictions, particularly where certain liabilities are not indemnified. Many jurisdictions impose mandatory requirements for domestic builders to have an insurance policy that covers a minimum amount for each project where there is a judgment awarded in favour of an owner against an insolvent or disappeared builder, but this applies only for certain categories of building and buildings of certain heights. So, in the ACT, where a building exceeds 3 storeys, owners or owners corporations will not be able to claim on these domestic insurance schemes.

In the time leading up to any judgment, the builder against whom an owner is making a claim may still be trading. This is where it can be very beneficial for the regulator to intervene and issue a rectification order.

Where the question of solvency is a live issue, the COLA provides Access Canberra with a helpful tool in respect of a rectification order that may not be available to a party owed a judgment debt, who, at liquidation of the insolvent builder company, will rank pari passu (‘equal’) with the general body of creditors, unless there is some security over the amount.

 

Hide behind the ‘corporate veil’ to no avail

This ‘tool’ as I have referred to it as, is the ability for the regulator to ‘pierce’ the corporate veil of the body corporate builder (or other construction practitioner) and go directly after the directors of that corporation.

Note that this is distinct from what was discussed earlier as the ‘nominee’ for purposes of corporate registration; here, the regulator can go after any natural person director, particularly those with assets sufficient to meet reasonable costs incurred by Access Canberra when arranging for an alternative construction practitioner to carry out the work required under the rectification order.[7]

There are a number of instances where Access Canberra has the opportunity to pursue the directors of a corporation or individual partners of a partnership.

The first is a general discretion for Access Canberra to issue the s 38 Rectification Order against the body corporate and the directors, or the partnership and the partners and/or directors of a corporation that is one of the partners.[8]

Secondly, Access Canberra may pursue the directors of a corporation where the corporation that provided the construction service is wound up before the rectification order is made.[9] The directors against whom Access Canberra may take action are those that were directors as at the time of the construction service being provided.

The third instance largely mirrors the second, albeit in circumstances where the corporation is wound up after the rectification order is made by Access Canberra. This provision applies automatically, and the order ‘is taken’ to apply to each director who was a director at the time the construction service was provided.

Conclusion

The takeout from these provisions is quite clear: insolvency and the corporate veil will not protect directors of corporations who are construction practitioners providing construction services and there has been a contravention of the legislation such that Access Canberra has seen fit to issue a rectification order. Directors of corporate construction practitioners are very much in the firing line if their firm winds up in insolvency.

It follows that builders and other construction practitioners should be mindful of this when carrying out construction services in the Australian Capital Territory. If a builder or other construction practitioner wishes to challenge a rectification order, it should seek legal advice, and consider a review at the ACAT. It also follows that owners who suffer from defective building work should consider engaging with ACT government authorities, particularly where defects are so substantial that they pose a threat to safety, as the rectification order path mollifies concerns regarding insolvency, and can procure outcomes for owners without necessitating civil proceedings.

 

Footnotes

[1] See Construction Occupations (Licensing) Act 2004 (ACT), s 35.

[2] See ibid, s 41(4).

[3] Ibid, s35(1)(b).

[4] See Ibid, s34(2).

[5] See Ibid, ss 6(2) & 6(7).

[6] Ibid, s 28.

[7] See s 41(5).

[8] See s 35(3).

[9] See s 39A.

By Professor Kim Lovegrove MSE, RML, Chair of the IBQC, Senior Lawyer, Lovegrove & Cotton – Construction and Planning Lawyers

Originally presented at the Society of Construction Law New Zealand’s 9th International Law Conference “Building for Change” 3-5 November 2021.

Essential Elements of a good practice building control regime

Over the last few years, the writer has been retained to identify and advise upon international good practice with regards to building regulatory systems in Japan, India, China and Southern Africa. In this capacity, the below flow-chart is promoted as encapsulating the essential elements of a good practice building control regime.[1]  A key part of the holistic framework is to have efficient conflict resolution systems for the resolution of civil disputes and building control appeals.

The writer has never promoted arbitration as a utilitarian dispute resolution mechanism in his capacity as an international law reform advisor. In no way is this a derogation of the virtues of arbitration.  Arbitration is uniquely equipped to develop sound dispute resolution outcomes within the context of multinational company major project collaborations in developing countries, where the local judiciary is not sufficiently capacitated to resolve high dollar value complex infrastructure disputes.

The utilitarian limitations are as follows:-

• Arbitration does not lend itself to consolidated multiparty legal proceedings for it is a creature of contract, and, as many disputes involve a number of responsible actors, a consolidated joinder in the one Dispute Resolution Theatre (DRT) action is unavailable.
• The cost of arbitrator retention would be prohibitive for most citizens in many jurisdictions, particularly emerging economies.

Dedicated Building & Construction Lists in Courts and Tribunals

Best practice jurisdictions feature DRTs that resolve disputes quickly and cost-effectively, where the decisions are handed down by very capable decision makers that comprise a blend of very highly legally qualified decision makers who have formalised access to technical expertise.

Dedicated construction lists in Courts and Tribunals are paramount. Across the Common Law world, many good practice jurisdictions have adopted specific lists for building litigation. This is due to the unique and significant nature of construction litigation.

In November 2019, the writer addressed a conference co-hosted by the World Bank,[2] the Beijing Municipal Government and the Ministry of Finance of the People’s Congress of China, in Beijing, where he enunciated the features of an international good practice dispute resolution Ecology, summarised as follows^[3]:

• Promulgated regulations that make mediation compulsory
• Dedicated construction dispute resolution divisions of courts and tribunals that specialise exclusively in the resolution of construction disputes
• Decision makers that work exclusively in construction dispute resolution theatres
• Independent expert review panels
• Fast track appeal bodies for building approval disputes

The above aspects capture the essence of an international good practice central dispute resolution system for the construction industry. Regardless of the jurisdiction that the writer is retained to provide good practice reform advice (be it emerging economies or high-income countries), the writer promotes that which was summarised above as being the essence of a progressive best practice dispute resolution matrix.

Promulgated regulations that make mediation compulsory

Mediation is a typical feature of formal dispute proceedings, but a well-functioning ADR solution is preferable to minimise costs for disputants and to free up public resources. Best practice DRT`s ensure that mediation occurs at an early stage of legal proceedings, or before the litigation process has formally started, in order to provide the disputants with the opportunity to avoid lengthy and costly dispute resolution scenarios.

The DRT appoints the mediator from an approved panel of expert mediators. Some jurisdictions such as the domestic building list of the Victorian Civil and Administrative Tribunal provide the mediators for free. Other jurisdictions appoint the mediators and insist that the parties remunerate the mediators on a 50/50 basis.

Independent expert review panels

It is the norm for separate experts to be retained directly by applicants and respondents. Experts owe their primary duty to the Court or Tribunal, but in practice there are quite diverging conclusions made by experts regarding the same matter and sometimes there is a perception of a bias towards those who retain them. In terms of technical diagnosis there should be no advocacy; rather, there should be clinical and arms-length analysis of causes of building failure or compromised construction outcomes. It is for this reason that when asked to devise a best practice expert testimony system the writer recommends that:

• The DRT have an accredited list of expert witnesses
• Accredited on the basis of them being venerated by peers of good repute

Instead of the adversaries retaining their own expert witnesses at a directions hearing, the jurisdictional decision maker will be apprised of the technical issues to be resolved whereupon an independent expert will be retained by the parties to diagnose failure and rectification costs. If the cause of the building failure is multi-faceted then a combination of experts with skills bespoke to the problem will be appointed by the DRT.

The parties will remunerate the experts on a 50/50 basis. The joint retainer is better suited to achieving impartiality, removes expert adversarialism and is likely to cut the costs and time of diagnostic analyses and solution engineering considerably.

 

Good practice – County Court of Victoria Single Joint Expert Witness Regime

The County Court of Victoria in its Building and Construction List Practice Note at clause 5.2 acknowledges the merit in the Court appointing a single joint expert. The Practice Note, however, leaves a great deal of discretion to parties: the parties will present a list of preferred experts to the “Judge in Charge” of the Building List and the JIC will thereafter appoint the expert. Parties may also attempt to persuade the judge to allow separate expert witnesses.

The Civil Procedure Act 2010 (Victoria) allows for the joint remuneration of expert witnesses.

This is still a fairly new practice note, and the extent to which the practice has been adopted is somewhat unclear; with disputants generally preferring expert conclaves and concurrent evidence (or ‘hot tubbing’). However, it is submitted that the Court’s practice note gives credence to the virtues of single joint expert witness testimony, with the view to lowering costs for litigants and ensuring greater impartiality.

The default approach to expert evidence in Queensland is that parties agree on a single jointly remunerated expert. If parties fail to appoint a single jointly remunerated expert for a technical fact in issue where they reasonably could have, then they bear the costs consequences of same. If the matter is too complex for a single jointly remunerated expert the parties, the parties will be entitled to choose partisan experts.

