By Kim Lovegrove RML, FAIB, Senior Lawyer, Lovegrove & Cotton – Construction and Planning Lawyers.

What worked, what failed, what was learnt and what wasn’t learnt.

This paper is a synopsis of a presentation that the writer used as an address to a combined World Bank and IFC forum at Washington in 2015.

The National Model Building Act was drafted by of the Chief Parliamentary Counsel of NSW at the behest of the AUBRCC, the predecessor of the Australian Building Codes Board.

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 bureaucracies had the responsibility of regulatory oversight, but they both in less than happy circumstances were disbanded and their jurisdiction was transferred 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 overriding 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.
• 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.

In terms of law reform philosophy or “scientific method” as it were, I was at pains to make the point that a responsibly strategic and forward-thinking approach needed to be applied to law reform and I opined that when fashioning new building controls one needs to bring to bear a mindset to bear that is akin to that of the master chess player. One looks to the future, one thinks through the consequences of each proposed change/move as the legacy of same will be reminiscent of a game of chess where the wrong move will generate unintended consequences.

And for policy makers one asks this question: Am I the policy maker effecting a change that will one day “check mate” my constituents or am I effecting a change that will culminate in success?

Success in this case can be defined as utilitarian regulations that improve construction efficiencies with the attendant benefits of lower cost outcomes along with the paramount complements of an as built product that is kind to the consumer and the general public. The later objective after all is the raison d’être of enlightened and responsible building control.

When the reforming jurisdictions invest in in law reform or microeconomic reform initiatives in developing countries, they need to be convinced that the reform manifesto, as it were, is very well thought through.  For there to be confidence in this aspiration, due diligence will establish that the reforms once enacted, will more or less guarantee the desired outcome so that there will be no unintended consequences as ill-conceived reform can actually be a regressive step both economically and socially and at worst can compromise the public interest.

Lovegrove & Cotton Lawyers to the Building Industry

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

If you wish to engage the firm, feel free to contact us via our website or by emailing enquiries@lclawyers.com.au.

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

Over the last 20 years the effectiveness of building regulations has been severely tested in light of a litany of regulatory failures in a number of jurisdictions. Interestingly many of the failures have occurred in advanced economies, economies that are not constrained by the extreme budgetary constraints of the developing nations. There has been a “pan jurisdictional” or geographically indiscriminate phenomena where nations from both hemispheres have experienced construction failures ranging from the significant to the extreme. The leaky ‘condo’ crises in the nineties cost Canada many billions of dollars, as did the leaky building syndrome in NZ which has cost that country considerably more. The Latvian supermarket roof collapse which killed 54 people was a negative legacy of the GFC austerity measures and the dismantling of the national building inspectorate.  Then there have been fire spread calamities such as the Brazilian night club 2013 inferno and Grenfell 2017, which claimed the lives of 242 and 72 lives respectively.

Building Control Failures have Assumed a Serial Dimension

When viewed in aggregate, one can conclude that building control in many jurisdictions is not delivering as building failures in one form or another have assumed a serial dimension. So there needs to be a rethink and a redesign of that which can lay claim to being best practice building control.  There are many whom consider that it would probably be best if the redesign of modern day building control design could occur in an ‘apolitical’ laboratory that comprises a coalition of internationally venerated experts on enlightened building control, to ensure that critically independent lenses firstly diagnose that which is wrong with regulatory ecology and then secondly to divine the cure. But the writer is the first to concede that there is a utopian naivety in that idea, because the reality is that law reform will always be the progeny of the governing sovereign jurisdictions, as that is their exclusive constitutional remit.

Having been deployed as a law reformer in a number of countries, the writer has been afforded the opportunity to identify best practice building legislation and regulatory systems that are worthy of consideration for reforming jurisdictions. Here are some thoughts on point.

There will be one Building Act

The Building Act will be called precisely that, and it will be the primary, holistic and overarching piece of best practice building legislation that will govern the regulation of building control in the State. It will be ‘mission control’ for all things involving building regulation. The Building Act will be easy to locate, and there will be no labyrinthine process involved in locating the legislation. One of the best ways of determining whether a governing act of parliament is readily accessible to the consumer is to google a term like ‘building act’ – if an internet search can immediately trace and reveal that act, then that is a good start. If one types in the words ‘building act’ and a potpourri of ill-defined regulations ‘pop up’, then that is a problem. The governing act of parliament will be easy to locate on the web, literally at one’s fingertip.

The Building Act will have Clear Objectives.

The objectives of the Building Act will be clear and to the point. The Building Act 1993 (VIC) is one such act that achieves this, and it does so with an economy of language. Section 4 reads as follows:

Objectives of Act

(1)     The objectives of this Act are—

(a)     To protect the safety and health of people who use buildings and places of public entertainment;

(b)     To enhance the amenity of buildings;

(c)     To promote plumbing practices which protect the safety and health of people and the integrity of water supply and waste water systems;

(d)     To facilitate the adoption and efficient application of—

(i)     National building standards; and

(ii)     National plumbing standards;

(e)     To facilitate the cost effective construction and maintenance of buildings and plumbing systems;

(f)     To facilitate the construction of environmentally and energy efficient buildings;

(g)     To aid the achievement of an efficient and competitive building and plumbing industry.

(2)     It is the intention of Parliament that in the administration of this Act regard should be had to the objectives set out in subsection (1).

There will be One Set of Building Regulations

There will be subordinate building regulations, called precisely that, ‘building regulations’. These regulations will be promulgated by the Building Act. They will deal with machinery or regulatory ‘drilled down’ and nuts and bolts matters like fines, time lines, penalties, prescribed fees and the like.

There will be One Building Code

There will be one Building Code which will enshrine the technical regulations and codified provisions that dictate how buildings will be built. (The Code will be called the Building Code although it will also mention the name of the State i.e. the New Zealand Building Code).

In the case of a federal jurisdiction where there is a Federal government, the code will be designed for national application, so that the state administrations can call up the Code, courtesy of the regulatory promulgation provisions in their local Building Act.

In the case of non-federal jurisdictions such as Singapore and New Zealand, there will be one National Building Act, one set of building regulations and one Building Code.

The codified building classification criteria will also have regard to the inherent or potential risks that are posed by different types of buildings such as:-

• Uncomplicated construction such as warehouses and storage facilities

• More complicated structures such as high rises
• Hospital facilities
• Residential abodes
• Civil defence facilities

Careful regard in the risk classification will be had to intended use, mindful of the fact that some buildings may be designed to contain pernicious components and elements that can cause injury to people and environment.  Warehouses that will house combustible or toxic chemicals would be case on point.

Rationale

From a consumer and industry perspective there are much greater efficiencies to be gained by centralised and single regulatory regimes. In jurisdictions where building regulations are dispersed in a number of statutes and multitudes of departments, it is much harder for the user to navigate through the regulatory terrain. This in turn causes delays and a greater opportunity for misinterpretation. Further, it requires a greater diversified skill level. All of the above impact upon the optimum operationality of the building regulatory ecology.

