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

The International Building Quality Centre (IBQC) had its third virtual board meeting for the year on 24 July 2020 at 8pm AEST. It was a great meeting and the Board was able to report upon the progress of some of the initiatives that are on foot.

The first key initiative that is close to completion is the generation of a ‘power-packed’ five page set of maxims that are considered to be paramount ingredients of international building regulatory good practice. The Board discussed and finalised a couple of concepts that required consensual resolution on the part of all Board members. The instrument will be published within the month through a variety of poignant online mediums.

The Board also resolved that in the 2^nd half of September, the IBQC will hold its first international online forum whereupon a number of board members will address various elements of the good practice maxims. Dominic Sims, Chief Executive of the International Codes Council of the United States of America very kindly volunteered that the ICC will host this inaugural online forum. Once the date and the program is finalised, it will be published and available for perusal.

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

Introduction

The Design and Building Practitioners Act 2020 (NSW) has now been enacted in New South Wales. The legislation has made key changes to the regulation of Building and Design practitioners in the state. This is particularly with regards to registration requirements, and by entrenching a duty of care owed by those practitioners to owners and subsequent owners for professional services carried out with respect to a building development.

Some of the provisions of the legislation including many of those pertaining to registration are yet to come into operation, but importantly, the statutory duty of care is, as of 11 June 2020, operative and may be used by consumers of as-built product in proceedings commencing (or that have commenced) after 11 June 2020 for loss that became apparent from up to 10 years ago.

This statutory duty of care, therefore, has profound impacts, particularly in light of its retrospective operation of up to 10 years and the fact that practitioners are unable to contract out of the statutory duty of care.[1]

The Jurisprudential Context: Brookfield

In common law jurisdictions, many relationships between certain parties are said to give rise to a “duty of care”. This phrase is often over-used, particularly in light of the fact that certain elements are needed to be shown to exist prior to there being found a duty owed. These aspects are known as “salient features”, and have proven, in certain high profile cases, as substantial obstacles for plaintiffs seeking compensation even in circumstances where there has been significant damage. A principal obstacle in building-related negligence claims has been the salient feature of “vulnerability” in claims arising in circumstances of what is known as “pure economic loss”.

The decision of Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 & Anor [2014] HCA 36 (“Brookfield”) has served for some time now as a substantial hurdle in the face of occupiers of multi-residential apartment blocks in regards to arguing the existence of a duty of care owed by a builder to subsequent owners of multi-residential buildings. Pursuant to the Brookfield decision, a duty of care owed by a builder (and arguably other building practitioners) may be denied where it is shown that there was either:-

• contractual means available for protection (such as Vendor’s warranties and contractual assignment of builder’s warranties), and the claimant was ‘commercially sophisticated’ enough to protect themselves; or
• a statutory consumer protection regime that singled out certain classes of consumers as being in need of protection whilst being silent on other classes of consumers, and the plaintiff belonged to a class not included as needing protection under the regime – essentially the legislative ‘silence’ is taken to be intentional.

The case also reaffirmed that a Court will be loath to impose duties owed by builders to subsequent owners that have a greater scope than duties owed to first owners, who are often developers.

The Brookfield decision, therefore, was a very substantial hurdle for multi-residential building defects negligence claims, as Owners Corporations, particularly in mixed-use developments, are considered sufficiently ‘commercially sophisticated’ to avail themselves of the likes of contractual warranties. It also provided that where certain multi-residential building developments are exempt from building industry consumer protection statutes such as the Domestic Building Contracts Act 1995 (VIC) and Home Building Act 1989 (NSW), the tort of negligence would not come to the fore to make up for that legislative omission.

Design and Building Practitioners Act 2020 (NSW)

Arising partly out of concerns for the ramifications of the Brookfield decision, the New South Wales government has now passed new statutory provisions entrenching a duty of care like the one denied in Brookfield in the Design and Building Practitioners Act 2020 (NSW)^[2]. Some similar components of the DBP Act regarding signing off on compliance exist in Queensland under the Queensland Building and Construction Commission Act 1991 (QLD)^[3].