 

Fast track appeal bodies for building approval disputes

Some disputes do not necessarily suit the traditional judicial dispute resolution processes of Courts. Often, these kinds of disputes relate to building permit ecology where there may be, for example, appeals over a refusal by a building official to issue a building permit or occupancy permit. These types of disputes are more suited to be resolved by an appeals board that comprises legally and technically qualified artisans. The costs should be borne by the parties on a 50/50 basis.

An example of this is the Building Appeals Board in Victoria. The BAB has been in existence for decades and is held up by the writer as being a model of best practice in light of its capacity to facilitate timely decisions, where the expertise is of high calibre. The BAB was established under the Building Act 1993 (VIC). The fact that the BAB has been in existence for 27 years is evidence of sustainability.

The members of the board are preeminent in their fields and are Ministerial appointees. There must be a broad spectrum of expertise in terms of the decision makers ranging from building officials, to engineers, architects and construction lawyers. Most of the above will have other full-time jobs, typically in the private sector.

For urgent determinations on matters relating to building control, an applicant may request a “fast-track appeal” which may be granted in specific circumstances.

When called upon to adjudicate over a matter, a panel is convened and the registrar will choose experts that have skills that are bespoke to that which is under consideration. Applicants and respondents will appear with their legal advocates and technical experts and present their submissions.

The hearings rarely go for more than a day and decisions are normally forthcoming within the month.

The system does not visit a great financial burden upon taxpayers as board members are somewhat altruistic, but attain considerable kudos amongst their peers by virtue of their appointments.

The key benefits of the system are:-

• Hearings can be convened swiftly
• The multi-skilled composition of the panels lends itself to holistic and balanced decision making
• Decisions are generally published quickly
• The cost of the decision-making infrastructure is not great hence is attractive to Treasury.

Aggregation and centralisation of Dispute Resolution Theatres,

Depending on the jurisdiction, there may need to be harmonised legislative amendments in Civil Procedure laws and Building Legislation along with dialogue and agreement between the Parliamentary members vested with responsibility for the judicial process and Building Ministers to give effect to a good practice cross jurisdictional building dispute resolution paradigm. This is because variations in procedure as between jurisdictions may cause confusion, extra time spent, and extra costs. National consistency is an important ambition for any regulatory sphere, and is even more pressing in federalised nations.

Key take outs

The rationalisation and consolidation of dispute resolution apparatuses will be required to generate faster and more cost-effective dispute resolution outcomes. There should be an emphasis upon a cross-jurisdictional approach to specialist dispute resolution theatres, the establishment of less adversarial expert witness protocols, and promulgation of front-end alternative dispute resolution mechanisms.

 

About the Author: Professor Kim Lovegrove MSE RML

Kim Lovegrove MSE, RML is a senior construction lawyer at Lovegrove & Cotton Lawyers. He is regarded as an authority in Victoria and New South Wales on building regulation. He was retained by the Victorian Government to perform a principal role in the development of the Building Act 1993. He also headed up the team that developed the National Model Building Act that became a law reform template in a number of Australian jurisdictions in the nineties.

Kim is also a Senior International Law Reform Consultant to the World Bank in which capacity he assists the Bank with the provision of international best practice law reform advice on building regulations. He has been deployed in law reform advisory capacities in Mumbai, Shanghai, Beijing, Chongqing, Guangzhou, Malawi and Tokyo.

Kim is the Chairman of the International Building Quality Centre (IBQC) which is affiliated with the University College of London (UCL) and Canberra University.

Kim is an Adjunct Professor at the University of Canberra Faculty of Design and Arts, and is a past Conjoint Professor of Building Regulation and Certification at the University of Newcastle (New South Wales).

Kim is a past Chairman of the Building Practitioners Board Victoria, a past President for the Northern Chapter of the New Zealand Institute of Building, and a past President of the Australian Institute of Building (Victorian Chapter).

Kim was also awarded Ethiopian Honours for humanitarian services to Ethiopia by the Ethiopian Crown Council.

 

Footnotes

[1] Many of the key general elements are extrapolated from Adjunct Professor Kim Lovegrove MSE RML’s paper, Elements of Best Practice Building Control, see original paper at http://lclawyers.com.au/best-practice-building-act-2020-beyond-look-like/ .

[2] “Improving the Business Environment for a More Dynamic Economy of China and the World – A High Level International Conference on Doing Business Practice and Reforms”, Address by Kim Lovegrove.

[3]Paper Dealing with Construction Permits in Beijing and Shanghai World Bank Group

By Professor Kim Lovegrove MSE RML, Senior Lawyer, Lovegrove and Cotton – Construction and Planning Lawyers

Preamble

The built ecology, both locally and internationally, has encountered profound, if not unprecedented, change in the last twenty years with the proliferation of Super High Rises (SHRs) and ever-changing technological advances. In some parts of the world, building regulations have not always evolved with sufficient alacrity and sensitivity to best calibrate with the dynamic and rapidly changing nature of the new building paradigm. Indeed, it is rare for regulations to keep up to speed with technological advances, and this has been an occurrence across multiple sectors.

Architecture has also changed significantly with SHRs punctuating and abounding in skylines across the globe. SHR design and construction renders redundant some traditional approaches to building technology in light of the height, insulation and fire resilience sciences. The emergence of the SHR paradigm and high-rise domestic abodes requires a rethinking of building control and this has not always occurred with sufficient regard to international best practice.

Policy needs to keep up with the science

Building regulation of the now and the future has to be sufficiently ‘elastic’ to keep up to date with a building industry metamorphosis that is gaining momentum. Some building regulatory regimes require significant  overhaul as they are not sufficiently protective of the public. Acquiescence has sometimes culminated in building related disasters – disasters that have culminated in loss of life. Grenfell is a very grim illustration of construction calamity. Other disasters that have had a profoundly deleterious economic impact upon too many members of the public; on point, also, is the Leaky Building Crisis of New Zealand which according to PWC could cost NZ more than 20 billion dollars.[1]

This paper endeavours to provide a conceptual template for progressive building control because to assist policy makers with their deliberations in the development of building regulations for the future. Lessons observed in recent times have helped shape some of the musings for consideration.

There will be objectives that reinforce the fundamentals of building control, namely:-

Buildings will be:-

• Safe in all material respects
• fit for purpose
• Structurally sound buildings
• Warm in winter
• Cool in summer
• Durable
• Immune to the vagaries of climatic tempest
• Conducive to good health with the accoutrements of sound sanitation and plumbing and reliable electricity
• Built in accordance with best practice building regulations and the plans provided to the constructors – on time – on price
• In circumstances of building failure there will be a regime that can deliver swift application of redress.

It is submitted that these key tenets would satisfy the overwhelming majority of members of the public.

There will be consolidated building legislation

A consolidated legislative hierarchy where there is a clear central regulatory hierarchy represents international good practice for purposes of regulatory structure. Multiple disparate legislative instruments run the risk of laws conflicting and creating a complex maze for legal practitioners, the judiciary, building practitioners and future reformers to navigate. One “single source of truth” legislative structure, somewhat reminiscent of a pyramid, is the model held up by the author as best practice. At the apex of the hierarchy pyramid is one all-encompassing Building Act. The next level down comprises the one set of building regulations and other delegated legislation, and the ‘ground floor’ level will comprise the uniform technical code.

Many reforming jurisdictions around the world are encouraged to adopt this top-down hierarchy to ensure that there is no duplication, doubling up or conflicts of responsibility of responsibilities or duties that would be best domiciled in one centralised legislative hierarchy.

There will be a Central Government Regulator (CGR)

The legislation will establish a principal Central Government Regulator along with administrative provisions that will dictate how the regulator operates as a department of the civil service.

For the purposes of this paper, it is assumed that there will be a federal body that produces a national building code such as:-

• The Canadian National Construction Code which is produced by the National Research Council
• The Building Code of Australia/ National Construction Code ( produced by the Australian Building Codes Board)
• The Building Code New Zealand

The code will be kept up to date with respect to the technical requirements and standards for construction.

The CGR will have exclusive responsibility for ensuring that building control is established and maintained in accordance with world’s best practice. This is critical as a ‘jurisdictionally-centric’ approach to building law reform that has assumed currency over the last 20 years in some parts of the world has not worked for certain legislatures in light of a failure to take on board lessons learnt from abroad.

The CGR will employ officers who will ensure that the legislation and regulations are regularly progressed and are in accordance with international best practice with respect to public safety and enlightened technological advances that impact upon the amenity and quality of buildings.

A senior officer/chief executive officer will be a statutory appointee who will report to a Minister who is identified as being the Minister for Construction.