It is not a ‘stretch’ to realise that users are reassured if there is one Act, one code and one lead agency that administers building regulation.

The regulatory hierarchy and top down approach where the technical code and building regulations are subordinate to the one Act also make it clear which legislation and regulatory instruments assume precedence. When there is no clear hierarchy there is greater risk of conflict of laws.

There will be a dedicated Ministry of Construction

There will be a Ministry or a Department for Building Control. This lead agency will be the responsible body for overseeing the administration of building control in that State and will report to a Minister that will be exclusively responsible for the building regulation portfolio.

The Ministry will maintain regulated inter-connectivity with key departments like the Fire Brigade to ensure that regard is had to their policy recommendations; such is the importance of this instrumentality in terms of minimizing loss of life to fire brigade personnel and the public.

Rationale

The logic in having one lead agency that performs the central administrative role for the building approval regime is compelling. The consumer will be in no doubt as regards whom the paramount regulatory body is and will not have to navigate between different lead agencies that interact in the regulatory ecology.

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. Case in point would be aluminium composite panels; manufactures intent on exporting ACPs to local market would be required by law to seek accreditation from the accreditation body.

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.

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 are thus critical. ACP vertical fire spread is case on point. China, Australia, the UK and the Middle East have all encountered like problems and infernos derived from like product.

There will be a Practitioner Licensing Board

There will be a practitioner licensing Board which will license all building practitioners in the state. The Board will come under the jurisdiction of the Ministry of construction.

There will be building officials responsible for the building approval process

The building officials will:-

• Issue building permits
• Carry out building inspections
• Issue occupancy permits when the building is completed

Rationale

The rationale for the establishment of the dedicated discipline of building official, sometimes referred to as an accredited checker (Singapore) or an accredited certifier (Australian state of NSW) is that there is merit in the appointment of one designated person that is vested with the responsibility of overseeing the building approval, from commencement of the process to the end. If multi – actors or agencies are engaged in this process then there can be significant delays to both permit issue, inspection and the issue of occupancy permits. Further the liabilities and accountabilities for oversight of the building approval process at law become more opaque and diffuse.

There is much divergence of opinion internationally about the amount of power the official should have and the role of government vs a vs local government in the building approval process. Suffice to say opinion is mixed as some jurisdictions prefer to see the heavy hand of the local governmental regulator rather than the ‘migration’ of much of the approval task to the private sector. Key determinants will be whether the oversight and regulatory probity regime is sufficiently robust to ensure that building officials are ‘dis-incentivised’ from compromising their statutory obligations for fear of attracting dire sanctions by the central regulator.

The building official will carry out at least 3 mandatory inspections at critical and legislatively mandated junctures and random inspections will also be required.

The official can either be an employee of local government or a private sector employee. If the official is a private sector employee, that official will be audited on at least two occasions annually by a licensed government auditor who will ascertain whether the official has at all times discharged his or her statutory obligations.( Japan has maintained an annual mandatory auditing regime for private certifiers for over 20 years, very successfully)

The building official will ensure that that which is approved and built is carried out in accordance with the approved plans and the technical requirements of the building code.

There will be a final joint inspection

Prior to issuing the certificate of final inspection the building official will attend a joint inspection with representatives from the officers of all of the practitioners that have had paramount involvement with the building project. This will include the:-

• builder
• design engineer
• approving engineer
• architect
• any other inspectors
• a representative of the Fire Brigade/Department

The building official upon completion of the work will arrange the inspection and will satisfy him or herself that the work is fit for occupation and will then issue an occupancy permit which will be filed with the local municipality. The joint inspection regime is very common in a great many Chinese jurisdictions and has much to commend it.

Rationale for the mandatory inspection regime

One of the most vital parts of the building approval regime is the inspection protocol.  A robust inspection regime operates like an early warning detector system; problematic future construction scenarios are identified early before they become problematic as-built scenarios.

Mandatory inspections at key junctures ensure that there is rigorous regard to each stage of construction so that the building official can if need be regularize matters, by issuing rectification notices and orders. Absent mandatory inspections there is no guarantee that any inspection will occur. Further absent mandatory inspection there exists a greater likelihood that compromised construction outcomes will not be discernible until a much later stage, on account of the fact that they were not identified earlier and at a time when the malaise could have been thwarted.

The idea of a joint inspection which is an approach that is used to great effect in Shanghai, has compelling merit particularly for complicated and high risk buildings. It affords the principal actors the opportunity to peer review in the presence of the official and determine whether indeed the building according to all, is fit for occupation.

Risk Based Building Inspection Regimes

The World Bank has expounded the merits in adopting risk based inspection regimes.

“Adopting a risk-based approach can simplify key regulatory processes that govern business activities. This fundamental step involves moving from inspections, licensing, and other regulatory tools that cover all business uniformly to an approach that tailors the instruments used for regulation and control based on the level of risk. The higher the potential risk posed by a specific business activity, the stricter the control and the greater the need for licensing or permitting and more frequent inspections. For low-risk activities, a license or permit should generally not be required, and inspections should be rare. Having a proper methodology and tools to classify enterprises or activities according to risk is thus particularly important. Risk matrices are the primary way used to conduct this sort of classification. Risk matrices are fundamental instruments used to classify establishments depending on their risk level – and adapt the regulatory response (e.g. inspections, licensing) on this basis. This means that resources can be used more effectively and efficiently, and that administrative burden is minimized while positive outcomes are maximized. Creating a risk matrix in itself is not necessarily a complex exercise, and can be done using international experience and examples, and relying also on the regulators’ and experts’ experience in the country. The parameters leading to higher or lower hazard are generally easy to identify, provided that the common mistakes listed above are avoided.”

(Blanc, Florentin; Franco-Temple, Ernesto. 2013. Introducing a risk-based approach to regulate businesses: how to build a risk matrix to classify enterprises or activities (English). Nuts & bolts. Washington, DC; World Bank Group.)

Building inspection regimes provide an ideal setting for the application of risk based inspections. The writers’ preference, as stated above, is that inspections be mandated by law. One jurisdiction that requires the carrying out of mandatory inspections is the Australian State of Victoria. The mandatory inspections stages are:-

• Before footing placement;
• Prior to pouring reinforced concrete;
• Frame completion;
• Inspection of fire inhibitors; and
• Final inspection.

 

Although there is much to commend the Victorian legislature for regulating the mandatory prescription of inspections, the limitation is that the inspection regime is not a sufficiently evolved risk base regime in that it is a ‘one size fits all approach’.

This inspection regime applies to all buildings regardless of their complexity or their risk ‘pathology’, be it simple and uncontroversial warehouse construction or SHR (super high rise). The Victorian Building Act 1993 fails to index the inspection regime with the inherent risk profile of the building classification and thus has limitations.