In the New South Wales legislation, legislators have seen fit to impose a duty specifically for persons “who [carry] out construction work” as regards pure economic loss, and this duty extends to builders, designers, building product suppliers or anyone “having substantive control over the carrying out” of such work.^[4] Importantly the relevant Section provides that “A person to whom the duty of care is owed is entitled to damages for the breach of the duty as if the duty were a duty established by the common law”.^[5] The provision expressly circumvents the hurdles in Brookfield in regards to the availability of contractual protection and the existence of a statutory consumer protection regime militating against the existence of a duty.

The provision giving rise to this statutory duty of care is contained in Section 37 of the Design and Building Practitioners Act 2020, and reads verbatim as follows:-

Extension of duty of care

(1)  A person who carries out construction work has a duty to exercise reasonable care to avoid economic loss caused by defects—

(a)  in or related to a building for which the work is done, and

(b)  arising from the construction work.

(2)  The duty of care is owed to each owner of the land in relation to which the construction work is carried out and to each subsequent owner of the land.

(3)  A person to whom the duty of care is owed is entitled to damages for the breach of the duty as if the duty were a duty established by the common law.

(4)  The duty of care is owed to an owner whether or not the construction work was carried out—

(a)  under a contract or other arrangement entered into with the owner or another person, or

(b)  otherwise than under a contract or arrangement.

It follows therefore that the duty is quite expansive particularly given that it dispenses with the common law position that a builder does not necessarily owe subsequent owners a duty of care to avoid economic loss.

The provision leaves issues of breach and causation, pursuant to subsection (3), to be decided by way of established common law as altered by the Civil Liability Act 2002 (NSW) – i.e. what has been now the established test for breach and causation for negligence claims in NSW for well over a decade.

A Large Net of Practitioners and Actors Subject to the Duty

Importantly, pursuant to Section 36, “construction work” is defined as:-

(a) building work;

(b) the preparation of regulated designs and other designs for building work;

(c)  the manufacture or supply of a building product used for building work;

(d)  supervising, coordinating, project managing or otherwise having substantive control over the carrying out of any work referred to in paragraph (a), (b) or (c).

This means there is a very broad net of actors that are captured by the provisions and owe a duty of care to owners and subsequent owners. This includes: builders, engineers, designers, architects, project managers and even manufacturers and suppliers of product for building work, or like actors having “substantive control”.

Owners Corporations

Owners Corporations for commercial components of multi-residential buildings have been viewed by Courts as commercially sophisticated which has proven to be a hurdle in establishing duties of care owed by builders and other building practitioners. In light of the promulgation of this statutory duty of care, Owners Corporations no longer face this substantial hurdle.

This important extension of the duty of care arises by virtue of Section 38 of the Act, which states that “an owners corporation or an association is taken to suffer economic loss for the purposes of this Part if the corporation or association bears the cost of rectifying defects (including damage caused by defects) that are the subject of a breach of the duty of care imposed under this Part.”

This means many Owners Corporations who were previously advised they were barred from attaining compensation under negligence for pure economic loss, may no longer be under the new statutory regime for claims in negligence against builders and other practitioners, against whom they had no contractual warranties nor statutory protections [such as statutory warranties under the Home Building Act], for loss or building defects that have appeared within the 10 years preceding 11 June 2020.

Economic loss under the provision includes economic loss for damage caused as a consequence of defects and loss associated with the provision of alternative accommodation for the likes of occupiers, but importantly is not limited to these kinds of economic loss.[8]

Building Actors and the Retrospective Application of the Duty of Care in New South Wales

The provisions will alter the risk profile of carrying out professional services in relation to building work in New South Wales. This is particularly the case in light of the retrospective application of the statutory duty of care and the inability for those subject to the duty to contract out of it.[9] The duty of care adds to existing duties, statutory warranties and other obligations under the likes of the Home Building Act and the common law.[10] It means actors involved in building projects in New South Wales will need to reassess the risk profile of their work.