The CGR will be empowered by statute to:

• Develop and maintain a dedicated Building Act
• Through statutory based authorization, participate with those charged with carriage of developing a national building code, ensuring that it is adopted, maintained and well-integrated with and complementary to the Building Act.
• Establish a practitioner licensing body responsible for the annual registration and licensing of building practitioners
• Establish an investigation, probity and auditing regime for building practitioners
• Establish regulations for a mandatory insurance regime in order to ensure that the:-
  • Insurance products provide the right type of construction indemnity both with respect to the amount of cover and the type of cover
  • Insurance accreditation is reviewed and implicit in that review will be regard to consumer satisfaction regarding the availability and effectiveness of that cover.
• Establish an appeal body empowered with the responsibility of ensuring that appeals with respect to building approval decisions and practitioner misconduct enquiries will be heard promptly.
• Establish a ‘policing the policing’ capability to ensure that those building officials/building surveyors whom are empowered to ensure that buildings are built in accordance with building regulations do in fact make good on that statutory mandate.
• Establish a research capability to ensure that the department, the Minister and the CEO are kept abreast of international best practice building practices.
• Develop or interface with the body charged with responsibility of ensuring that non -conforming manufactured goods either constructed locally or imported from abroad do not find their way into the market place. If no such external accreditation of product regime exists, then the department will establish such a regime or a collaboration which may consist of the accreditation of appropriate testing bodies that in turn test and recommend to the department the accreditation of suitable new product.
• Such accreditation body will maintain a register of accredited manufactured product and will have the power to “de-accredit” product that is proved to be dated, obsolete or not in accordance with international best practice.

 

The legislation will establish and maintain sound oversight enforcement and compliance regimes

Unless the building regulatory probity regime is capable of protecting the public, the regime will fail. Sound building control systems never leave things to chance and do not function on the basis that the market will self-regulate and deliver utilitarian outcomes for consumers. Most construction actors are motivated by delivering good construction product. A minority of actors compromise the integrity of the profession particularly if they are primarily actuated by the maximization of profit at the expense of the consumer.

In a worst-case scenario, corruption can find its way into building ecology and this can have a profoundly negative impact upon the quality of building and end user amenity. Hence, when enforcement regimes break down, the vagaries of the market emerge and the more unsavory elements of the industry are afforded the opportunity to express themselves without restraint. When this occurs, quality plummets and the risk of dangerous building practices emerge.

It is therefore paramount that government adopts an intrusive and interventionist approach to the monitoring of building control and the construction process. It is equally important that genuine and venerated consumer representatives make up part of the composition of key Boards, tribunals and key advisory committees to avoid cronyism.

Part in parcel to this is the establishment of enforcement regimes that have ‘early warning detector systems’ – systems that are capable of detecting failure and noncompliance at the earliest opportunity to ensure that problems are identified and dealt with at genesis.

Key ingredients of enlightened probity regimes

There will be regulations and technical codes that clearly articulate the rules of building. These regulations and codes will be based upon a heritage of best practice approaches to building control. They will be updated regularly and perennially, sympathetic to the rapidly evolving nature of building which is an ‘accomplis’ of technical innovation.

The probity regimes will ensure that as the buildings are constructed, progress is independently scrutinized and approved at key legislated inspection junctures.

The probity regime will ensure that the building officials are very much in the nature of probity officers, are qualified, preferably with degrees in building surveying so that they have a sufficient level of technical dexterity to determine that which is acceptable versus that which is unacceptable construction practice.

There will be rigorous building approval processes and a highly professional building officialdom

Enlightened building approval regimes rely upon the establishment and maintenance of robust statutory approval processes and mechanisms that compel all construction actors to comply with those processes.

The most important professional in the regulatory ecology is the “building official” – the person charged with the responsibility of ensuring that buildings are constructed in accordance with the building regulations. In this paper, the term ‘Building Official’ will be used interchangeably with ‘Building Surveyor’. Best practice building regulation will fully articulate the roles and powers of this paramount building practitioner.

The Statute will provide that building permits can only be issued if the designs and the documents that support the building permit application comply with the Building Act, the apposite building code and the relevant standards and interwoven Acts of parliament.

The building official will ensure that building permits cannot be issued if the work does not comply with:-

• The building permit
• The building code
• Any fire regulation requirements
• Other regulations that by law must be complied with.

The official, by law, will be required to inspect the progress of the building work at key and legislatively mandated stages and will only pass the inspections if satisfied that the building work complies with the laws that overarch the approved plans. Such an approval process must be attended by the highest levels of integrity on the part of the building official.

If the building official forms the view that the work does not achieve the requisite benchmark, the legislation will ensure that the building official has the power to:-

• Refuse to pass the building work.
• Communicate in writing why that work was not capable of being passed and that which is required to bring the work up to a suitable standard.

If building work deviates from approved plans or contraventions the law, the building surveyor will issue orders that make mention of the contravention and that which needs to be done to rectify the contravention.

The legislation will provide that a failure for a constructor to abide by the order within the period required for rectification will result in referral to the central probity and oversight body for investigation and prosecution.

The building official will discharge these functions ‘without fear or favor’ in that the official will act:-

 

• Professionally
• Without hesitation
• Promptly
• In a manner that is immune and impervious to the wishes or demands of a client or practitioner where those demands are at odds with the legislation codes and standards

The legislation will ensure that there are provisions that dictate that a failure by the building official to discharge his or her statutory duties along the above lines will be grounds for serious disciplinary censure; such is the vital importance of that which is associated with the discharge of those functions.

There will be robust building official qualifications

Building officials will at the very least be qualified in building surveying and code compliance assessment and inspection, and the qualification will be robust and purpose designed. The qualifications will be obtained by attending a reputable tertiary institution. Courses will be accredited by the CGR and will only be approved if the qualifications equip building officials with the skills and rigor necessary to understand the relevant Acts of parliament, building codes and standards, and that which constitutes sound construction practices.

The qualification will also have a compulsory unit in construction ethics and probity; the course will highlight the critical role of the vocation and equip the official with an understanding of best practice probity protocols.

There will also be an experience criteria whereby the qualified official will have to serve a formal apprenticeship, with a licensed building surveyor before he or she will be eligible for registration.

Limitations will be imposed upon building surveyors with respect to approving performance based designs

Building surveyors will not be able to approve alternative solutions of performance-based design proposals unless such approvals have been approved by independent peer review.

The peer review body will be a body established by the regulator that has the power to assess performance-based design applications. Such body may be an appeals board or a panel that is established to exclusively deal with such applications.

Conflict of interest provisions will dictate that the peer reviewers will be totally “arm’s length” on any project that relates to the application.

Mandatory auditing will be a given

Building officials will be audited by performance auditors appointed by the CGR annually on at least two occasions. One audit will be without notice.

The auditors be empowered to:-

• Inspect the building officials records and procedures
• Inspection protocols
• Enforcement notice and orders procedures and records

If there is any evidence of recalcitrance or compromise, it will be fully investigated and referred to the registration probity regime for deliberation.

The auditing system will be a user-pays regime based upon the law society regimes where the “auditee” has to pay for the audits. This will ensure that the auditing regime has sufficient funds to properly resource a function that is vital to the integrity of the probity regime.

Licensing, investigation and prosecution regimes

A best practice licensing regime will ensure that the legislation establishes a practitioner registration and probity body that will be independent of the CGR to ensure that it operates as an independent body.

All key or principal construction actors will be licensed and registered with a central government-controlled registration body. Such is the importance of the registration regime, as the market cannot be allowed to self-regulate.

That which is instructive is the fact that in the late nineties, the New South Wales government set up the BSAP, a self-regulating body augmented to monitor the conduct of building surveyors. The system failed within a couple of years, as it lacked the financial resources to properly discharge its oversight functions.  Investigation, prosecution and disciplinary decision making requires a bureaucracy which is expensive to establish and just as expensive to maintain. This is the job of the state and cannot be easily outsourced, particularly in an industry where non-conformist building practices can culminate in death.

The licensing body will have the power to both license and remove a license or, to put it another way, register or deregister.

There will be a licensing arm that will:-

• Establish the qualification and experience criteria for registration
• Resource the regime
• Ensure that the qualification and experience criteria is in accordance with best practice
• Maintain the register of practitioner registration and de-registration

There will also be a probity arm that will carry out investigations and audits:-

• Investigatory and auditing resources
• Ensure that the resources are responsible and have the degree of elasticity to quickly respond to and investigate complaints

Some best practice elements of a sound qualification registration regime will be implemented to ensure that:-

• All actors will have “real” (rather than token qualifications), degrees or diplomas from reputable and rigorous tertiary institutions.
• An apprenticeship category that gives the graduate trainee mentored and supervised training for a couple of years to ensure that that which has been learnt can be applied to practice.
• A code of ethics that is taught, examined and passed to reinforce the paramount virtues of building structures that suit the public and to ensure that quality of product with the public in mind is always top of mind.

The practitioner registration and licensing regime will ensure that key actors in the construction paradigm are registered, namely:-

• Builders
• Engineers
• Designers i.e., architects and draftspersons
• Building surveyors/officials
• Electricians
• Plumbers
• Expert witnesses that give evidence in the resolution of building disputes

In circumstances where recalcitrants are identified, the government will have in place auditing and disciplinary institutions that can:-

• Investigate
• Adjudicate

And either exonerate if there is no case to answer or punish and remove the recalcitrant from the fraternity of registered building practitioners. The statute-backed enforcement and decision-making institutions will calibrate the magnitude or severity of the professional misdemeanor with the appropriate level of censure. This will range from:-

• Reprimand
• And or fine
• Suspension or license cancelation
• Referral of matters involving corruption to statutory bodies that preside over corrupt conduct such as the Independent Commission Against Corruption ICAC ( NSW) or the IBAC (Victoria)
• In a worst-case scenario, such as proven cases of corruption or reckless negligence that causes death, Jail. The Japanese Building Act features such power.