A best practice inspectorial regime would correlate the number of prescribed inspections with the complexity and the ‘personality’ of the intended building in use. It would follow that the ‘lower the mercury’ on the building ‘risk barometer’, the lesser number of prescribed inspections. It may follow that SHRs would require ten inspections, warehouses two.

Ideally a regulatory risk matrix would be developed by highly regarded technical experts with the complement of a very capable construction lawyer. The matrix would be divided into different building classifications and those classifications would then be matched with a regulated mandatory inspection regime. The number of mandatory inspections and the type of inspections would be driven by construction complexity and the buildings` capacity to generate harm in circumstances where there are compromised construction outcomes.

Enforcement powers of the building official

If the building official observes any irregularity or construction input that is not in accordance with the Building regulations then:-

• A building enforcement notice will be issued
• If the notice is not complied with an order must be issued
• If the building official is from the private sector and there is noncompliance then the matter must then be referred to an auditor at the Ministry.

The auditor will have powers to compel compliance. Furthermore the auditor will automatically refer the matter of non-compliance to the Licensing Board for further investigation.

The auditor will be able to seek full cost recovery for any material noncompliance of an order issued by a building official.

Legislative provisions must be drafted to make it very clear that the building official affords no favours to owners or builders in respect of the impartial and decisive application of enforcement notices and orders.  As there is increasing resort to private certification in many countries, strong probity controls are critical. The import of the provisions will be such that if an auditor or investigatory body establishes that a building official has not been impartial in the exercise of the enforcement powers, then that will be a ground for suspension of license and in circumstances where there is corruption or there has been evidence of financial incentivisation to turn a blind eye as it were then resort to criminal prosecution.

There will be a licensing and registration regime.

The Ministry for Construction will establish the licensing Board. The Board will determine the criteria for licensing and will oversee the probity regime for registration and licensing of practitioners to ensure that the public is protected from practitioner recalcitrance and ethical compromise

The Licensing Board will ensure that principal Construction actors licensed annually.

The criteria for gaining a practitioner license will be:-

• An approved qualification
• Approved level of experience
• The maintenance of compliance insurance cover
• Maintaining annual compulsory professional development
• Payment of the annual licensing fee

 

The practitioners will be:-

• Residential builders
• Commercial builders
• Engineers
• Building officials
• Building inspectors
• Architects
• Electricians
• Plumbers
• Proof engineers
• Designers and draftspersons

The Licensing Board will establish the qualifications and experience criteria for the actors. In the case of engineers, architects and building officials the qualification criteria will be not less than a degree in the respective discipline from a recognised university or tertiary institution.

With regards to the establishment of qualification criteria regard should be had to international best practice on point. The greater the skill, the level of professionalism and ethical propensity the less likelihood of optimum construction outcomes.

There will also be grading mechanisms. In Shanghai for instance to practice as a medium level engineer one must have a degree in engineering and 5 years’ experience. To become a quality assurance supervisor, the engineer has to obtain an additional 4 years’ experience and must then sit and must then pass a further examination to qualify as a quality assurance engineer. Under this system little is left to chance in terms of ensuring that a key actor in the building approval design and quality vetting process is up to speed.

In Germany the “proof engineer” is licensed by government to vet engineering designs and computations that have been prepared by the engineers and designers engaged by the developer. This second set of eyes brings to bear the ‘lenses’ of total arm’s length objectivity and detachment along with a very high qualification and skill set.  This approach resonates with a culture that is very much disposed to best practice quality outcomes.

The German approach has much to commend it with respect to complex buildings such as high rises or SHRs ( super high rises) or buildings that contain high risk elements or buildings that harbour the likes of combustible cladding; there is a lot to be said for making the deployment of a proof engineer mandatory by law.

Insurance

The insurability of a building regulatory environment is an insightful bell weather as regards whether a construction paradigm functions properly. The insurance industry keeps a very close eye on building regulatory failure and the pricing of construction risk.  Market underwriting is rather nomadic, insurers move in and out of markets as they are global players with global appetite, but they do not have an appetite for higher risk as countries that have experienced the flow on effect of the combustible cladding controversy have found out. If insurers refuse to underwrite construction jurisdictions then there is little consumer protection for compromised construction outcomes so it is critical that regulation in light of its holistic and utilitarian make up delivers an insurable paradigm. An insurable paradigm will show case strong building controls, skilled practitioners and swift and efficient dispute resolution mechanisms and the most compelling evidence of building control success will be no construction related death and minimal claims for economic loss.

Building practitioners will be required by law to carry compulsory professional indemnity cover. This cover will provide indemnification for losses that emanate from negligent design or supervision. This assists the aggrieved in obtaining recompense for losses caused by building practitioners.

The insurance requirements will be approved by the Ministry and will be published in Ministerial ordinances or gazettes and it will be illegal for building practitioners to practice unless they are insured.

In the case of builders they will be required to carry a warranty cover that provides compensation for losses that emanate from defective workmanship.

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. The disaster ultimately led to the resignation of the Prime Minister whom felt partially responsible for the systemic failure.

American prohibition likewise in the 1920s 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 incident 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 the premium levied finds its way into the regulator’s 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.

Licensing Board Probity regime

The Board will oversee the probity regime for the building industry in the State. The licensing body will have broad investigatory powers and will also have the power to:-

• Conduct a hearing
• Fine suspend or cancel a license
• Refer heinous matters to the policy for criminal investigation and prosecution

There will be an investigatory and auditing arm of the Licensing Board.

The auditing arm will ensure that all building officials are audited twice a year. The auditing arm will ensure that all other building practitioners are audited at least once a year. The auditors will be empowered to carry out random audits at any time. It will be incumbent upon the ‘auditees’ to afford full cooperation to the auditors with respect to giving the auditors access to building project records and practices.

The auditors will be required to have a technical qualification and a law enforcement qualification.

Rationale

Auditing and enforcement is critical in so far as it is one of the best means of public protection. One of the best auditing regimes that the writer has observed is the Japanese regime where the private building official is audited annually. Although the Japanese had regard to the private certification model adopted by a number of Australian jurisdictions in the early nineties, whereas in the Australian jurisdictions there was no legislative requirement for building officials to be annually audited, the Japanese made the auditing requirement mandatory at law.

The impartiality of a small sector of private certifiers in Australia has been called into account as there is a view that some certifiers have not been sufficiently arm’s length from their contractor or developer clients. The Japanese approach which is very much akin to the auditing regime that applies to lawyers that hold client monies in trust, ensures that audits occur at regular intervals. As the practitioner is ever mindful of the fact that he or she will be audited and investigated for errant practices, the process serves to put a break on any temptation to compromise a statutory obligation.

Although in Japan the annual mandatory auditing only applies to private building officials it is considered that an optimum best practice probity regime would ensure that all building practitioners are audited annually. The challenge however for the establishment of a ‘broad church’, auditing regime would be that it would require the government to provide immense funds to the capability. For this reason the user pays funding regime sighted below is commended to the reader for consideration.