Considerations for Building Practitioners Going Forward

A Non-Delegable Duty of Care

A crucial consideration for those subject to the new duty of care is found in Section 39 of the Act, namely that the duty of care is non-delegable. This means that principal contractors will be unable to delegate the duty of care to their subcontractors if they engage them for certain components of building or design work or the supply and manufacture of building products.

Concerns have therefore been raised regarding this inability to delegate the duty of care to subcontractors as it may leave principal contractors effectively vicariously liable for the subcontractors they engage on projects.^[11] This will have clear financial risk impacts upon principal contractors going forward.

It will thus behove principal contractors to ensure they adequately contractually protect themselves to account for the risks they will now assume with subcontractors. Prudence will dictate that in doing so, those carrying out building work, design work, or the supply or manufacture of building products, and those who have “substantive control over” such work, as a principal contractor, should consult an expert construction lawyer. The objective will be to fashion contractual provisions within their subcontract agreements to indemnify them for liability under the new provisions, in the event of want of care on the part of subcontractors.

Insurance Ramifications

Building practitioners affected by the new duty of care will need to turn their minds to ramifications for their insurance arrangements, particularly their professional indemnity cover, as it has been projected by some that there will be an increase in litigation as an eventual result of the new enactment.^[12]

Conclusion

The new statutory duty of care enshrined under the Design and Building Practitioners Act 2020 (NSW) therefore has a significant impact upon the building industry in New South Wales. The duty extends to owners and Owners Corporations and removes certain common law hurdles in negligence claims for pure economic loss. The provisions will alter the liability paradigm for building practitioners and other non-registered actors that provide services in the New South Wales building industry.

Owners and Owners Corporations in certain cases will now have an alternative statutory cause of action to argue in building defect matters.

Professionals involved in the provision of services in relation to building and design and the supply and manufacture of materials will need to consider the risk impacts involved with this new duty of care.

Regardless of whether one is an owner or a building professional, it will be prudent for one to consult with an expert construction lawyer to ensure you are appropriately apprised of your rights and obligations under the new law.

Footnotes:-

[1] See Design and Building Practitioners Act 2020 (NSW), s 40.

[2] s 37.

[3] s 74AF.

[4] Design and Building Practitioners Act 2020 (NSW), s 37(1).

[5] Ibid, s 37(3).

[8] See Design and Building Practitioners Act 2020 (NSW), s 38(4).

[9] Design and Building Practitioners Act 2020 (NSW), s 40.

[10] Design and Building Practitioners Act 2020 (NSW), s 41.

[11] Design and Building Practitioners Act 2020 (NSW), s 39; Aiden Davey, Fighting chaos with chaos: an analysis of the Design and Building Practitioners Bill 2019 (NSW) — (2020) 31(4) ACLB 49; Michael Bleby, ‘NSW opens door to thousands of defect claims’, AFR, June 15, 2020.

[12] See Michael Bleby, ‘NSW opens door to thousands of defect claims’, AFR, June 15, 2020.

Disclaimer

This article is not legal advice rather it is a discussion of the topic in only general terms.

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

Introduction

The Design and Building Practitioners Act 2020 (NSW) has now been enacted in New South Wales. The legislation has made key changes to the regulation of Building and Design practitioners in the state. This is particularly with regards to registration requirements, and by entrenching a duty of care owed by those practitioners to owners and subsequent owners for professional services carried out with respect to a building development.

Some of the provisions of the legislation including many of those pertaining to registration are yet to come into operation, but importantly, the statutory duty of care is, as of 11 June 2020, operative and may be used by consumers of as-built product in proceedings commencing (or that have commenced) after 11 June 2020 for loss that became apparent from up to 10 years ago.

This statutory duty of care, therefore, has profound impacts, particularly in light of its retrospective operation of up to 10 years and the fact that practitioners are unable to contract out of the statutory duty of care.[1] It has significant impacts for aggrieved owners, particularly those who have purchased units in multi-residential buildings.