 

Liability apportionment laws will be fair, logical and the accountabilities will lie with those responsible

Proportionate liability, rather than joint and several liability, will be the liability apportionment regime. The proportionate liability regime will ensure that all parties judicially implicated in a building failure are held to account for their level of accountability is matched with the level or degree of negligence that is proportionate to their contribution to building failure.

No actor or defendant will be liable to assume the liability of any other codefendant. This will ensure that liability apportionment is fair and determined by the defendant’s level of culpability.

Joint and several liability, the traditional British-based liability doctrine still followed in England and New Zealand will not apply in light of certain limitations. Reason being defendants assume the liabilities of other parties or codefendants in circumstances where others are insolvent. This results in a disproportionate burden of responsibility being attributed to defendants or actors not responsible for the third-party contribution to the building failure.

To ensure that the public is protected, proportionate liability regimes will only operate in circumstances where there is compulsory insurance for all building practitioners. Proportionate liability will not be introduced unless the complement compulsory insurance exists, because a failure to legislatively mandate these complements can culminate in the public’s inability to obtain appropriate recompense for building failure.

All registrants will be insured with insurance providers that provide indemnification for defective building workmanship or workmanship that is the product of negligent work practices and inputs.

Without insurance, there will not exist the opportunity for members of the public to achieve financial recompense for compromised construction outcomes. It is recognized that insurance is not a perfect panacea but is the best mechanism currently available to deliver financial redress; albeit a mechanism that is sometimes attended  by  dissatisfaction when relied upon by consumers.

The CGR will be responsible for ensuring that the insurance regime satisfies members of the public who fall victim to compromised building quality outcomes.

There will be an insurance complaints officer

In accrediting insurers that are afforded permission by the PGR to operate in the market place, the regulator will ensure that there is an insurer complaints officer akin to an ombudsman. This person will be tasked with receiving and assessing complaints furnished by members of the public, Tribunals or stakeholders whom are aggrieved by or have concerns about:-

• The time the insurer takes to assess and respond to the complaint
• The costs associated with pursuing the insurer with respect to the resolution of genuine claims

The insurance officer will then have the power to make recommendations to the CEO as regards whether a formal communication should be sent to the accredited insurer that gives the insurer the opportunity to provide the appropriate level of redress to the consumer. In a worst-case scenario, the insurance officer may recommend that the insurer accreditation be removed. The legislation will dictate that the CEO must have regard to and act upon such complaint, unless there are compellingly objective reasons as to why those complaints have not been acted upon.

The regulator would also establish the criteria by which the insurer can participate in the market place in addition to establish the protocols for participation and revocation of insurer accreditation.

10 year liability capping

The French based concept of liability decennial, 10-year liability capping will be implemented. This concept ensures that plaintiffs have the ability to issue legal proceedings for building failure for a period of ten years after the building official issues an occupancy permit. The regime brings to bear clarity and non-contentiousness with respect to the period of time that one can issue legal proceedings.

Swift and efficient appellate systems will be established

There will be two appellate streams; one for appealing the determinations of statutory decision makers i.e., the decisions made by building officials relating to the rejection or the approval of building approval related decisions.

The second stream will relate to findings regarding professional misconduct.

Appealing statutory decision maker determinations

All Building officials will be endowed with the power to:-

• Issue building permits
• Carry out building works inspections
• Issue construction completion certificates
• Issue enforcement notices and orders
• Alternatively refuse to issue the above instruments

All of these decisions, regardless of whether they are affirmative or in the nature of a declinature, will be capable of being appealed. Time will be of the essence in terms of the progression and resolution of the appeal.

It follows that there must be an appellate regime, be it a tribunal or a Board that is endowed with the power to assess and review the decisions and determination and either uphold the decision at first instance or overturn it. A sound model is the Building Appeals Board of the Australian state of Victoria.

Features of such a regime will be:-

• The members will be government part time appointees – Ministerial nominees to be precise
• Appointees who are well-regarded and have venerated expertise
• A full complement of expertise that is required to make informed determinations
• A membership that comprise a combination of lawyers and technically qualified professionals.
• The system will be swift and the hearings will very rarely take longer than a day or so.

The legislation will ensure that more consumer representatives are appointed to a best practice appeal board to ensure that decisions take on board public dictates.

The resolution of civil disputes will be more efficient and better integrated

As there will be in existence an established dispute resolution regime for the resolution of disputes concerning defective building work and contractual conflicts, the legislation will not create new Tribunals or Courts. The legislation will, however, generate regulations that interact or ‘dance with’ the Acts of Parliament that govern dispute resolution to ensure that the matters that enhance the efficiency and cost of dispute resolution are best practice. This will mean that the intervening Acts of parliament will amend their respective statutes to ensure that:-

• Expert witnesses giving evidence in building cases are registered and accredited with the registration body.
• Mediation is made compulsory at the outset of a building dispute
• Tribunals or courts that are empowered to hear building cases will ensure that only registered expert witness are permitted to give expert evidence and, moreover, there will be a regime in place which enables such bodies to appoint the experts to give evidence in contested matters
• The experts will be remunerated by the disputants on a fifty/fifty basis to ensure that the system is both user pays but also guaranteed impartial expert opinion
• Legislation will also provide that the party that loses the case will pay the entirety of the victor’s legal fees on a full indemnity basis and will be required to provide reimbursement for the victor’s court expenses and the reimbursement of the fifty percent paid for expert evidence.

A summary of a good practice formal dispute resolution process is outlined in the below graphic:

 

Funding of departments and the related statutory bodies charged with the responsibility of discharging central building control functions

It is well established that without sufficient human resourcing and funding probity regimes building control apparatus will fail. When it fails, there can be disastrous consequences. The Latvian supermarket roof collapse that caused 54 deaths was in part due to the failure of the probity regime. Post GFC austerity measures culminated in the disbanding of the national building inspectorate.

American prohibition likewise in the twenties was doomed to fail from the outset because the governments did not allocate anywhere near the amount of funding to underpin the enforcement regime. The amount of funding was infinitesimal in comparison to that which was required. The illegality of alcohol consumption then established a culture of vice and systemic disregard for the law and the notorious gangster culture took hold and multiplied. This led to the repealing of prohibition in light of the unmitigated failure of the legislated regime. Prohibition failed because enforcement failed and enforcement failed because of fiscal parsimony and woefully insufficient resources.

It follows that the establishment of sustainable funding is of absolutely critical importance to the viability of a probity and enforcement regime.

Sustainability of income streams is critical; hence, the central regulator must ensure that there is a responsive and continual funding supply.

The Latvian encounter reveals that this is not always possible, particularly in challenging economic circumstances, so the regulators need to think “outside the circle” and look for user pays ways of funding probity regimes. Some of which are as follows:-

• Annual licensing and registration fees
• A brokerage imposed on insurance providers so that a percentage of premium levied finds its way into the regulators treasury
• User-pays auditing regimes where practitioners pay the auditors for annual and mandatory audits
• A construction levy being imposed when building permits are issued and remitted to the regulators treasury.
• Annual and compulsory continuing professional development training where the training is provided by external and accredited training providers on the basis that a percentage of the training revenue is remitted back to the central regulators treasury

If the above mediums are implemented, the costs of financially underpinning the regulator`s probity regime can be substantially underwritten.

The composition of statutory boards and tribunals and key advisory bodies will be based upon high levels of skill and probity

All statutory boards will have a balanced blend of both venerated industry participants and genuine consumer representatives. At least one third of all members of such boards will comprise consumer representatives and no decision will be possible unless the consumer representatives agree with the decision.

The consumer representatives will comprise one representative from the relevant department of consumer affairs but the balance will comprise members of the public that are chosen in response to an advertised campaign.  The successful applicants will need to establish that they genuinely represent the consumer constituency.

The tenure of board members will be three years with a right of reappointment for an additional three years.

There will be a best practice product accreditation body

There will be a national product accreditation body which will assess and determine whether construction product is fit for purpose and suitable for use and sale in the market place. Such a body has to be a national or Federal body as some of its jurisdiction may involve a legislated relationship with customs authorities and border control officials.

The test for suitability will be such that any product approved must satisfy rigorous testing to ensure that the product does not and will not cause any harm of whatsoever nature to the end user or the fabric of the building.

Once product is approved, it will be formally accredited and placed on an accredited product register. Products that are not featured on the register will not be capable of being lawfully used.

Any business, regardless of whether it is an on or offshore manufacturer, will be required by law to pay one hundred percent of the cost of testing and accreditation.

If it becomes evident that an approved product is subsequently found to be defective, the accreditation of that product will be revoked and it will be illegal to henceforth use that product.

The legislation will provide that regard must be had to such accreditation and it will be an offence for any actor to utilize product that is not accredited.

The product accreditation body will, in all likelihood, be a federal body that is aligned with or collaborates with best practice testing authorities. The federal body will be empowered to approve and accredit testing authorities that will be exclusively empowered to test, approve or reject product applications. The body will also have the power to remove the accreditation of the testing authority if it is established that the testing regimes do not accord with international best practice.