Funding of the Auditing regime

There will be a user pays regime. The auditors will be accredited by the Ministry of Construction but the practitioners will pay the Ministry an amount that is commensurate with the auditor’s fee. The auditors need not be in the full time employ of the Ministry but will be accredited and approved by the Minister.

This auditing funding model regime is based on the auditing regime for Australian lawyers, a user pays model that is established and has been pivotal in ensuring that practitioner recalcitrance is minimised. New Zealand also has had in place a like regime for many years.

Rationale

The rationale for the user pays auditing system is to ensure that regardless of the ebbs and flows of the building economy, the enforcement regime funding model is sustainable and not constrained by contracting governmental budgets. The Latvian super market roof floor collapse occurred as a result of post GFC austerity measures where the inspectorate regime was dismantled. As user pays self-funding auditing regime based on the Australian lawyer auditing model would ensure that this would never occur.

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.

Emergency Powers

Where there is an imminent threat to life and limb or major adjoining property damage the Ministry of Construction will be able to direct the building official to issue enforcement orders and directives immediately by also will maintain an absolute discretion to intervene on its own behalf and invoke whatever measures in its absolute discretion it considers necessary.

Appeal Powers regarding building approval matters

There will be a designated tribunal or division within that Tribunal that will have the power to preside over and hear appeals in respect of the following:-

• Notices and orders issued by building officials
• A failure on the part of an official to approve an inspection
• A failure on the part of an official to issue an occupancy permit
• A failure on the part of an official to issue a building permit
• The appealing of a reprimand or censure handed down by the licensing body

There will however be no appeal right in circumstances where the Ministry of Construction has been compelled to invoke emergency intervention powers.

There will also be a fast track appeal procedure, where matters that require urgent determination are ‘moved up the line’. The Building act will define the circumstances that qualify for urgent determination.  There will be a significant fee levied for the initiation by the appellant of a fast track appeal and this fee will be prescribed in the regulations.

Regardless of whether the hearing is a fast track appeal or a normal hearing there will be 3 decision makers presiding over the appeal, one of whom will be a lawyer experienced in administrative or construction law.

The decision makers will be ministerial appointees and they will be chosen on account of them being venerated and respected by members of good repute from the construction fraternity. They need not be full time employees of the Tribunal or the public service; rather they can also be employed in other capacities.

The members will be remunerated in accordance with a remuneration scale published in the regulations.

The Powers of the Decision Makers

The decision makers will have the power to:-

• Uphold the decision of first instance
• Overturn the decision of first instance
• Award costs against the party that was unsuccessful

The Responsible Theatres for the resolution of civil, commercial and residential building disputes

There will be dedicated specialist divisions of Courts and or Tribunals that will specialise in the resolution of building disputes. These specialist divisions will be established by legislation that will empower the designated theatre to have primary responsibility for the managing and resolution of construction disputes.

The jurisdiction will comprise mediators and specialist decision makers, be they judges or referees that facilitate the resolution of building disputes.

The regime will also ensure that in addition to providing accredited mediators there will be accredited expert witnesses whom are venerated by peers of good repute and these expert witnesses will be deployed to diagnose construction failure causation and the costs associated with rectification of same.

Both mediators and independent expert witnesses will be remunerated by the parties on a 50/50 basis to ensure that the costs are born equally. This will ensure that the State does not have to underwrite such deployment.

Judges and decision makers will be remunerated by the state and will be employees of the state judicial systems.

Rationale for dispute resolution system

Building disputes are complex and highly specialist and require the deployment and intervention of specialists with both experience that is tailored to resolve building conflicts that are specific to this area. Ideally the decision makers will have a background in construction law. In the Australian state of Victoria there are a number of dedicated construction dispute resolution theatres such as divisions within the Victorian Supreme Court and the Victorian Civil and Administrative Tribunal. These divisions comprise decision makers that practised construction law prior to their joining the Bench. Their experience belies a natural affinity for the resolution of building disputes.

Mediation will be compulsory on account of the fact that building disputes are very costly affairs. It follows that the sooner a matter is resolved, i.e. preferably at the genesis of the dispute, the less prejudice will be sustained by the disputants on account of “run away” legal and expert witness fees.

The requirement for Court appointed expert witnesses, is to remove the need for adversarial expert argument that tends to characterise plaintiff/respondent litigation. In terms of technical diagnosis there should be no argument, rather there should be clinical analysis of causes of building failure or compromised construction outcomes by one actor, in circumstances where that clinical analyses is:-

• Independent and totally arm’s length of the parties rather than ‘expert for hire’ as it were
• Carried out by someone that is highly qualified and venerated by peers of good repute
• Remunerated in equal shares by the parties to ensure that the impartial deliberator does not need to be funded by the public purse

The Liability regime

10 Liability Regimes

The aggrieved i.e. those negatively affected by a construction outcome that emanate from the negligence of a practitioner will have 10 years to initiate legal proceedings from the date upon which the occupancy permit was issued. 10 years after that period of time has concluded the plaintiff will forfeit the right to sue for damages. There will be one exclusion and that is where the negligence culminates in an injury or death the claimant’s rights to sue will still remain intact.

The Rationale

The system is based upon the Spinetta Law, a very established French liability regime that has underpinned French Liability Laws for many years. The concept has also been adopted by many Australian jurisdictions.

The rationale for adoption is that the limitation period is non-contentious as there is a clear and defined period for the initiation of legal proceedings i.e. 10 years, post issue of an occupancy permit. Furthermore it is well established by insurance actuaries that by the tenth year, the incidence of claims emanating from a construction output dating back ten years prior, is nigh on non-existent; hence there is more than ample time within the ten years for the aggrieved to initiate legal proceeding as the defect that was consequential upon negligent construction would have revealed itself.

Proportionate Liability

This doctrine dictates that each practitioner that is responsible for his, her or its contribution to a construction failure will be found liable, for a percentage that is commensurate with or equal to the practitioner’s liability. When a number of practitioners’ are found liable for a negative construction outcome, the judge will apportion the liability between the defendants in the shares that the judge considers equate with their liability.

Rationale

Proportionate liability complements a compulsory registration and mandatory insurance regime in that all parties responsible, in their being licensed are also insured. This enables them to financially account for their failure. It is a fair doctrine in that accountability is measured and judged having regard to the allocation of contribution for construction failure.

The system was introduced to the Australian States and Territories in the early nineties and has been well received by consumers and practitioners alike on account of its inherent fairness and jurisprudential logic.

Conclusion

It is considered that the best way for building control to move forward is for regulators to go back to the fundamentals, back to the drawing board. As building control is very much an internationally interconnected paradigm in the 21^st century the pressure for regulatory harmonization is much greater not only within the context of local settings, be they Federal or non-federal but also ‘pan country’, ‘pan pacific’, ‘pan northern hemisphere’.