The Jurisprudential Context: Brookfield

In common law jurisdictions, many relationships between certain parties are said to give rise to a “duty of care”. This phrase is often over-used, particularly in light of the fact that certain elements are needed to be shown to exist prior to there being found a duty owed. These aspects are known as “salient features”, and have proven, in certain high profile cases, as substantial obstacles for plaintiffs seeking compensation even in circumstances where there has been significant damage. A principal obstacle in building-related negligence claims has been the salient feature of “vulnerability” in claims arising in circumstances of what is known as “pure economic loss”.

The decision of Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 & Anor [2014] HCA 36 (“Brookfield”) has served for some time now as a substantial hurdle in the face of occupiers of multi-purpose multi-residential apartment blocks in regards to arguing the existence of a duty of care owed by a builder to subsequent owners of multi-residential buildings. Pursuant to the Brookfield decision, a duty of care owed by a builder (and arguably other building practitioners) may be denied where it is shown that there was either:-

• contractual means available for protection (such as Vendor’s warranties and contractual assignment of builder’s warranties), and the claimant was ‘commercially sophisticated’ enough to protect themselves; or
• a statutory consumer protection regime that singled out certain classes of consumers as being in need of protection whilst being silent on other classes of consumers, and the plaintiff belonged to a class not included as needing protection under the regime – essentially the legislative ‘silence’ is taken to be intentional.

The case also reaffirmed that a Court will be loath to impose duties owed by builders to subsequent owners that have a greater scope than duties owed to first owners, who are often developers.

The Brookfield decision, therefore, was considered a very substantial hurdle for multi-residential building defects negligence claims, as Owners Corporations, particularly in mixed-use developments, are considered sufficiently ‘commercially sophisticated’ to avail themselves of the likes of contractual warranties. It was also noteworthy that certain components of multi-residential building developments are exempt from building industry consumer protection statutes such as the Domestic Building Contracts Act 1995 (VIC) and Home Building Act 1989 (NSW).

Design and Building Practitioners Act 2020 (NSW)

Arising partly out of concerns for the ramifications of the Brookfield decision, the New South Wales government has now passed new statutory provisions entrenching a duty of care like the one denied in Brookfield in the Design and Building Practitioners Act 2020 (NSW)^[2].

In the New South Wales legislation, legislators have seen fit to impose a duty specifically for persons “who [carry] out construction work” as regards pure economic loss, and this duty extends to builders, designers, building product suppliers or anyone “having substantive control over the carrying out” of such work.^[4] Importantly the relevant Section provides that “A person to whom the duty of care is owed is entitled to damages for the breach of the duty as if the duty were a duty established by the common law”.^[5] The provision expressly circumvents the hurdles in Brookfield in regards to the availability of contractual protection and the existence of a statutory consumer protection regime militating against the existence of a duty.

The provision giving rise to this statutory duty of care is contained in Section 37 of the Design and Building Practitioners Act 2020, and reads verbatim as follows:-

Extension of duty of care

(1)  A person who carries out construction work has a duty to exercise reasonable care to avoid economic loss caused by defects—

(a)  in or related to a building for which the work is done, and

(b)  arising from the construction work.

(2)  The duty of care is owed to each owner of the land in relation to which the construction work is carried out and to each subsequent owner of the land.

(3)  A person to whom the duty of care is owed is entitled to damages for the breach of the duty as if the duty were a duty established by the common law.

(4)  The duty of care is owed to an owner whether or not the construction work was carried out—

(a)  under a contract or other arrangement entered into with the owner or another person, or

(b)  otherwise than under a contract or arrangement.

It follows therefore that the duty is quite expansive particularly given that it dispenses with the common law position that a builder does not necessarily owe subsequent owners a duty of care to avoid economic loss.

The provision leaves issues of breach and causation, pursuant to subsection (3), to be decided by way of established common law as altered by the Civil Liability Act 2002 (NSW) – i.e. what has been now the established test for breach and causation for negligence claims in NSW for well over a decade.

