The new DBDRS – likely to cut the cost and time for the resolution of Victorian domestic building disputes

The new DBDRS – likely to cut the cost and time for the resolution of Victorian domestic building disputes

30 Jun 2017

By Kim Lovegrove RML, FAIB of Lovegrove & Cotton – Construction and Planning Lawyers; Chairman Centre for Best Practice Building Control; past president of the Australian Institute of Building (Victoria); immediate past president of the NZIOB; and past consultant to World Bank on building regulatory reform.

In recent months, we have heard stories of plummeting new file openings for domestic building disputes and members of the legal profession have been pontificating over reasons why.

Building approvals, at least in Victoria, have been strong, the crane index has remained high and although economic storm clouds are gathering momentum, there seemed to be nothing to explain the uncharacteristic plummet in domestic building dispute instructions for members of the legal fraternity.

Then the penny dropped, the new variable – maybe the game changer – is the Domestic Building Dispute Resolution Service. Then we started to hear anecdotally that builders and consumers alike were choosing to delay the initiation of dispute resolution proceedings until the new service was up and running. Well now, it is up and running and, not surprisingly, there is quite a backlog. This is understandable because the new system is free and if I personally had been intent on issuing legal proceedings in a domestic building setting, I would have made a point of waiting until the new regime took shape.

The DBDRV (Domestic Building Dispute Resolution Victoria) commenced on April 26, 2017. This day heralded a massive shift in the domestic building dispute arena, and anyone that does not fully appreciate this needs to take stock and take note. It is a game changer because, as from that date, if you are a builder or an owner, you cannot go straight to the VCAT anymore if you want to resolve a domestic building dispute. Instead, you must at least attempt conciliation through the DBDRV system, subject to that body’s acceptance of the matter as one that is eligible for conciliation.

Before one applies to the DBDRV, the guidelines state that one has to take reasonable steps to resolve the dispute with the other side, and the guidelines state that unless reasonable steps have been taken, there may be a finding that the dispute is not suitable for conciliation.

A party wanting to apply for the conciliation process through the DBDRV will need to access that organisation’s website and complete the application form online. The usual suspects of contact details, the other party’s details, and a synopsis of the issues in dispute will be submitted, and once submitted, a reference number will be given along with a next steps information sheet. Relevant information to assist you to complete the application form and information about the process is available on the website. Then the following steps will occur:

Jurisdictional check

A dispute resolution officer will be assigned and at first instance will determine whether the applicant has invoked the correct jurisdiction. One would imagine inquiries will revolve around issues such as whether the dispute has a Victorian domicile or whether the matter is a domestic building dispute rather than a commercial dispute. To be clear, commercial building disputes will not be affected by the new system and cannot be resolved by the DBDRV.

Preliminary assessment

In accordance with section 45C3 of the Domestic Building Contracts Act 1995, the appointed officer will determine whether the dispute is suitable for conciliation, and that officer can also ask for additional information to assist him or her with the assessment.

Rejection of application

If the Dispute Resolution Officer (“DRO”) does not consider that the matter is suitable for conciliation he or she will then contact the applicant by phone. Subsequently, a certificate of conciliation will be issued with the caption “not suitable.” This is referred to as a certificate of non-eligibility. Once this certificate is obtained by a party, they will then be able to proceed to the VCAT as an alternative pathway to resolve the issues.

Acceptance of suitability

If the dispute is considered suitable by the DRO, the parties will be notified by phone and a notice of decision will be dispatched that provides a synopsis of issues germane to the decision to conciliate. The officer will come up with options for the parties to consider. If successful, the parties can sign a notice of agreement in circumstances where the matters were effectively put to bed absent the need to proceed to a conciliation conference.

The conciliation conference

When the matter proceeds to the conciliation conference, needless to say, the parties must attend and the meeting will be convened and chaired, as it were, by the conciliation officer. One will be required to bring material germane to the dispute and the conciliation such as:

    • the contract, plans and specs
    • the building permit and any record of inspections or building directions by the building surveyor, and conceivably any amendments to the building permit
    • variation instruments
    • EOT requests/responses along with relevant correspondence and other documents
    • A building assessment or report (for instance, in regard to alleged building defects).

The conciliation officer may be of a mind to arrange for a registered consultant to assess the works, and as part of that assessment there will be an analysis of the integrity of the work to determine whether it is defective or not. There may be recommendations as regards that which is considered necessary to fix the work along with a time frame. Of note is the fact that the assessor will also be able to determine whether there have been any contraventions of the Building Act 1993 and if so, the assessor has the power to report the contravention to the VBA.

The actual conciliation

Typical of mediation, the dispute resolution officer will listen to the parties, give them time to express their position and will be open to permitting legal representatives to appear in certain circumstances.

There is an expectation and assumption of “good faith” that will prevail with respect to the parties and, reminiscent of mediation, it is expected that the parties will be open-minded and willing to resolve their disputes and differences. A refusal to make any offer or to compromise on any issues in dispute could be a sign of a lack of good faith by a party.