Best practice building control must be holistic, reminiscent of a jigsaw puzzle that can never be complete unless every component of the puzzle is incorporated into the complete picture. To leave out one piece of the puzzle is to generate an imperfect outcome and in the case of the design of building regulation that can be fatal, literally. The completed picture must be designed to eliminate construction deaths, minimise negative economic consequences, and reach a balance of building efficiency with robust building control mechanisms.

Consistent with the globalization of markets, products and systems is the need to develop internationally best practice building regulations that are inspired by precisely that: international best practice. The comfort factor associated with looking within is becoming less and less viable. One of the reasons the emerging Asian economies are progressing so remarkable quickly is their willingness to be at the cutting edge, their willingness to be the best, to adapt and evolve. They are not held back by the inertia of the past or even the present for that matter. Progress requires embracing the future and recognising that building regulation is not concrete (in that once the concrete is set its pathology is such that it must not move). Regulation has to be designed so that it can move to ensure that it can adapt and be living rather than static in terms of its ability to evolve.

About the author

Kim Lovegrove RML FAIB is a general counsel at Lovegrove and Cotton lawyers. He is Senior Consultant to the World Bank and a law reform adviser having been deployed in an advisory capacity in Japan, Australia, India and China. He is a past conjoint professor in building regulation and certification. He is the Ethiopian Honorary Consul to the Australian State of Victoria.

 

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

The built ecology, both locally and internationally, has encountered profound, if not unprecedented, change in the last 20 years.

Regrettably, building regulations have not evolved with sufficient alacrity and sensitivity to best calibrate with the dynamic and rapidly changing nature of the new building paradigm.

A holistic and best-practice approach to law reform is critical to moving forward. Such an approach must not be governed by provincial drivers. We now live in a world where the building industry is influenced by the headwinds of globalisation, as so much of local construction product and construction systems are heavily influenced and reliant upon that which is sourced from abroad.

Architecture has also changed in a profound sense in that super high rises (SHR) punctuate and abound in skylines throughout the planet. 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 revolution in building control thinking and this has not occurred with sufficient regard to international best practice.

It follows that the building regulation of today and the future has to be sufficiently ‘elastic’ to keep up to date with a building industry metamorphosis that is gaining momentum. Many building regulatory regimes require major overhaul as they are not sufficiently protective of the public. The net effect of acquiescence has been a proliferation in building related disasters – disasters that have culminated in loss of life such as Grenfell and disasters that have had a profoundly deleterious economic impact upon too many members of the public such as the Leaky Building Crisis of New Zealand.

What follows is a conceptual template for progressive building control, because it is time to take stock and develop building regulations for the future. Lessons learnt in recent times have helped shape some of the recommendations for consideration.

There will be objectives that reinforce the fundamentals of building control

Buildings will be:

• safe in all material respects
• fit for purpose
• structurally sound
• 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 and on price
• in circumstances of building failure, there will be a regime that can deliver swift application of redress.

These key tenets would satisfy the overwhelming majority of members of the public.

There will be a central government regulator (CGR)

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

For our purposes here, 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 the provincial approach or ‘jurisdiction-centric’ approach to building law reform that has assumed currency over the last 20 years has not worked for many 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 – the Minister for Construction.

The CGR will be empowered by statute to:

• Develop and maintain a dedicated Building Act
• Through statutory based authorisation, 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 insurance products provide the right type of construction indemnity both with respect to the amount of cover and the type of cover and that insurance accreditation is reviewed. 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/surveyors who 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.

That 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 regimes 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 maximisation 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 detrimental 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 unsavoury 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 a paternalist, 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, otherwise cronyism can become entrenched which can compromise the public good dividend.

Part and parcel to this is the establishment of enforcement regimes that have early warning detector 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 scrutinised and approved at key legislated inspection junctures. Best practice building control regimes are inherently cynical as they distrust market forces.

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. For our purposes, the term ‘building official’ will be used interchangeably with ‘building surveyor’. It follows that 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 he or she forms the view that 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.

In circumstances where the building work deviates from approved plans or contravenes 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 favour’ in that the official will act:

• impartially
• 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 on the part of 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 be qualified in building surveying, 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 rigour 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, 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.

In the late 1990s, 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 licence 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 (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 and adjudicate.

These institutions can 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 misdemeanour with the appropriate level of censure. This will include:

• reprimands
• fines
• suspension or licence cancellation
• referral of matters involving corruption to statutory bodies that preside over corrupt conduct such as the 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 and logical and accountability 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 on the basis that their level of accountability is matched with the level or degree of negligence that is proportionate to the factors that culminate in building failure.

No actor or defendant will be liable to assume the liability of any other co-defendant. 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. This is because defendants assume the liabilities of other parties or co-defendants 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 substantial 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 recognised that insurance is not a perfect panacea but is the best mechanism currently available to deliver financial redress; albeit a mechanism that is often attended by considerable dissatisfaction and disillusionment 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 who are aggrieved by or have concerns about:

• the time the insurer takes to assess and respond to the complaint
• the bona fides of the insurer in responding and granting indemnity
• 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 complaint 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.

Ten-year liability capping

The French 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 10 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. The first will be 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.

Under such a regime:

• the members will be government part time appointees – Ministerial nominees, to be precise
• appointees will be well-regarded and have venerated expertise
• a full complement of expertise that is required to make informed determinations will be available
• membership will 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. 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 50/50 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 50 per cent paid for expert evidence.

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 1920s 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 incident 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 the premium levied finds its way into the regulator’s 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 a 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. A case in point would be aluminium composite panels (ACPs); manufacturers intent on exporting ACPs to local market would be required by law to seek accreditation from the accreditation body.

Once a 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 per cent 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 utilise 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 globalisation and free trade agreements have generated an international market place where exporters of product can export to any given jurisdiction. Cross-jurisdictional harmonisation and best practices are thus critical. ACP vertical fire spread is case in point. China, Australia, the UK and the Middle East have all encountered like problems and infernos derived from like product.

Restrictions will be imposed upon those who utilise performance building codes

Australia and New Zealand have had performance building codes since the mid-1990s. 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 is nevertheless a critical mass of disenchanted members of the public who are very vocal about their 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-length” 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.

Lovegrove & Cotton Lawyers to the Building Industry

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

If you wish to engage the firm, feel free to contact us via our website or by emailing enquiries@lclawyers.com.au.

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

Early Nineties Australia was the Camelot of Cooperative Federalism

The early nineties heralded an unprecedented era of cooperative federalism under the auspices of the Special Premiers’ Conferences (‘SPC’) which in turn was one of the brain child’s of the late prime ministerial icon Bob Hawke.

The SPC which comprised the senior statesman for the nine Australian governments voluntarily corralled themselves into a coalition of like-minded leaders whom having identified the microeconomic inefficiencies that go with lack of cross-jurisdictional regulatory harmonization, embarked upon mission to generate uniform laws that had national application.

