Articles

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.