A Large Net of Practitioners and Actors Subject to the Duty

Importantly, pursuant to Section 36, “construction work” is defined as:-

(a) building work;

(b) the preparation of regulated designs and other designs for building work;

(c)  the manufacture or supply of a building product used for building work;

(d)  supervising, coordinating, project managing or otherwise having substantive control over the carrying out of any work referred to in paragraph (a), (b) or (c).

This means there is a very broad net of actors that are captured by the provisions and owe a duty of care to owners and subsequent owners. This includes: builders, engineers, designers, architects, project managers and even manufacturers and suppliers of product for building work, or any actor having “substantive control”.

Naturally, broad definitions will need to be tested in Court systems before it is known precisely what actors possess “substantive control” over building work, design work and product manufacture and supply work.

A Potentially Expanded Suite of Claimable Defects

The types of defects captured by the provision are very broad by virtue of Section 37 (1)(a) and (b) in that they are not confined to the likes of structural defects.

This means that unlike the statutory warranty regime in Part 2C of the Home Building Act 1989 (NSW), there is no distinction between “major” building defects and “other” building defects and “major elements” of buildings.[6] The distinction in the Home Building Act had previously left some claims for non-structural defects and defects concerning non-load bearing elements of buildings vulnerable particularly in light of the Brookfield decision.

It follows that certain defects that were formerly subject to short 2-year statutory limitation periods,[7] which often barred claims under the statutory warranties, may now be able to be claimed under the new statutory duty of care which has a much longer limitation period.

Owners Corporations

Owners Corporations have traditionally been viewed by Courts as commercially sophisticated which has proven to be a hurdle in establishing duties of care owed by builders and other building practitioners. Now, Owners Corporations suffering damage by way of defects to common property have had this substantial obstacle cleared.

This important extension of the duty of care arises by virtue of Section 38 of the Act, which states that “an owners corporation or an association is taken to suffer economic loss for the purposes of this Part if the corporation or association bears the cost of rectifying defects (including damage caused by defects) that are the subject of a breach of the duty of care imposed under this Part.”

This means many Owners Corporations who were previously advised they were barred from attaining compensation under negligence for pure economic loss, may now commence proceedings under the new statutory regime for claims in negligence against builders and other practitioners, against whom they had no contractual warranties nor statutory protections [such as statutory warranties under the Home Building Act], for loss or building defects that have appeared within the 10 years preceding 11 June 2020.

Economic loss under the provision includes economic loss for damage caused as a consequence of defects and loss associated with the provision of alternative accommodation for the likes of occupiers, but importantly is not limited to these kinds of economic loss.[8]

This legislation, therefore, is very beneficial for New South Wales Owners Corporations seeking redress for defects that have arisen due to want of care on the part of either builders, engineers, designers, architects, project managers and even manufacturers and suppliers of product for building work, or any actor having “substantive control” over such work.

It may be prudent for Owners Corporations who may have previously considered taking action, and had not proceeded due to the legal impediments outlined in Brookfield, to consider consulting an expert construction lawyer and potentially reconsider taking action in light of these new changes. For owners and Owners Corporations making future claims, the new duty of care will serve as a strong alternative argument for claims in contract or under statutory warranties.

Building Actors and a New Risk Profile in New South Wales

On the other side, the provisions profoundly alter the risk profile of carrying out professional services in relation to building work in New South Wales. This is particularly the case in light of the retrospective application of the statutory duty of care and the inability for those subject to the duty to contract out of it.[9] The duty of care adds to existing duties, statutory warranties and other obligations under the likes of the Home Building Act and the common law.[10] It means actors involved in building projects in New South Wales will need to reassess the risk profile of their work.

Considerations for Building Practitioners Going Forward

A Non-Delegable Duty of Care

A crucial consideration for those subject to the new duty of care is found in Section 39 of the Act, namely that the duty of care is non-delegable. This means that principal contractors will be unable to delegate the duty of care to their subcontractors if they engage them for certain components of building or design work or the supply and manufacture of building products.

Concerns have therefore been raised regarding this inability to delegate the duty of care to subcontractors as it may leave principal contractors effectively vicariously liable for the subcontractors they engage on projects.^[11] This will have clear financial risk impacts upon principal contractors going forward.