An international best practice criteria for testing will be used as globalization and free trade agreements have generated an international market place where exporters of product can export to any given jurisdiction. Cross-jurisdictional harmonization and best practices regarding product approval and accreditation are thus critical.

Restrictions will be imposed upon those who utilize performance building codes

Australia and New Zealand have had performance building codes since the mid-nineties. There is little doubt that performance building regulation has afforded more flexibility and innovation and has also lowered the cost of building on account of the benefit of innovation being a much greater variety of means by which one can design buildings.

There are some critics, albeit a few, that have  reservations concerning performance codes, alternative solutions and the inherent flexibilities of the newer system. There is also a consensus amongst this constituency that performance regulations have lowered the cost of building on account of an opportunity created to use cheaper construction methods and products.

Another criticism is that building surveyors are afforded far too much discretion to sanction and approve performance-based solutions via the non-prescriptive pathway.

Performance building codes will only operate when:-

• Building surveyors, regardless of whether they are of the private or public sector derivation, are legislatively prevented from approving performance-based designs.
• Performance-based design applications are referred to independent peer review and the peer reviewers are totally “arms-lengthed” from the application and the parties that submit the application.
• The panel members are appointed by government and the basis of such appointment is that they are venerated, highly qualified and by the same token have a consumer representative as one of the experts presiding with the decision.

 

Risk based building inspections and building classifications

Some jurisdictions apply a uniform approach to mandatory building inspections regardless of the type and use of a building. This means that in some jurisdictions the construction of an average-sized commercial shed used to store non-combustible objects requires the same statutory minimum of inspections as a single-staged construction of a multi-residential building, which potentially houses hundreds of people. This had led to an acknowledgment that inspections of buildings should be correlated with their risk.

The number of inspections will correlate with the complexity, type and intended use of the building. It will also be driven by the building’s capacity to generate harm in circumstances where there are compromised construction outcomes. The lower the risk, the lesser number of prescribed inspections. For example, SHRs may require ten inspections, whereas warehouses may require two. This information would be published in a risk-matrix, correlating building type & risk with respective inspectorial requirements.

A conceptual example of a risk-based structure is as follows:

 

 

Conclusion

A holistic approach to the design of building regulation is best practice. This is captured in the flow chart above. Good practice ‘regulatory architecture’ is reminiscent of a jig saw puzzle or a fine watch; if any piece of the puzzle or watch component is left out, the final product will not be fit for purpose. Unless every piece is incorporated, it will always be incomplete. When this occurs within the context of building regulatory ecology, the consequences are not always easy to anticipate, but invariably in the fullness of time they culminate in prejudice to the consumers of the as-built product.

 

Footnotes

[1] Anne Gibson, New Zealand Herald, 5 Nov 2017.

By Adjunct Professor  Kim Lovegrove MSE, RML,  Senior Lawyer at  Lovegrove & Cotton – Construction and Planning Lawyers Historians and students of building control could well be interested in this piece, particularly in a time of volatile law reform as policy makers try to keep up with the ever changing ecology of the as-built environment. The writer has an intimate understanding of the reasons for the early nineties building regulatory law reform agenda and the process that culminated in the promulgation of a bevy of reforming Acts of Parliament. This understanding was borne of his heading up the law reform advisory team that was commissioned by the Australian Uniform Building Regulatory Coordinating Council ( the predecessor of the ABCB ) to manage the process that culminated in the publication of the document known as the Model Building Act.

AUBRCC – the Catalyst

In 1990 the Australian Uniform Building Regulatory Co-ordinating Council (AUBRCC) commissioned a consultancy to generate a National Model Building Act. This model template was designed to be a model piece of legislation that could be called up by the eight states and territories to facilitate best practice building regulation and uniform or harmonised building regulation. In the words of Doctor Anthony Lavers, a British international construction law expert, “Nothing so radical and so holistic in concept has ever been undertaken in a major jurisdiction…”(taken from paper “Protection of Real Estate Developers and Users Against Economic Loss Arising from Defects in Construction”, 2000.)

The Rationale for the Project and the Problems with Building Regulation in the Early Nineties

National Microeconomic Reform – Bob Hawke and Cooperative Federalism The Special Premiers Conference, a coalition of the nine governments, that was established by Australian Prime Minister Bob Hawke was intent on driving national microeconomic reform and where possible uniform inter-jurisdictional regulation. The reason being: to cut the cost of government, increase national efficiency and reduce costs emanating from conflicting regulation. More expansive rationale for this building regulatory law reform initiative is found in the publication “Managing Microeconomic Reform” by Galligan, Lim and Lovegrove (a book published by the Federalism Research Centre, Canberra), where it is stated on pages 115 and 116,

“The ideological impetus for the preparation of model national building legislation emanated from a Special Premiers’ Conference in March 1989 where, in a communique released after the conference, the premiers indicated that they would be giving a high priority to the rationalisation of regulatory activities undertaken by the different levels of government, so as to remove inefficiencies brought about by varying regulatory regimes in the different jurisdictions.

There was recognition that although there was a single national construction industry, there were eight state and territory acts demarcating regulatory activity and furthermore entirely different state and territory approval and dispute resolution processes. It was conceded that the different legislative philosophies were not conducive to national harmonisation of building control and they severely impacted upon the maximum efficiency of the construction industry.

It was considered that the existing regulatory demarcation gave rise to an increased economic and social cost resulting from a less mobile workforce and reduced capacity to act quickly to meet the demand of interstate construction activity. Negative economic consequences included  ‘developers operating beyond a single state/territory and associated costs of engaging experts to advise on up to eight different acts and regulations and the increased costs of operating the business that flow from this’. Furthermore a report prepared by Dr R. T. Graham of the University of Tasmania for the Commonwealth Department of Immigration, Local Government and Ethnic Affairs in 1990 ‘Identified potential savings of a billion dollars nationwide for the land and building development industry’ that would emanate from culling.”

The NMBA was one of the projects that came within its “radar” as it was identified that conflicting and contradictory building regulations were costing the country hundreds of millions of dollars annually. To quote Brian Welch, (a past CEO of the MBA and at the time the CEO of the Building Owners Managers Association) as stated on the back page of the Model Building Legislation Commentary publication, “There can be no doubt that streamlining legislation and regulation in a country as over governed as Australia is long overdue” Liability Conundrums and Concerns “The liability reforms would also benefit municipal associations and local authorities which were the recipients of grossly inequitable litigious assault.” The Age Newspaper Wednesday October 1991 Local government in particular, or as plaintiff lawyers affectionately refer to them “insurers of last resort”, were buckling under the burden of the joint and several liability doctrine. Frequently joined as co defendants in building actions, councils were often first choice defendants as they became de facto underwriters of the liability of impecunious co-defendants in multi party proceedings. The cost was identified as being an unfair burden on local government and something had to be done about it. At the time plaintiffs had six years to initiate legal proceedings for building disputes. The problem was, six years from when? From when the damage occurred or from when the damage was discernable? The limitation period start date was not clear at law, with the consequence that legal proceedings were being issued in an ambiguously long time after a building was built. The term “infinity plus six” was coined to illustrate the uncertainty. Consensus was that this area of law was very problematic. Delays in building permit issue The building industry at the time was concerned about the delays in the issue of building permits as the delays held up projects and caused negative economic collateral. We were charged with the task of identifying a way to speed up the building approval process.

The Aims of the Project

• To develop the world’s best practice model of building regulation
• To reform construction liability laws/regimes
• To establish the most efficient appeal mechanisms and building control mechanism for expeditious resolution of building permit matters.
• To establish a privatised alternative to local government to the issuing of building permit – private certification.

The Methodology

1. The first phase was comparative regulatory analyses and synopsis. The publication The Primary Building Acts of Australia a Comparative Study provided a synopsis of the then eight disparate building regulatory systems in Australia.
2. The next publication and research project summarised the building permit and building control dispute resolution systems in the eight jurisdictions. This culminated in the publication of the book The Primary Building Acts of Australia Dispute Resolution Systems and Options.

1. The reform team needed to analyse the best way of generating model legislation that could be promulgated as law. AUBRCC engaged the Comparative Constitutional Studies Centre of Melbourne University to prepare a report that we published called Constitutional Options for Uniform legislation.
2. Comparative analysis was then carried out by the team on world best practice regulatory regimes to identify:
   • Best practice insurance laws
   • Best practice liability laws
   • Best practice private certification regimes
   • Best practice compliance and probity regulations
   • Best practice registration systems

The reform team analysed on and off-shore regimes including:

• The UK
• France
• Certain US and Canadian jurisdictions
• NZ
• All Australian states and territories

The reformers then summarised the research and generated a report that culminated in the publication titled Model Building Act Legislative Aims and Options.

