Articles

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

For some years this firm has been following the vexed issue of building practitioner insurability, particularly with respect to fire engineers and building surveyors and registered certifiers (and other coordinate jurisdictional equivalents). The worst of this culminated in exemptions to mandatory professional indemnity insurance cover with respect to cladding claims against accredited certifiers in NSW,[1] and fire engineers and building surveyors in Victoria,[2] amongst others.

The exemptions were made in reflection of the simple fact that insurers were unwilling to assume the risk for cladding claims under professional indemnity policies held by those certain building practitioners. This is a huge problem that continues to face the industry, and at the end of the day, an uninsured profession benefits neither construction practitioners nor the general public who could suffer the consequences of defective construction.

What Australia has been faced with, then, is an exodus of insurers that previously underwrote risk in building and construction. Industry bodies such as the Australian Institute of Building Surveyors have therefore been working very hard to bring insurers back to the various Australian jurisdictions. It is within this context that the Australian Institute of Building Surveyors’ Professional Standards Scheme has come about to limit liability for the likes of building surveyors in respect of “occupational liability”. The Scheme has just become operable in Victoria from 1 September 2021, and in other jurisdictions like NSW since 1 July 2021.

The AIBS Professional Standards Scheme

The AIBS’s Professional Standards Scheme was approved by the NSW Professional Standards Council as empowered under Section 12 of the Professional Standards Act 1994 (NSW) (‘NSW Act’). Under Section 28 of the NSW Act, such a scheme may have the effect of limiting occupational liability for persons to whom the scheme applies.

The NSW Act allows for liability to be limited by reference to insurance requirements[3] – which is the case in the AIBS Professional Standards Scheme. The persons to whom such a scheme may apply include members of professional associations,[4] such as those members of the AIBS. Specifically the AIBS scheme applies to “all Practising Members (including a Body Corporate Member) as defined in the AIBS Membership Policy” and those who had a relevant membership and policy of insurance as at the time of an act or omission giving rise to a cause of action. The provisions apply for 5 years from the date of the scheme commencing.

Although initially approved by the NSW Professional Standards Council, it was approved in conjunction with coordinate jurisdictions’ Professional Standards Councils.  This means that the regime also applies in the other States and Territories under their relevant Professional Standards legislation, including Victoria (albeit from the first of September),[5] Tasmania,[6] Queensland,[7] South Australia,[8] Australian Capital Territory,[9] Western Australia[10] and the Northern Territory.[11]

The Scheme has therefore been adopted into the bodies of law of the eight State and Territory jurisdictions, providing limits on liability for claims against building surveyors or registered certifiers in respect of acts or omissions made by them in the course of their occupation.

The various government gazettes call up the NSW Professional Standards Act 1994 wording, and it follows that the wording is consistent as across the various States and Territories.

The AIBS Professional Standards Scheme provides as follows:

3.2 If a person to whom the Scheme applies and against whom a proceeding relating to Occupational Liability is brought is able to satisfy the court that:

3.2.1 the person has the benefit of an insurance policy insuring such person against that Occupational Liability, and

3.2.2 the amount payable in respect of that Occupational Liability is not less than the monetary ceiling specified in Clause 3.4 below,

the person is not liable in damages in relation to that cause of action above the monetary ceiling

The Scheme goes on to specify a table in clause 3.4 that sets out the “monetary ceilings”. The monetary ceilings are $2 million for “unlimited buildings” (buildings with storeys greater than 3 and greater than or equal to 2000m²) and $1 million for “limited buildings” (buildings with storeys less than or equal to 3 storeys and less than 2000 m²).

Importantly, occupational liability is taken to have the meaning found in the NSW Act, meaning: “civil liability arising (in tort, contract or otherwise) directly or vicariously from anything done or omitted by a member of an occupational association acting in the performance of his or her occupation.” The net, then, is cast very wide for the kind of liability captured by the limitation.

This scheme therefore has legislative force, limiting ‘occupational liability’ by reference to insurance arrangements. It is not just a requirement of a professional body in respect of membership; it is protection at law, called up by the relevant Professional Standards legislation in each jurisdiction – clearly justified on public policy grounds as regards insurability of the profession.

It therefore follows that those building surveyors who are members of AIBS and have AIBS approved insurance will have their liabilities capped for professional building surveying work at the amounts mentioned above, unless they seek an exemption from the operation of the Scheme at any time for a specific project (and if that exemption is granted by AIBS).

At face value, this might not seem so great for potential claimants; but claimants should think of this as improving confidence in the industry as a whole. By maintaining and promoting high standards through professional association membership and by bolstering insurability, the industry as a whole arguably benefits.

Notifying Clients of Limited Liability

As this scheme is operable by law, there is no need to expressly limit liability under contract for the retention of building surveying services. As the scheme is called up by statute, it limits liability regardless of contractual provisions relating to the same. What is important, however, is that building surveyors’ clients are notified of the Professional Standards Scheme. The AIBS recommends this come in the form of a statement included on office and business documentation which reads along the following lines:-

‘Liability limited by a scheme approved under Professional Standards Legislation.’

It is therefore prudent for contracts entered into by building surveyors and their clients to include said statement as a notice of the limited liability scheme established under the respective Professional Standards legislation for the jurisdiction in which building surveying functions are being carried out.

Conclusion

The primary issue for building surveyors is ensuring they continue to meet the requirements for membership of AIBS and that their insurance policies are compliant with AIBS Insurance Standards. When dealing with clients, ensure that your correspondence and documents give notice of the limitation of liability pursuant to the Professional Standards Scheme.

It also has ramifications for claimants in building actions and the way they go about litigation with respect to concurrent wrongdoers, and the like, and will be an important facet to consider in respect of case management.

Hopefully the scheme has its intended effect, namely the bolstering of insurability, so that claimants are not making claims against “straw-man” uninsured defendants, as it were.

Footnotes

[1] See the now historic, Building Professionals Regulation 2007 (NSW), cl 14A.

[2] See the Building Practitioners’ Insurance Ministerial Order No. S 19 Friday 17 January 2020, made pursuant to Section 135 of the Building Act 1993 (VIC).

[3] See Section 21.

[4] See Professional Standards Act 1994 (NSW), s 17.

[5] See Victorian Government Gazette G26, 1419, Professional Standards Act 2003 Authorisation And Publication Pursuant to Section 14 Australian Institute of Building Surveyors Limited Professional Standards Scheme

[6] See Tasmanian Government Gazette, 23 June 2021, 545, Professional Standards Act 2005 Notification Pursuant to Section 14.

[7] Professional Standards (The Australian Institute of Building Surveyors Professional Standards Scheme) Notice 2021 Subordinate Legislation 2021 No. 91 made under the Professional Standards Act 2004

[8] South Australian Government Gazette, Professional Standards Act 2004 The Australian Institute of Building Surveyors Ltd Professional Standards Scheme

[9] Civil Law (Wrongs) Australian Institute of Building Surveyors Professional Standards Scheme 2021 (No 1).

[10] Western Australian Government Gazette, Professional Standards Act 1997 The Australian Institute of Building Surveyors Professional Standards Scheme

[11] Northern Territory Government Gazette, Professional Standards Act 2004 Notification: The Australian Institute of Building Surveyors Professional Standards Scheme