It will thus behove principal contractors to ensure they adequately contractually protect themselves to account for the risks they will now assume with subcontractors. Prudence will dictate that in doing so, those carrying out building work, design work, or the supply or manufacture of building products, and those who have “substantive control over” such work, as a principal contractor, should consult an expert construction lawyer. The objective will be to fashion contractual provisions within their subcontract agreements to indemnify them for liability under the new provisions, in the event of want of care on the part of subcontractors.

Insurance Ramifications

Building practitioners affected by the new duty of care will need to turn their minds to ramifications for their insurance arrangements, particularly their professional indemnity cover, as it is projected that there will be an increase in litigation as an eventual result of the new enactment.^[12] This may have quite a taxing impact on the industry in light of other external factors including diminished insurability and the current economic slowdown.

Conclusion

The new statutory duty of care enshrined under the Design and Building Practitioners Act 2020 (NSW) therefore has a profound impact upon the building industry in New South Wales. Whilst the duty benefits owners and Owners Corporations by removing what have been viewed as undesirable common law hurdles in negligence claims for pure economic loss, they also radically shift the risk paradigm for building practitioners and other non-registered actors that provide services in the New South Wales building industry.

Owners and Owners Corporations who have previously been advised that a claim for negligence would not succeed may wish to check if there may now be a successful claim made in light of the coming into effect of these provisions.

Professionals involved in the provision of services in relation to building and design and the supply and manufacture of materials will need to consider the risk impacts involved with this new duty of care and will need to ensure they adequately protect themselves.

Regardless of whether one is an owner or a building professional, it will be prudent for one to consult with an expert construction lawyer to ensure you are appropriately apprised of your rights and obligations under the new law.

Footnotes:-

[1] See Design and Building Practitioners Act 2020 (NSW), s 40.

[2] s 37.

[3] s 74AF.

[4] Design and Building Practitioners Act 2020 (NSW), s 37(1).

[5] Ibid, s 37(3).

[6] See: Home Building Act 1989 (NSW), s 18E.

[7] See ibid.

[8] See Design and Building Practitioners Act 2020 (NSW), s 38(4).

[9] Design and Building Practitioners Act 2020 (NSW), s 40.

[10] Design and Building Practitioners Act 2020 (NSW), s 41.

[11] Design and Building Practitioners Act 2020 (NSW), s 39; Aiden Davey, Fighting chaos with chaos: an analysis of the Design and Building Practitioners Bill 2019 (NSW) — (2020) 31(4) ACLB 49; Michael Bleby, ‘NSW opens door to thousands of defect claims’, AFR, June 15, 2020.

[12] See Michael Bleby, ‘NSW opens door to thousands of defect claims’, AFR, June 15, 2020.

In 2020, coupled with the building defects and cladding crisis afflicting Australia and very high insurance premiums and excesses, a diminished work prospectus has left some Victorian building surveyors with no option but to leave the profession altogether.

The question therein lies – how does one go about appropriately and legally ending their statutory retainer as responsible building surveyor (‘RBS’) for a project? This article covers two key statutory processes for ending a building surveyor’s appointment, and discusses some considerations that building surveyors may wish to be mindful of in the event it appears their functions under the Building Act 1993 can no longer be carried out. This article cannot be treated as legal advice, and discusses the topic in general terms. Any advice regarding termination of private building surveyor functions must have regard to the specifics of the case, and an experienced construction lawyer should be consulted.

A Private Building Surveyor (‘PBS’) cannot simply contract totally on their own terms with the owner of a building development – their retainer is largely a statutory one which has key terms determined by the legislature through the Building Act 1993. It follows that ending such an engagement, in circumstances other than seeing the appointment through to completion, requires one to follow strictly the germane statutory processes.