Consultation

Interposed and running in parallel with the research, the law reformers embarked upon a massive interstate consultation process. Be it addressing trade associations, state and territory building controllers and civil servants; be it addressing national or state and territory conferences on the reform proposals, the consultation process was exhaustive, exhausting and comprehensive. Peak representative bodies were briefed and consulted with: local government, the MBAs, the HIAs, the then BOMA (predecessor of the property council), the Institute of Engineers, the AIBS; to name a few. Some seven research books totalling 27,000 were printed, published and distributed by AUBRCC throughout the nation at no cost to the key stake holders along with every council in Australia. Questionnaire and Feedback After the key stake holders had considered the Legislative Aims and Options book, they filled out questionnaires that had been dispatched 2 throughout the country seeking reform preferences. The reform team then sifted through the stake holder feedback forms and synthesised reform preferences. Industry stakeholders and local government representatives volunteered certain key preferences:

Ten Year Liability Capping

A clear start date for the initiation and conclusion of legal proceedings being ten years from the issue of a construction permit. Ten years hence, the ability to initiate legal proceedings for economic loss or damages occasioned by problematic building work was “guillotined”. The use of the word guillotine is metaphorically poignant as we imported this idea from French based legal systems dating back to the Napoleonic code and the concept of liabilitie decennial.

Proportionate Liability

Building practitioners, representative bodies and local government all “sang the same tune” that joint several liability (JSL) as a liability apportionment and allocation doctrine should be replaced. The consensus was that JSL should be replaced with the legal doctrine, proportionate liability. This is the doctrine where in multi defendant legal proceedings, no defendant would be held liable for any more than his, her or its contribution of responsibility for the building ailment or malaise.

Private Certification

In the early 90’s, one could only obtain a building permit and occupancy permit and related building approval inspections through local government. Industry and consumer feedback revealed that the building approval process monopoly enjoyed by local government slowed down optimum speed regarding the issuing of building approvals.

Consensus was such that a privatised regime for the building approval process be introduced to enable private building surveyors to compete with local government for the issue of statutory building approvals. This was identified as a very important micro-economic reform.

Further, it was identified that a stringent compliance regime be introduced to “police” the private certification community, whereby state regulatory bodies would register and oversee private certifiers to ensure that they discharged their statutory obligations to the public. The phrase “deregulation with safeguards” was poignantly coined.

Alas, deregulation occurred but history has shown that the safeguard regime did not sufficiently evolve with the passage of time in that no jurisdiction introduced mandatory and annual auditing of private building surveyors and key building practitioners.

Furthermore, in the mid-90s a performance-based building code was introduced that gave building surveyors a largely unfettered discretion to approve alternative solution-based building design proposals. It should be noted that at the time the National Model Building Act was fashioned, there was no contemplation of the promulgation of a performance based building code. If there had been, model provisions would have been incorporated into the model template, specifically designed to manage this discretion-based aspect of the BCA.

Compulsory Insurance for Principal Actors

It was identified that the removal of the application of JSL and the replacement of this  liability doctrine with proportionate liability without the compliment of compulsory insurance could be problematic.

Consumer advocates correctly, if not anxiously, opined that if joint several liability was removed and key co-defendants were not insured, then consumers could be met with “men of straw” defendants who would simply wind their companies up when confronted with judicial judgement. Net result, consumers would be in the invidious position of only receiving a mere percentage of that which had been found judicially owing to them. In the case of JSL the solvent defendant would have been compelled to pay the consumer for the financial liabilities of his, her or its insolvent co-defendants.

It was thus resolved that the NMBA would provide that all key building practitioner players of the likes of builders, engineers, building surveyors, building inspectors, architects would all be required to be registered with a central registration body and insured by law.

Compulsory Registration System

It was resolved that the above categories of registrant should be required to be registered by a central government body and insured.

One stop shop dispute resolution for building approval disagreements

It was resolved that any disputes or appeals to do with the issue of building approvals would be referred to an Appeals Board comprising reputable and prominent industry peers. The peers would preside over informal hearings and hand down prompt and practical decisions.

The stakeholder preferences were conveyed to the AUBRCC and the inter-jurisdictional building controllers that comprised the AUBRCC then conveyed this information to their governments and Ministers. It was resolved that the stakeholder preferences would be endorsed which culminated in the move to regulatory creation.

The Regulatory Drafting Process

Once the building controllers from the eight state and territory governments agreed in principle with the key reform tenets it was resolved that the writer would write to the relevant building control ministers to seek their permission to communicate with the Standing Committee of Attorney’s General (“SCAG”). This was, in due course forthcoming whereupon the writer had to contact  the nine Attorney’s Generals to secure an official imprimatur for the deployment of the inter-jurisdictional Chief Parliamentary Counsels Committee. Again, fortuitously, this inter-jurisdictional imprimatur was forthcoming. The law reform team then formally wrote to the CPCC to nominate a parliamentary counsel to draft a Model Building Act. The CPCC did indeed, after some consultation with certain members of the committee, elect Dennis Murphy QC (Head of the offices of Parliamentary Counsel NSW) to utilise the resources of his august offices to draft the Model Act. Once this sanction was forthcoming, the drafting instructions for parliamentary counsel were prepared.

Drafting Instructions

A set of drafting instructions is a document that is prepared by policy officers and the instructing officer to parliamentary counsel to encapsulate instructions and explanations to parliamentary counsel to assist them with preparing or drafting legislation. A number of drafts are usually honed with a great deal of consultation between the instructing officers before the legislative instrument is perfected. Within about 14 months of the beginning of this national micro economic reform initiative, the Model Act materialised. About 5,000 copies of the book, The Model Building Legislation for Consideration by the States and Territories – Legislative Commentary, were published and distributed throughout the nation to key stakeholders.

What then Happened?

The Model Building Act, sadly according to some, did not become a uniform national act of parliament. Rather, the key tenets below were picked up in substance by the most Australian jurisdictions over the next ten years. The key tenets to reiterate were the introduction of:

• Proportionate liability and a ten-year liability limitation period
• Private certification of building approvals
• An expedited building approval dispute resolution system
• Compulsory registration and insurance of building practitioners

The Northern Territory

This was the first jurisdiction to substantially promulgate Model Building Act reforms. The then Building Controller for the NT, Mr Bob Wallis, encouraged the NT to adopt the large majority of Model Building Act provisions. Indeed, the NT Building Act that was proclaimed in the early 90s would prove to be the “truest disciple” of the Model Building Act. The following was introduced:

• a totally privatised system of building approval with no involvement of local government
• proportionate liability and ten-year liability capping
• compulsory registration of building practitioners with a government registration body
• compulsory insurance
• Building approval dispute resolution systems that were very true to the Model Building Act template.

The next jurisdiction to follow suit was Victoria.

Victorian Building Act 1993

This Act, although considerably more expansive than either the NT Act or the Model Building Act in keeping with the NMBA established proportionate liability and ten-year liability capping. A Building Practitioners Board that registered in excess of 24,000 registered building practitioners was established. The VBA now has responsibility for practitioner licensing and registration under Part 11 of the Building Act. A privatised approach to the issue of building permits was established where private building surveyors went into competition with council building surveyors for the issue of building permits. Other jurisdictions subsequently picked up a great many of the Model Building Act reform pillars; namely South Australia, Queensland and the ACT. The ACT, like the NT, introduced a building approval process where there was no involvement of local government and private certifiers carried out the entirety of building approval functions. Likewise, building practitioners came within the jurisdiction of government-controlled registration bodies. To varying degrees these jurisdictions adopted the liability reforms but not with identical wording.

NSW

In the late 90s, the writer was engaged by the NSW government to advise on reforms to the Environmental Planning and Assessment Act (EPAA). The writer recommended that both ten-year liability capping and proportionate liability be introduced. Most of the writer’s recommendations were acceded to. Additional recommendations were that all key building practitioners of the likes of engineers, builders and designers should be registered with the central governmental registration body. A private sector body oversaw the initial establishment of private certification in NSW and it is a matter of historical fact that the private sector watch dog was not able to get long term traction. The BSAP failed and  in due course the role was subsumed by government under the auspices of the Building Professions Board NSW. Further, unlike Victoria and the NT where builders, engineers, building surveyors, and in the case of Victoria, draftspersons, were required to be registered/accredited, the registration pool was limited to residential builders under the Home Building Act 1989, NSW building certifiers and their local government counterparts. A quarter of a century later, NSW passed the Design and Building Practitioners Act 2020, which required, amongst other things, the registration of any practitioner required to make compliance declarations under that Act including builders, professional engineers, designers and architects. Tasmania early in the third millennium radically reformed it’s building legislation and took cognisance of many of the tenets of the Model Building Act. More recently, West Australia has conducted a major overhaul of its building regulatory regime but without speaking with any authority on point it appears that this new act of parliament would not be considered a “close relation” of the Model Building Act.

What Was So Pioneering About the Model Building Act?