In the publication, The Model Building Act for Consideration by the States and Territories, the late former Prime Minister Bob Hawke’s vision for regulatory harmonization of the building industry was quoted:-

“At the Special Premiers Conference in March 1989… my colleagues the State Premiers and Northern Territory Chief Minister, endorsed a Commonwealth proposal to sponsor a national building regulation review program over three years.  The micro economic reform initiative has the objective of streamlining building requirements and processing more cost effective construction of housing and other buildings. At present, building requirements are controlled by eight Sates/Territories and administered by over 880 local Councils.”

The sentiment was reinforced at the Special Premiers Conference held in Brisbane the same year. In a communique released after the conference, the Premiers indicated that they would be giving “…high priority… to the rationalization 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”.[1]

Mr Simon Crean, who was then the federal Minister for Science and Technology at a keynote address titled ‘Microeconomic Reform: Planning and Building Controls Conference’ stated that in the years 1988/89 the building industry amounted to $45 Billion of the Australian Economy.[2] As of 2018, the Construction industry in Australia generates $350 billion worth of revenue, producing around 8% of Australia’s GDP.[3]

The Building Regulatory Review Taskforce

Mr. Hawke made good his undertaking and established the Building Regulatory Review Taskforce courtesy of Federal Government funding. The BRR also commissioned other consultancies and one such consultancy culminated in a report prepared by a Dr R.T. Graham who identified that delays that emanated from conflicting regulation had negative economic impacts, not the least of which being ‘the economic and social cost of having a less mobile workforce and a reduced capacity to act quickly to meet the demand of building construction’.[4] The BRR in addition to recommending the establishment of the Australian Building Codes Board recommended that there be an initiative that would culminate in model building regulations that could be used as a mechanism to facilitate regulatory harmonization. This was in keeping with the Prime Minister’s objective of streamlining building requirements to produce more cost-effective construction of housing and other buildings, and the SPC’s ‘high priority’ for the rationalizations of regulatory activities emanating from the different regulatory regimes in the different jurisdictions.

“Regulamania”

The writer, at the time, had noted a Herald Sun article coining the term ‘regulamania’, and it was considered that it encapsulated the zealousness for over regulation at the time.

“It is extraordinary that a country of 17 Million people essentially comprises eight different countries, evidenced by a plethora of constitutional and legislative barriers that carve up and isolate each State from the other. It may be in the interest of the ‘empire builders’ but it is certainly not in the interest of Australia, least of all members of the building industry that operate on an interstate basis.

The consumer, and for present purposes the consumer means the like of interstate government operations, interstate builders, tradesmen and architects, has to contend with eight different legislative labyrinths. Instead of engaging on lawyer and one consultant, eight separate sets of lawyers and eight separate sets of consultants are required to decipher the puzzle.

Furthermore, because some states are more renowned for legislative puzzles than others, there are different time periods for getting approval through and different degrees of success in relation to the dispute resolutions systems.

The overseas investor must be totally bemused when confronted with the legislative battery.

Australia has to become one market instead of eight micro-markets. Until the legislative red tape that isolates one State from another is dismantled, Australia will not be able to perform anywhere near optimum efficiency.

The legislative uniformity initiative will break down barriers, ease the burden and will provide much more user friendly tools.”[5]

Out of these concerns, the Model Building Act was born.

The Model Building Act

In 1990, the Australian Uniform Building Regulatory Coordinating Council (AUBRCC), the predecessor of the ABCB, invited Australian law firms to tender for a project that would culminate in the generation of a national Model Building Act. The NMBA was to be a best practice template for modern day building control in Australia. The writer headed up the team that was successful in winning the engagement.

At page 5 of the publication The Model Building Act for Consideration by the States and Territories: Dispute Resolution Systems and Options, it was stated that “AUBRCC has indicated that the model legislation should be prepared in a framework of least amount of government intervention, supervision and procedural arrangements necessary in the building regulatory process whilst maintaining adequate standards of public health, safety, amenity, consumer protection, accountability, equity and natural justice.”[6]

For a period of ten months, an intensive comparative analysis of global best practice building control regimes ensued, with the aim of generating a model statute that would showcase internationally best practice construction law regulation.

The Primary Building Acts of Australia: A Comparative Study

The first research report that was published by Federation Press Pty Ltd (Federation Press published all of the 6 books) was, as the above heading connotes, a comparative study of the primary building acts of Australia – all eight of them. At page 5 of the introduction, it is stated that “we have drawn from the summaries of an objective and clinical comparative analysis. It is not the domain of this report to investigate or address policy issues and historic factors that motivated the legislation”. In addition to generating a synopsis of the eight Australian apposite Acts of Parliament, a synopsis of the Hong Kong and Singapore was forthcoming. Thousands of these books were published and they were distributed to every local council in the country, along with every key stakeholder representative body, and this cost was underwritten by the Federal Government. Every one of the subsequent five publications was likewise distributed to the same constituents. The books became known as the ‘rainbow books’ in light of the vibrant colour scheme that adorned the front covers.

Primary Building Acts of Australia: Dispute Resolution Systems and Options

This publication, as the title connotes, provided a synopsis of “the current dispute resolution systems and structures in Australia, [identified] uniform themes and differences, gives commentaries on the systems in operation and concludes with a variety of options for systems that could well be adapted to a model act”[7]

Constitutional Options for Uniform Legislation

The Comparative Constitutional Law Centre of Melbourne University under the stewardship of Professor Cheryl Saunders wrote the above-named publication. The report canvassed the variety of ways by which one could achieve uniform legislation in Australia. The option that was adopted was the one where model regulation was drafted which then enabled the state and territories to adopt, through their own adoption and promulgation mechanisms, the model act.

Legislative Aims and Options

By the time we started to write this publication, the team had begun to determine what the regulatory pillars for enlightened building control going forward would be. This publication, as connoted by the title, provided an array of options for the national stead of constituents and stakeholders to consider. The publication traversed the following components of best practice regulation, not the least of which being:-

• The charter;
• Definitions;
• Administration regime;
• Approval procedures;
• Appeal structures;
• Liability regimes;
• Notices and Orders;
• The resolution of neighbour disputes;
• Fire protection and safety; and
• Qualification regimes.

The books were dispatched throughout the nation to all stakeholders, not the least of which being the very large body of local councils, along with a questionnaire. The questionnaire consisted of a list of questions and boxes to tick to enable the constituents to, having read the publication, tick the preferred option. The questionnaire was then returned by a designated submission date, somewhat like a referendum, and the reforming team then analysed every questionnaire to generate a substantial set of conclusions that had been forthcoming from the bodies that represented the good people of Australia. It is probably fair to say that there has never been, before then nor since, a democratic, extraordinarily consultative methodology to generate a similar law reform outcome. Once the synopsis was completed, the next phase of the law reform journey began.