Two Key Termination Mechanisms

Part 6 of the Building Act 1993 contains provisions concerning the appointment, termination, and, importantly, the transfer of functions and appointments of ‘managers’ of building surveyor functions by the VBA. For a building surveyor seeking to end their appointment, Divisions 1A and 3 of Part 6 are of particular relevance, namely the divisions concerning transfer of functions and appointment of managers. The two methods can be considered alternatives. These alternatives may be considered in extenuating circumstances where the building work has not yet been completed or has not been terminated.[1]

Transfer of functions to another Building Surveyor

Section 81 of the Building Act provides that no termination of the appointment of an RBS is to occur without the consent of the VBA. This is subject to an exception in Section 80C, namely where appointment is terminated as a result of a transfer of functions.

Section 80C outlines the circumstances under which a transfer of building surveying functions can occur. This would be the route one would take if one had a willing transferee building surveyor in mind. This process does not heavily involve the VBA, and as a result may be potentially quicker. This is because the process is one fundamentally reliant upon the consent of the owner, transferor building surveyor and transferee building surveyor. In regards to the involvement of the VBA and the relevant council, all that is required is that the form of transfer be in the form approved by the VBA and be lodged with the VBA and council.[2] The transfer is taken to have occurred[3], and thereby the appointment of the RBS deemed terminated, upon the latest of the date of either lodgement of the transfer form with the VBA, Council or the date specified on the form of transfer.[4] After that, it is then the new transferee RBS’s responsibility to notify the owner and builder of the giving effect of transfer.

Section 80C, specifically subsection (2), provides that no transfer may occur unless there is agreement by the person who appointed the RBS (i.e. the owner of the development) and the transferee building surveyor. Attaining the consent of another PBS may be a rarity in the current economic environment, and in light of concerns for potential assumptions of liabilities by the second building surveyor emanating from work carried out by the first building surveyor.

One important consideration for an RBS in this situation is the lack of reviewability of an owner’s decision or transferee RBS’s decision to refuse to allow the transfer, whereas a decision by the VBA under Part 6 Division 3 is reviewable.

Transfer to “Manager” of the PBS’ Business by the VBA

In other circumstances, the Building Act 1993 (VIC) provides that effective termination of a building surveyor’s functions requires the written consent of the VBA.[5] One consideration that must be borne in mind by an RBS when considering this route for ending their retainer is that the VBA’s consent may take time. Essentially this means that best practice would dictate that a PBS act as soon as possible to take steps to communicate with the VBA about the need for a termination of their appointment. There are review avenues under this process for a decision by the VBA.

Section 83B of the Building Act 1993 (VIC) provides that the VBA may appoint a manager of the Building Surveyor’s “business”. The use of the term “business” is interesting, but in this instance it refers to the PBS’s functions under the Building Act 1993.[6] The VBA may appoint that manager if it is of the view that it is “necessary to make the appointment in order to protect the interests of other persons”.[7] The ‘manager’ must be a registered building surveyor or an appropriately qualified employee of the VBA.[8]

The appointment of a ‘manager’ by the VBA for a Building Surveyor’s ‘business’ may occur upon “request” by a building surveyor seeking to end their appointment,[9] but the VBA may also appoint a “manager” if the private building surveyor:[10]

• Ceased carrying out the functions of a private building surveyor;
• Has had their registration suspended or cancelled;
• Has died;
• Is in prison;
• Has become a represented person within the meaning of the Guardianship and Administration Act 2019; or
• Has become insolvent under administration.

This indicates there are a range of practical considerations the legislature had in mind that may inhibit a building surveyor from continuing to act despite an otherwise rather rigid locked-in statutory retainer.

It is important to note that Section 83B came about after some changes made to the Building Act in 2017. The purpose was to incorporate more pragmatic flexibility into the statutory retainers of building surveyors in Victoria.

In the current heightened litigious environment, and with the economic shocks of the COVID-19 pandemic, anecdotally one hears of a larger number of building surveyors bringing forward their retirement plans, so it is likely that there is going to be a greater number of requests for the appointment of managers in circumstances where building surveyors have not been able to wind down their practices with sufficient alacrity.