It was the first legislation that introduced proportionate liability in the Antipodes and to that extent was many years ahead of the wholesale tort reform movement that occurred to Wrongs and Tort Acts early in the third millennium. The writer once remembers bumping into a past Victorian Chief Parliamentary Counsel, Mr John Finnamore QC in a Bourke St tram and the learned gentleman quipped that he never thought he would see these types of reforms in the 20th century. In the Model Building Legislation – Legislative Commentary, the Honourable David Smith, the then Minister for Local Government Western Australia, stated, and I quote, “The Model Building Act will aim to encourage these savings by deregulating different elements in the system… will… cap liability at a definite time – this will result in quantifiable risk, lower premiums and the return to favour of professional indemnity cover. It will also reduce local authority liability exposure.” Indeed, liability has been capped and PI has returned to favour and under any criteria local authority exposure has been reduced although this exposure has migrated to the private building surveying profession which is under severe pressure. Doctor Anthony Lavers, an international expert on building regulation a then Doctor at Oxford Brookes University Oxford in a paper titled, “Protection of Real Estate Developers and Users Against Economic Loss Arising from Defects in Construction” at a Pacific Rim Real Estate conference in 2000 had this to say about the model act base reforms:

THE AUSTRALIAN REFORMS Australia undoubtedly presents the best examples of system reform in a common law country, Nothing so radical and so holistic in concept has ever been undertaken in a major jurisdiction as the legislative reforms in the States of Victoria and New South Wales, now being followed to differing extents in other Australian states. At least 5 principal benefits can be identified even from this author’s outline knowledge of the legislation, when compared with traditional liability/litigation based systems which the Australian States previously shared with the U.K.

1. The ten year duration of liability could be regarded by producers as worse than the Limitation of Actions Act six year period. However, there is much solace in having a definitive start and end to the period of risk exposure of the producer and this certainty may be seen as a fair exchange for the additional four years. From the point of view of consumers, the extension is very welcome; the evidence before the Australian Uniform Building Regulations Co-ordinating Council (Lovegrove, 1991) was that this would increase the percentage of post-construction defects detected from some 80% (within 6 years of error) to some 98% (within 10 years of error).
2. Proportionate liability. The doctrine of j o i n t and several liability is deeply embedded in the common law and it has caused difficulties in U.K. reform (see below). The Victorian and NSW legislatures have cut through the problem by enacting proportionate liability; so that the respective parties to the project only bear a maximum of financial liability based upon their contribution to the work. In the U.K., the objection has been two-fold: that this allocation of percentages is arbitrary or even impossible and that it leaves clients/plaintiffs less protected than before. The answers which can be made to these objections are that courts routinely allocate percentages of responsibility in contributory negligence cases and that the notional reduction of protection can be compensated for through greater certainty of recovery, including insurance protection.
3. Mandatory insurance. One of the most interesting innovations in the Australian reforms has been to require all ‘building practitioners’ to carry compulsory insurance cover. Mandatory insurance sometimes has negative connotations for practitioners. This author conducted simple attitude studies in Singapore and in Malaysia in 1996 and found resistance to the idea of compulsion. The U.K. Latham reforms (see below) have been partly stalled on this point. The French system’s mandatory requirements are considered below.
4. Registration of building practitioners. To make possible the enforcement of mandatory insurance, all practitioners have to be registered. While many countries have long required architects and professional engineers to be registered, extending this to contractors is less common. Contractor registration does exist in some states of the US and also in Singapore, although the Australian States have gone further than the latter, where little use is actually made of the registration system. The idea of contractors being insured against post-construction defects would be novel in most, although not all, systems, (see France below).
5. Dispute resolution. As was emphasised earlier in this paper, this is one of the most heavily criticised aspects of the traditional liability/ litigation based systems, by both consumers and producers. The jurisdictions of the Building Appeals Board and the Domestic Building Tribunal respectively represent a serious attempt to take construction disputes out of the court system and locate them where they can be resolved using non-confrontational techniques where possible (there is jurisdiction to use ADR), by tribunals with knowledge of construction (giving confidence to the parties and legitimacy to the decisions) and without excessive delay or cost. (Watts, 1998, pp. 10-12)

So Did the Model Building Act Reshape Modern Day Building Control?

Dr Lavers observed that “nothing so radical and so holistic in concept has ever been undertaken in a major jurisdiction as the legislative reforms in the states of Victoria and NSW”. This observation comes from an international expert with a strong academic and legal pedigree in comparative analysis of international construction laws and legal regimes. Doctor Lavers would also qualify as a truly independent umpire who was able to proffer an opinion devoid of any agenda or bias. The combination of his academic credentials and an impartial disposition make his observations compelling. As an aside, the other day the author was asked whether there could indeed be uniform legislation in Australia. The author said highly unlikely. Although Australia is one country in the geographical sense, as there are eight different state and territory governments, with eight different Acts of parliament regulating building control, Australia is not, for fear of sounding simplistic, one “legal country or legislature” rather it could be construed as eight separate “legal countries”. This being the case there are very well established parliamentary and legislative chorales that structurally make it exceptionally difficult to augment uniform legislation. If an Act of parliament is not uniform from an inter-jurisdictional perspective, regulatory uniformity for better or for worse will be “a tall order”. Although the NMBA did not achieve uniform legislation there is little doubt that it generated far more philosophical and “legal doctrine” uniformity in Australia. Ironically the regulatory parlance is an area where there is much divergence. Be it a professional who is called a building surveyor in one jurisdiction or someone who is called a principal certifying authority in another jurisdiction or a NSW construction certificate that is called a building permit in another jurisdiction, the language with respect to the same mechanisms differs. In Terms of Legacies of the National Model Building Act – What Worked, What Failed, What Was Learnt and What Wasn’t Learnt The writer published an article in Sourceable, based on a paper he presented to the World Bank in Washington in 2016. The paper was called “Building Control – From Monopoly to Free Market to Hindsight”. In analysing the impact of the NMBA reforms, the writer stated and will be quoted verbatim:

The NMBA became the law reform blue print or template for much of modern day building control in Australia in that it introduced:

• Proportionate liability
• 10-year liability capping
• Compulsory insurance
• Private certification

At the same time, NZ had introduced a performance based building code and had amended its own Building Act absent the above NMBA reform innovations. Australia used the NZ performance based code as a template for the generation of the performance based building code – the Building Code of Australia that came into being in the mid-1990s.

The conclusions that I proffered with regards to the NMBA legacies were as follows:

Both countries in the early-1990s embarked upon a deregulation drive. Australia focused more on the concept of deregulation with safeguards and had greater regard for utilitarian holistics. NZ, meanwhile, experienced a massive system failure – the leaky building syndrome (LBS), the impact of which still reverberates today.

NZ has paid a terrible price measured in terms of billions of dollars and sadly some lives lost due to leaky building suicide for failing to have sufficient regard to regulatory safeguards and holistics. The LBS has cost the country billions of dollars and culminated in the proclamation of legislation to establish a Weather Tight Homes Tribunal that is still is in existence and was purpose-crafted to adjudicate over leaky building homes disputes.

Both countries witnessed the demise of certain bureaucracies – both the Building Commission of Victoria and the NZBIA fell. Both bodies were born of early-1990s law reform initiatives, good intention and optimism (as is so often the case with reforming civil servants), both were charged with regulatory oversight, but they both in inglorious circumstances were disbanded and their jurisdiction wrenched back into mainstream governmental and overarching departmental control.

In NZ, private certification came and went very quickly, whereas in Australia (albeit in a variety of guises depending upon the jurisdiction) it has survived to date.

A number of stakeholders in both countries came to recognise that the reforms went too far and in some instances not far enough and these are some of the lessons that should be learnt are as follows:

Classic free market principles should not apply to building surveyors in terms of that which they charge as they are performing a critical statuary function. Experience has shown that the free market often ensures that he who charges the least gets the gig, hence the term fee cannibalisation. This “professional” predilection that is characteristic of some members of the certifying profession has culminated, according to the sceptics, in an economic approach being deployed to the time devoted to tasks such as building inspections.

The use of performance based building codes married with the building surveyor’s power to issue building permits that are assessed with reference to performance or objective based criteria rather than prescriptive criteria was an ill-conceived cocktail, fraught with downsides and could create an environment where cutting cost “incentivisation” ran the risk of anaesthetising the public safety imperative.

When one introduces a privatised option for building control, then one must have very robust safeguards in place to ensure that the certifier cannot compromise his primary fiduciary obligation – the protection of the public. One of the ways to do this is to ensure that certifiers are audited annually, on at least one occasion each year. This is precisely what occurs in the legal fraternity where lawyers hold client monies in trust.

When one deregulates one must ensure that the utilitarian dividend to the public is not compromised which requires one to embrace the law reform mantra of “deregulation with safeguards.” Yes, deregulate – and yes this will improve efficiencies and yes it will reduce the cost of construction. But only deregulate if the regime introduces robust probity mechanisms such as:

• Mandatory annual auditing of key building regulatory service providers. In this regard, look to Japan for the best practice. Note that the Japanese in their Building Act have criminal sanctions for the most heinous of building related regulatory misdemeanours. Some would say that this is a bridge too far, over the top as it were, but not the Japanese who canonise the virtue of public protection.
• Ensure that the insurance and liability apportionment “holistics” are on song. For best practice, look to the proportionate liability and compulsory insurance regime in Victoria. This coupling has endured and unlike private certification has generated no controversy. Do not score highly the residential warranty regime for builders in Australia, however, as this regime has attracted a great deal of ire on the part of consumer advocates.
• For best practice in long tail liability, look to Victoria with its 10-year liability regime, but recognise that that concept is French in derivation.