The Drafting of the Model Building Act

The writer was tasked with the responsibility of writing to each one of the nine Ministers responsible for building control, seeking their permission and unanimous agreement that a National Model Building Act be drafted. The unanimous support for the initiative was forthcoming from all nine ministers.

The Support of the Standing Committee of Attorneys General (SCAG)

The writer then had to write to each one of the nine attorneys general to seek the unanimous agreement that the Chief Parliamentary Counsels Committee (comprising the nine chief parliamentary counsels from the legislature of all nine governments) be forthcoming with respect to garnering the resources of these venerated draftspersons to draft a national Model Building Act. Unanimous agreement was forthcoming and it was resolved by the CPCC that Mr Dennis Murphy QC, the then chief parliamentary counsel NSW, be afforded carriage of this important initiative. Mr. Dennis Murphy QC was chosen on account of, amongst other things, his high level of plain English drafting dexterity. In due course, the Model Building Act was completed and two publications were generated: one being called ‘The Model Building Legislation for Consideration by the States and Territories’ and the other publication of same name, albeit that pertaining to ‘Legislative Commentary’.

It was interesting to read the quotes from Ministers of the time when discussing the importance of the work of AUBRCC and the Model Building Act initiative.

‘It is essential that Australia does not lag behind the ability of many countries – like, for example, the European community – to establish uniform laws and regulations’ (The Hon. Andrew McCutcheon, Minister for Planning and Housing, Victoria)

‘The Model Building Act provides a perfect vehicle for building control legislative reform throughout Australia. Some of the benefits are – reduction in the cost of building, breaking down of barriers between State and Territories, freeing up of the Australian Building Industry Market, streamlining building approval processes, providing user friendly and philosophically sound legislation.’ (The Hon. Mr. Peter Patmore, Minister for Environment and Planning, Tasmania)

‘The development of a single, simplified Building Act to be used in all States and Territories has been identified as one of the most important steps in streamlining building regulations.’ (The Hon. Max Ortmann, Minister for Lands and Housing, NT)

‘The first advantage of having the Model Act must be stated in dollars… the Model Act will aim to encourage these savings by deregulating different elements in the system. One of the main reforms proposed by the Model Building Act will be to 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.’ (The Hon. David Smith, Minister for Local Government, WA)

Going Forward 30 Years – The More Things Change, The More they stay the same

In 1991, there was a general consensus that a lack of cross-jurisdictional regulatory harmonization did not bode well for the national construction economy. Against this backdrop, the nine governments, showing tremendous cooperation, created an impetus for a National Model Building Act.

The NMBA became the legislative blueprint that underpinned the foundations of the Victorian Building Act 1993 and the Northern Territory Building Act 1993. The Northern Territory at the time made the pragmatic decision to heavily draw upon the NMBA as virtually a complete template. The Victorian Building Act, to reiterate, although not using the NMBA verbatim, essentially used the law reform template as a reform manifesto. Other Australian jurisdictions in the 1990s adopted concepts that were hatched in the NMBA, namely:-

• A privatised alternative approach to building approvals;
• Ten year liability capping;
• Proportionate liability;
• To varying degrees, the establishment of registration regimes for building practitioners;
• To varying degrees, a changed building control paradigm for local government;
• In the case of some jurisdictions, like Victoria & Northern Territory, mandatory professional indemnity cover for all building practitioners.

Just as the nineties heralded a decade of cooperative federalist momentum, the beginning of the 3^rd millennium witnessed a departure from cooperative federalism and increasing drift back towards state and territory inspired regulation. One could say that there has been some ‘de-federalisation’ to a degree.

Yet, if one looks closely at the ambitions and hopes of the ministers of the time, be they Labor or Liberal, their optimism belies rather compelling logic. The Honourable Andrew McCutcheon promoted critical imperative of ensuring that Australia did not fall behind other countries in terms of uniform harmonization of laws. Ironically, the status quo in the Northern Hemisphere has changed on account of Brexit.

The Honourable Peter Patmore identified the virtues of reducing the cost of building breaking down state and territory barriers as part and parcel to reducing the cost of building.

The Honourable David Smith, rather prophetically, predicted that the NMBA would culminate in the return to favour of professional indemnity cover, and would reduce local authority liability exposure; the latter being the bane of local government risk appraisal at the time.

The reader may well ask why is it that thirty years later the Australian consumer of building industry outputs is still having to contend with and navigate through the ‘border control’ demarcation of state and territory building control. The building industry now generates $350 Billion per annum in revenue, yet in population terms Australia is a tiny country. In fact, Australia has a smaller population than some of the large global metropolises such as Tokyo, Chongqing or Shanghai.

Although the writer is not advocating a diminished role of state and territory government, mindful of the fact that would be a rather naïve notion as the constitution has ordained that the state and territories are set in stone; this does not trivialise the notion of there being yet again compelling merit in the resuscitation of cooperative federalism and a move towards cross-jurisdictional regulatory harmonisation. A ‘Model Building Act Mk II’ commissioned by the Federal Government and the ABCB would be, as the titles of the ‘rainbow books’ state, ‘worthy of consideration’.

Lovegrove & Cotton Lawyers to the Building Industry

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

If you wish to engage the firm, feel free to contact us via our website or by emailing enquiries@lclawyers.com.au.

 

[1] The Model Building Act for Consideration by the States and Territories: Legislative Aims and Options, Page 9

[2] Ibid

[3] Australian Industry and Skills Committee, Industries: Construction, accessed at https://nationalindustryinsights.aisc.net.au/industries/construction

[4] Page 13 of ‘the Graham report’

[5] Kim Lovegrove, The Model Building Act for Consideration by the States and Territories: The 1991 Interstate May Seminar Series Presentation, page 30

[6] Lyle Dix, Director of Building Control (VIC), Project Supervisor and Deputy Chairman, AUBRCC Executive, cited in The Model Building Act for Consideration by the States and Territories: Dispute resolution systems and options, page 5

[7] The Model Building Act for Consideration by the States and Territories: Primary Building Acts of Australia: Dispute Resolution Systems and Options, page 11

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

If a building dispute runs to conclusion, there will obviously be a winner and a loser. Yet those who become disillusioned with jurisprudence may wonder why there have to be casualties in litigation.

The law is not that mysterious a discipline; by and large, when a decision is handed down, the reasons expounded for loss and victory are based upon common sense and logic. The loss is thus rarely attributable to the fault of the decision maker as his or her judicial mandate is limited to digesting the facts, listening to the arguments, and then following the precedents to divine the judgement. Sometimes decision makers of first instance get it wrong, but the wrong is typically righted on appeal.

So why do litigants lose building cases? Why do some lawyers proceed to trial in circumstances where both parties are confident of victory yet both opponents are mindful of the fact for there to be a victor there will have to be a loser?

Building disputes are invariably characterised by:

• defective building work
• time overruns
• over-payments or cost overruns
• monies being owed to builders and contractors

As building disputes are so very technical in nature, It follows that the role of the expert witness is paramount. A lawyer is not qualified to inspect and diagnose the cause of construction failure. It would be negligent for a construction lawyer to presume in such matters, and he or she would not be indemnified by an insurer for venturing into the expert witness terrain.