This would be particularly the case in circumstances where a building surveyor is no longer able to attain the mandatory professional indemnity cover, whereupon they would be statutorily barred from continuing to carry out building surveyor functions, thereby arguably falling within the curtilage of one the express grounds for appointment of a Manager by the VBA, namely that “the private building surveyor has ceased carrying out the functions of a private building surveyor”.[11]

As the average age of a Building Surveyor is 55 years of age, over the next few years, it may be likely that there may be a significant increase in retirees and those who are intent on “[ceasing] carrying out the functions of a private building surveyor”. It does not appear that the legislature intends on prohibiting Private Building Surveyors from retiring in good faith[12] by locking in building surveyors to appointments, especially in cases of projects that, for unforeseen reasons, extend for elongated periods prior to certificates of occupancy being issued.

To ensure that the building surveyor does everything possible to perform their professional service contract, it would behove a surveyor facing adverse external factors impeding upon their ability to carry out their functions, to act swiftly to communicate with the VBA about those circumstances and processes involved with ending the appointment. It is also essential that communication lines are open with the owner of the development who appointed the building surveyor, as a communicative approach is best practice.

A Right of Review by VBA, VCAT & Victorian Supreme Court for a decision under s81 and/or s83B

A decision on the part of the VBA is a reviewable decision, pursuant to either Section 140, enlivening the Building Appeals Board’s jurisdiction, or Section 83R of the Building Act 1993 (VIC), which enlivens the Victorian Civil and Administrative Tribunal’s Review Jurisdiction, which is a merits review jurisdiction. This effectively places the VBA or the VCAT ‘in the shoes of’ the VBA. At VCAT, the decision will be either affirmed, varied or set aside and substituted or set aside and remitted back to the VBA for reconsideration.[13]

In tandem with the right to merits review, there is the right for judicial review at the Supreme Court of Victoria either by way of the Administrative Law Act 1978 or the common law writs of Certiorari, Mandamus, and Prohibition, or through equity seeking equitable injunctions or declarations. This route would usually occur as a last resort in the event that Merits review was unsuccessful or unavailable and if the VCAT or VBA made what is known as a “jurisdictional error”. The processes involved with this are more laborious and legally exacting than a merits review.

It follows that the Section 83B mechanism of appointing a “manager” leaves open more options for Building Surveyors who may, given the array of extenuating circumstances impacting upon the industry presently, need to end their appointment as responsible building surveyor for certain projects, or all projects altogether.

Conclusion

There are therefore two main avenues under the Building Act for a building surveyor to go about ending their appointment. In many instances, the conciliatory approach under Section 80C may be a good first port of call. However, there may be reasons why the Section 80C consent-based approach may be impractical, and the Section 83B appointment of a ‘manager’ by the VBA more suitable – the PBS may need to end multiple appointments or may be faced with a lack of willing transferee building surveyors. In either case, communication lines should be open and action should be taken at the earliest opportunity. It would be prudent for a building surveyor to consult a well-versed construction lawyer with the specifics of their circumstances so as to ensure that the necessary rigour and appropriate steps are taken with regards to ending their appointment.

This article written by Justin Cotton, Director of Lovegrove and Cotton, with assistance from Jordan Davies (co-author). 

Footnotes

[1] The Building Act 1993, s 81(2) & (3) provides that an RBS’s appointment terminates upon the termination of building work.

[2] See Building Act 1993 (VIC), s 80C(5).

[3] Ibid.

[4] Ibid, s 80C(6).

[5] Ibid, s 81(1).

[6] Ibid, s 83B(2)

[7] Ibid, s 83B(1)

[8] Ibid, s 83C

[9] Ibid, s 83B(1)(a)

[10] Ibid, s 83B(1)

[11] Ibid, s 83B(1)(g)

[12] See also the VBA website, where retirement is noted as a ground for likely consent for termination of appointment by the VBA; https://www.vba.vic.gov.au/consumers/home-renovation-essentials/ending-employment-private-surveyor/change-building-surveyor.

[13] Victorian Civil and Administrative Tribunal Act 1998, s 51.

Lovegrove & Cotton Lawyers to the building industry

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