(Lovegrove, 2016, Building Control – From Monopoly to Free Market to Hindsight, published in Sourceable)

About the author

Professor Kim Lovegrove MSE RML, is a senior lawyer at Lovegrove & Cotton Lawyers; a past senior law reform consultant to the World Bank; currently has three conjoint/adjunct professorships and is a past Conjoint Professor of Building Regulation and Certification at the University of Newcastle; Past Chairman Building Practitioners Board Victoria; Past President for the Northern Chapter of the New Zealand Institute of Building and a past President of the Australian Institute of Building (Victorian Chapter). Kim is increasingly being deployed to advise policymakers and law reformers in offshore jurisdictions on best practice building control and building regulatory ‘holistics’. Kim Lovegrove has also been awarded the MSE and the RML – Royal Medal of the Lion by Prince Ermias Sahle Selassie. This award was in recognition of Kim’s humanitarian endeavours in Ethiopia, where he and the firm sponsored the Lawyer position at the Hope for Children Organisation. Disclaimer This article is not legal advice rather a discussion of the topic in only general terms. Should you be in need of legal advice, please contact a construction law firm. Lovegrove & Cotton Lawyers and our experienced team will assist you based on the facts and circumstances of your case.

By Justin Cotton, Director, and Jordan Davies, Senior Paralegal, Lovegrove & Cotton – Construction and Planning Lawyers

A range of professionals and practitioners in Australia are subject to oversight by regulators with powers to initiate disciplinary action against those professionals or practitioners. This is the case in fields such as the medical and legal professions, and it is also true for building practitioners in jurisdictions like Victoria pursuant to Part 11 of the Building Act 1993.

This article provides some essential points of general application for those who decide not to contest charges in relation to professional misconduct, and wish to enter a plea in mitigation.

For a building practitioner in Victoria this would ordinarily be after a show cause notice is issued pursuant to Section 182 of the Building Act 1993 in relation to proposed disciplinary action, and the practitioner and their advisors consider there to be little ground for contestation. In the case of a building practitioner, the practitioner may opt to provide written or oral representations to the VBA (see s 182A). For a building practitioner, it is at this stage where, with the guidance of a building practitioner advocate, a plea in mitigation might be considered.

Having extensive experience over the course of some decades in building disciplinary jurisdictions, including one of our lawyers being a past president of the former Victorian Building Practitioners Board, our firm is well aware of what works well for a plea in mitigation and what does not. The aim is to show the decision maker why disciplinary censure need not be severe in the particular case, mindful of the purpose of disciplinary action being to protect the public interest and the profession.

Strategy

Once a decision is made not to contest charges (for instance in written or oral representations to the VBA in response to the show cause notice), but to present a ‘plea in mitigation’, the correct strategy must be considered. Your legal advocate will of course need to go in fully prepared. It is not simply a case of “rolling over”, rather it is an exercise in creating a true picture of all the circumstances, in order to gain the most favourable sentence from the trier of fact. In fact, there is often no agreement between the defence and prosecution as to what the appropriate penalty would be, even where facts are admitted, so such hearings as these can still be adversarial in nature.

When one thinks of the word “whitewash”, a scene in a Mark Twain novel is brought to mind where the protagonist is punished by being made to whitewash many yards of a paling fence. It was an unhappy scene in the novel (at least at first), and whitewashing will likewise prove an unhappy experience if it is attempted in a court or tribunal. Do not attempt to sugar coat or whitewash the actions that occurred, or make a political statement. It may even create the impression in the mind of the judge or member that there is no genuine remorse and no real lessons learned.

With political statements, at best the judge or member will simply place such arguments in the ‘too hard basket’ as being outside of their jurisdiction. Such arguments may sometimes have real worth, but are best left out of a plea in mitigation in disciplinary proceedings.

The Plea in Mitigation

A good plea in mitigation should provide an explanation for any unprofessional conduct, and hopefully offer some mitigating circumstances. Such a plea will have many elements to it, and ideally, as many bases will be covered as possible.

If the situation is bleak for the client, and the facts overwhelming, it will be difficult and probably counterproductive to ‘whitewash’ the facts. Despite this, on many occasions you will be able to cite some form of chronology that explains why the practitioner acted the way they did, or detail circumstances that may have contributed to the conduct.

Examples of other contributing or ‘mitigating’ factors may be:

• where a ‘safety’ incident is contributed to by natural conditions such as freak weather
• where there were contributing factors outside of the practitioner’s control or caused by the involvement of other parties

In some cases, on a building site the prosecutor may be interested in prosecuting a number of parties. Once you obtain witness statements in a brief of evidence this will become clear, and this information may assist the defence lawyer in ‘plea bargaining’ with the prosecutor.

If for example a prosecuting authority is more interested in its action against a builder or owner in a development, it may agree to resolve the matter against other parties (such as a building surveyor or certifier) on the basis of undertakings as to future conduct and payment of costs. The possibilities for this will of course vary on a case by case basis. Whether such an outcome is possible will also of course depend on the overall conduct of the practitioner in all the circumstances.

At the outset, your lawyer should always obtain a full brief of evidence from the prosecutor’s lawyer to assess the situation. Even where the practitioner is pleading guilty, they may want to comment on statements made by other parties in witness statements.

A good plea in mitigation follows a formula and you should try to ‘tick’ as many boxes as possible. If you can tick most of the boxes in your submission you have normally done as much as you can do to extract the best decision from the court or tribunal.

The ingredients of the plea

So, here are the key ingredients of a strong plea in mitigation:

• Explanation of why the conduct occurred;
• Evidence (if possible) that any mistakes were honest/made in good faith
• Ownership and admission of guilt;
• Contrition and remorse;
• Changes to work practices/systems to avoid a repeat;
• Evidence of changes to behaviour/continuing education;
• References i.e. professional character references;
• The harm principal i.e. if there is no evidence of harm flowing from the conduct
• Financial limitations and distress;
• Demeanor and appearance;
• Sound prior record (i.e. is the conduct habitual or aberrational?)

Sometimes it will not be appropriate to touch on all of these elements, but you should tick as many of the boxes as you can. Where there is some wrongdoing admitted, then evidence of changes to work practices and any continuing education is invaluable.

Case law can sometimes be invoked e.g. Harm principal: Hans v Building Professions Board [2008] NSWADT 285. O’Connor J took significance from the fact that “no harm of any great significance resulted from the conduct of the respondent.”

References

Professional and personal references from reputed persons are generally paramount but some science needs to be applied. You should ensure the reference hits the right notes.

The reference should ideally:

• Describe the person, their qualifications / profession and how they know the practitioner;
• Describe their professional dealings with the practitioner;
• Speak favourably about the practitioner’s knowledge, professionalism, diligence, honesty etc;
• Advise the writer is aware of the complaints/allegations;
• Say something to the effect that the practitioner is remorseful about what occurred or that it is an aberration.

Avoid a reference that sends the wrong message. For example, if you are acting for a building surveyor charged with failing to adequately ensure plans are consistent, a reference that suggests the practitioner works briskly and speeds up the process would be unsuitable.

Aim for at least 2 or 3 key references from someone in the person’s industry. It goes without saying that these references should be as current and up-to-date as possible. As a back up, any references that also talk about character or contribution to the community are also helpful.

There will be the odd occasion where the practitioner will not be able, or will be unwilling, to obtain references. But these occasions will be the exception rather than the rule. If the practitioner has a sound record and there are other things you can say in their favour, there is no need to panic if it is not possible to obtain references, though they will certainly assist where provided.

Some important points from some cases

Law Society of NSW v McElvenny [2002] NSWADT 166: this looked at various factors that can be considered by a Tribunal to militate against the highest level sanction, e.g. such matters as: contrition, candour with an investigation and hearing, demeanor, and an otherwise sound record.

Craig v Medical Board of South Australia [2001] SASC 169: this establishes that the protection of the public is the key aim of disciplinary proceedings, not to punish a practitioner in a punitive sense. In some cases, the public might be better served in circumstances where a practitioner is allowed to continue practising, albeit with better education/systems.

Conclusion

As a building practitioner or professional person, if you are faced with a disciplinary proceeding or investigation, it is an extremely stressful time. It is pretty difficult not to take the process personally, and often a cool head is needed to strategise. Your lawyer will care about your plight, but will also have that level of detachment to make sound decisions. When faced with such an investigation or proceeding, you should seek experienced legal assistance as soon as possible.

 

Lovegrove & Cotton: Leaders in building practitioner legal representation

Lovegrove & Cotton are experts in construction law and building practitioner legal representation in Melbourne, Sydney, the ACT and Queensland. Kim Lovegrove RML, FAIB is co-author of leading text, “Disciplinary Hearings and Advocacy”. Justin Cotton has represented building practitioners and building surveyors successfully for nearly fifteen years and has established leading precedence in a number of Australian tribunals. If the reader knows of anybody who needs legal representation in this complex and gravity-laden area, feel free to contact us via our website or by emailing enquiries@lclawyers.com.au.