If there is any refusal to participate, the guidelines provide that an assessor can be appointed to inspect the works regardless. The DRO can also issue a dispute resolution order or a certificate can be issued stating that the matter is not suitable for conciliation.

The guidelines canvass the possible outcomes

In circumstances where settlement is effected, a written agreement will be signed along with a reckoning of those matters and actions that have been agreed by the parties. It is then incumbent upon the parties to abide by the agreement and make good those matters agreed upon within the relevant time frames.

Dispute resolution orders

In circumstances where the parties are not able to resolve all of their disputes or differences, the DRO may issue a ‘binding dispute resolution order” against one or both of the parties. Dispute resolution orders are binding upon the parties. The guidelines provide that, “the CDRO can issue a dispute resolution order if the dispute was resolved by conciliation, was partially resolved or when a record of agreement was not honoured… …Where an order is made about defective or incomplete work against a builder who did not participate in conciliation, the builder may be liable for the cost of the building assessor report on which the order was based.”

The certificate of conciliation

In circumstances where the conciliation process does not culminate in a settlement and the parties are at odds about the resolution of matters, the DRO has the power to issue a certificate of conciliation – dispute not resolved. Either party is then at liberty to issue proceedings in the VCAT.

Powers of the CDRO

The CDRO can issue dispute resolution orders that:

  • the dispute was not resolved
  • the dispute was partially resolved
  • an order was not complied with; or
  • an order that the owner pays money to the builder

How to review a DBDRV determination

The following decisions can be reviewed by the VCAT:

  • a decision that the conciliation is not suitable for conciliation
  • a lack of resolution or circumstances where no certificate of conciliation is forthcoming
  • when a party has been compelled to comply with a dispute resolution order and the description of the defect or the work is not accurate
  • the date for completing the work is unreasonable; or
  • Any other action required by the order is unreasonable.

If a builder has been issued with a breach of the dispute resolution order notice, the builder can apply for a review of that notice on the basis that the notice was not correct, was overly heavy-handed, or that the orders had indeed been complied with.

The preliminary verdict

As the process is free, the initiative should be a very welcome development for owners and builders alike. Even the most strident of naysayers would be hard pressed to find a way to take issue with a concept where a free form of conciliation is fashioned for consumers and builders.

As most disputes are resolved by mediation, it is astute to make the conciliation process the first cab off the rank, and as someone with experience in law reform, I commend the virtues of front-end mediation. Think about it: under the previous regime, one had to issue legal proceedings in the VCAT, accompanied by formal points of claim. A directions hearing would inevitably be convened where lawyers would generally appear on behalf of the parties and in the main, there would be an order for points of defence and any counterclaim prior to the mediation being set down. Under the old system, thousands of dollars could well have been spent before the mediation. Under this system, zero dollars will have been spent if the matter is resolved by conciliation, save for any application fee to start the process.

In the pre-April 2017 world, by the time the matter got to mediation, the litigation process was well into its life cycle. Under the new regime, conciliation occurs up front and no doubt, disputes that are capable of being resolved by negotiation will indeed be resolved.

Mediation and conciliation with a twist

Be under no illusion, however, that the DRO is a mediator or a conciliator if one examines the ordinary connotations of said words. That is probably why he or she is called a dispute resolution officer rather than a conciliator or a mediator. Mediators and conciliators in their purest form cannot force or compel settlement and they have no ability or mandate to do more than facilitate or encourage settlement. The DRO, on the other hand, is a pretty powerful character armed with arguably quasi-judicial powers in some respects akin to those of tribunal members in that he or she can:

  • Issue binding orders against one or both parties and owners should have regard to the fact that the officer can order the owner to pay money to the builder; and
  • Compel resort to an assessor who can in turn file a complaint with the VBA concerning practitioner misconduct.

It follows that the process has some similarities to mediation but also some very significant dissimilarities, one of them being that in mediation the process is typically confidential and conducted in a without prejudice setting.

Anyone utilising this new service should take the DROs very seriously on account of that which they can ordain and divine.

There may well be some punters who will be well disposed to the new system because if they are able to resolve their disputes through the DBDRV, then they will save themselves a great deal of money. I doubt however that you will find many lawyers that relied upon domestic building disputes as a primary form of income doing ‘high fives’ as it is very difficult to see how resort to the legal profession with regards to the resolution of domestic building disputes will not be impacted upon.

To put it plainly, there is likely to be less demand for the services of construction lawyers in the domestic building dispute realm. If this prediction is on the money, then some policymakers will be congratulating themselves. For fear of belabouring the point, if matters are inherently capable of being resolved at mediation then one would imagine that a good many cases that traditionally had to be litigated at first instance will be resolved front end. I would not be surprised if 30 to 40 per cent of matters that traditionally had to be litigated will be resolved front end.