So there is a case to argue that the role of the expert witness in a construction dispute is even more germane than that of the lawyer. The lawyer after all, in getting a case trial ready, provides the theatre for the experts to persuade a decision maker that their technical diagnoses and costings are more plausible than those of their opponents. Sure there might be legal arguments concerning contractual interpretation and repudiation, but it is the technical diagnostics that shape the size of the award for quantum.

So one’s choice of technical expert is very, very important. This being the case, when one engages a technical expert, it is crucial to look for:

• someone in possession of the relevant skill sets, be they costing, engineering, construction or design
• an expert with whom one is familiar with; a person that is held in high esteem
• integrity, candour and a spine – no one likes surprises, so it’s not about the expert telling you what you want to hear. One needs the truth, and often that does not align with that the client’s position. Hence you need an expert who can stand up for him or herself, that will not be led and backs a position
• eloquence, as the expert has to be persuasive in the giving of expert opinion
• unflappability, as expert witnesses will be subjected to the blowtorch of cross examination where the advocate will seek to discredit and sometimes humiliate the expert to nullify the effectiveness of the testimony
• experience giving testimony in court; the court is no place to “road test” a fledgling for fear of the client becoming the casualty

Alas, unless one has a “road tested relationship with an expert” the only way one can locate experts of higher calibre is by way of word of mouth. Otherwise it can be a lottery, because there is no expert accreditation or registration regime. Expert witnesses are not found in the categories of building practitioner registrants, so they do not come under the jurisdiction of any oversight body like the VBA. Unlike lawyers and doctors, there is no ability to strike an expert off the roll, because there is no roll.

Furthermore there is no recognised qualification in expert witness testimony, nor is there any requirement by law that they be insured. If a lawyer is negligent in a building case, regardless of whether it is due to an over-reliance upon expert evidence or other factors, the aggrieved knows the solicitor by law is required to be insured. No such luck for the aggrieved with the expert.

Troublingly, in 30 years of practice, during which time I have been involved in thousands of building disputes, I have never witnessed a plaintiff expert agreeing with a defendant expert on diagnosis and costing. I am not going to speculate on the reasons for the divergence, but the contrary nature of expert evidence has become part of the DNA of building disputes. This is a very serious problem in the dispute resolution dynamic. The inability of the system to facilitate expert opinion convergence of opinion is, in my view, the greatest factor that influences the winning or losing of cases. If the experts can’t or won’t agree on the construction solution or the cost of the solution, how the hell can a matter be resolved?

Choosing the right lawyer

Although there are specialist construction lawyers, the glut of lawyers and the finite and limited amount of work means many solicitors are desperate for work, which drives some to take on briefs that are well outside their comfort zone. A building industry luminary once said to me “lawyers throw their bodies at me to get work.” Unfamiliar with the relevant statutes, case law and contracts and lacking intel regarding where to find the best technical expertise, non-specialist lawyers can flounder. This is particularly true when they come up against a seasoned and battle hardened construction lawyer. Construction law is not an area to dabble in, so if there is a knowledge vacuum in the lawyer of choice, the battler may harbour false hope and be in for a big surprise.

But even if one chances upon a construction law expert, it is critical that the client provides accurate and comprehensive instructions. It is equally critical that the lawyer, flanked by the expert witness, provides a very candid risk assessment in writing of the strengths and weaknesses of the case. A failure to risk proof the case will inevitably culminate in that which proves to be the antithesis of all things one hopes for.

Insurers, sometimes known as professional litigants, always insist that their lawyers as soon as practicable provide a written legal opinion that clinically and dispassionately analyses the liability risks and the quantum. Typically an insurance letter of advice template will have the following headings:

• Facts and Chronology
• Liability and Indemnity
• Quantum
• Best case Scenario
• Worst Case Scenario
• Likely Scenario
• Reserve

The reserve will be calculated on the basis of the likely scenario.

The letter of advice will be updated regularly and any changes to the risk profile of the file will be factored into the advice. This type of rigour is conducive to no surprise litigation and assists with formulating of settlement offers. Plaintiffs should also embrace the same type of rigour, although it is not common and absent the rigour, a case can run a cropper.

Emotion and false hopes

Litigation is by definition emotional and stressful, but emotion cannot be allowed to impact upon decision making, nor can ill temper or anger, as these can cloud one’s vision.

For the plaintiff, litigation is by and large about getting paid an amount of money that will place them in the position they should have been if matters hadn’t gone off the rails. Typically this will mean receiving a sum of monies that will fix defects and resolve associated expenses whilst spending as little money as possible. It is pure mathematics.

For the defendant, it is about paying out as little money as possible, period. There is no largess in construction litigation, no generosity and there are no windfalls. So if a litigant thinks they will get a windfall and in bending the lawyer’s ear gets him or her to tell them what they want to hear rather than what they will on balance get, sadness and disillusionment will surely follow. It follows that the lawyer retained must – like the expert – have a spine and reality test.

Over the years, I have seen a lot of opponents who harbour unrealistic aspirations either in terms of the payout or the payday.  The truth always plays out in a court of law and the result invariably is close the real cost to fix and or complete, the real cost of delays. There’s no padding, no fat, no largess. It is thus incumbent upon the client’s lawyers and advisers to reality test to remove any false hope.

The cost of litigation

Despite repeated attempts by policy makers to reduce the cost of litigation, success has remained elusive. Construction litigation is very expensive and in their determination to spend less, litigants often choose advocates who charge less but at the end of the day achieve less for the clients. The top practitioners generally have a lot of work on and they don’t compete on the basis of fees. Rather, they compete on the basis of expertise.

Furthermore, the litigation team will typically involve a barrister, a solicitor and an expert witness, which costs a lot of money. The often exorbitant costs sometimes dictate that litigants simply can’t continue with their cases and this can culminate in loss, particularly if they are forced to become lay advocates.

A refusal to settle in a timely manner

If the parties can’t negotiate and settle their cases at mediation, they lose the ability to maintain control over their destiny. Once a matter goes to trial and a third party – the decision maker – assumes that control and determines one’s destiny, to the victor the spoils. When a case is lost, it’s most often because the parties refuse to settle. The refusal would have been based upon underestimating the strength of the opponents case, naive resolve or pigheadedness, and there is always insufficient appreciation of the dangers inherent in not settling.

Sadly, there is no silver bullet when it comes to resolving building disputes. If such panacea existed, no one would ever lose a case and trial advocates would be out of work.

But maybe, just maybe, these musings provide some assistance to those who are about to embark enter into the theatre of adversarialism.

Lovegrove & Cotton Lawyers to the building industry

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

If you wish to engage the firm, feel free to contact us via our website or by emailing enquiries@lclawyers.com.au.