Introduction

During 2014, the then Victoria Liberal state government intended to legislate a number of amendments to the Domestic Building Contracts Act 1995 (DBC Act), the Building Act 1993 (Building Act), and consequential amendments to the Victorian Civil and Administrative Tribunal Act 1998 (VCAT Act).  Delayed due to a change of state government at the November 2014 election, these amendments (with some modification) are now being advanced through the new parliament by way of the Building Legislation Amendment (Consumer Protection) Bill 2015 (Vic) (Bill).

Responding to findings of the Victorian Ombudsman[1] and the Victorian Auditor-General’s Office[2], the amendments contained in the Bill are directed at addressing consumer protection issues arising from domestic building works by improving dispute resolution mechanisms within the domestic building industry and strengthening domestic builder regulation and registration practices.

Key Changes

Dispute Resolution – Part 2 of the Bill

The Bill provides for a new dispute conciliation framework.  This framework will include a new service named Domestic Building Dispute Resolution Victoria (DBDRV) which will consist of a chief dispute resolution officer, conciliation officers and technical assessors.  The DBDRV will be administratively linked to Consumer Affairs Victoria.

All domestic building work disputes (not already commenced in VCAT or a court prior to the Bill being enacted) will be required to be conciliated at DBDRV before a party may make any application to VCAT or a court (save for actions for injunctive relief).

Any party to a domestic building work dispute may refer the dispute to the chief dispute resolution officer within 10 years after the date an occupancy permit is issued, a certificate of final inspection is issued, the date of practical completion, or the date the domestic building contract was entered into (which ever is applicable in the particular circumstances).

Upon referral to DBDRV a dispute will be initially assessed by a conciliation officer who will recommend to the chief dispute resolution officer if the referral should be accepted or rejected.  If accepted, the chief dispute resolution officer will refer a dispute to a conciliation officer for conciliation.  If rejected, the chief dispute resolution officer must issue a certificate of conciliation certifying the dispute is not suitable for conciliation, with reasons.  A party to a dispute must be issued with such a certificate, or otherwise participate in conciliation before they may make any application for a hearing before VCAT.

During the conciliation process, a technical assessor may be directed by the chief dispute resolution officer to examine domestic building work for defects and completeness.  Also, a party to a domestic building contract may request the chief dispute resolution officer to direct an assessor to undertake such examination.

Should conciliation not resolve a dispute a ‘dispute resolution order’ may be issued by the chief dispute resolution officer.  These orders may, for example, require rectification of defective or incomplete work; compel a building practitioner to meet the costs of rectification by an alternative builder; and payment to a builder or into a trust fund (to be established under the Bill) for release to a builder upon completion of rectification or incomplete work.

If a party refuses to participate in conciliation or refuses to participate in good faith, the dispute will still be heard by DBDRV with the non-participant liable for costs.  Similarly, if a party seeks review of a dispute resolution order in VCAT and loses, a costs order against them may be made.

A party may apply for review of a dispute resolution order in VCAT.  However, if the dispute resolution order is either confirmed by VCAT or varied by VCAT to increase the obligations on the party applying, a costs order may be made against that party.

If a dispute resolution order is not complied with, the aggrieved party (whether building owner or building practitioner) may terminate the relevant building contract and apply to VCAT for compensation.

Regulation of building work and building practitioners – Part 3 of the Bill

The Bill provides for the abolition of the Building Practitioners Board and the transfer of its registration and regulatory functions to the Victorian Building Authority (VBA).  Consequently, the VBA will carry responsibility for the registration, regulation and disciplining of building practitioners together with its role in monitoring and enforcing compliance with the Building Act and regulations.

The VBA’s regulatory powers will also be strengthened.  For example, it will be able to direct a building practitioner to rectify non-compliant or defective building work.

Registration of building practitioners

The Bill introduces time-limited registrations which will last for up to a maximum of five years.  That means building practitioners will be required to apply for renewal of their registration every five years, with renewal subject to the applicant demonstrating their ongoing competence (such as by completing prescribed continuing professional development requirements).

The VBA will be able to attach conditions to registrations.  These will operate to categorise or class building practitioners to restrict them to work activities the VBA considers they are competent to undertake.

A broader ‘fit and proper person test’ more aligned with grounds for discipline will be introduced to replace the existing, narrower, ‘good character’ test.  A building practitioner may be disciplined if they are found to not be a fit and proper person to practise.

The VBA will be able to approve new codes of conduct, whether prepared by the VBA or an organisation representing building practitioners.  These codes may make different provision for different categories of practitioners who will be required to comply with any code applicable to their category or class of registration.  Non-compliance with a code will be grounds for VBA disciplinary action.

The Bill includes provision for building practitioners to seek internal review of VBA registration decisions and a right of appeal of an internal review decision to VCAT.

Disciplinary processes and sanctions

Show cause

The Bill also introduces a ‘show cause’ disciplinary process.  If, after investigation, the VBA reasonably believes grounds exist to take disciplinary action against a registered building practitioner the VBA must give the practitioner a show cause notice.  The notice must outline the facts and circumstances underpinning the grounds of the VBA’s proposed action, the registration to which the proposed action is related, the intention of the VBA to take disciplinary action and the nature of that action, and invite the practitioner to show within the show cause period why the VBA should not take the proposed action.  The show cause period is at least the 14 days after the date on which the practitioner receives the show cause notice, but may be extended by the VBA at the request of the practitioner.

A registered building practitioner may make written or oral representations to the VBA about the show cause notice within the show cause period.

The VBA must decide within 28 days after the show cause period ends whether any grounds exist to take disciplinary action against the building practitioner concerned.

Sanctions

Grounds for VBA disciplinary action are expanded by the Bill and include non-compliance with any of the following:

  • an applicable code of conduct;
  • a dispute resolution order;
  • a direction of the VBA or VCAT; or
  • a condition of registration.

The Bill provides for the VBA to impose a range of sanctions including conditions on a registration, and suspension or partial suspension of a registration.

Additionally, the grounds for immediate suspension of registration are expanded beyond the existing public interest ground to include bankruptcy or insolvency of a practitioner, contravention by a practitioner of the Building Act, DBC Act or other prescribed Act or law, conviction of a practitioner of an indictable offence involving fraud, dishonesty, drug trafficking or violence, a practitioner ceasing to be covered by the required insurance, and non-compliance by a practitioner with a condition of registration.

The Bill includes provision for building practitioners to seek internal review of VBA disciplinary decisions within 28 days of the later of the notice date or the date the notice is given to the practitioner, and a right of appeal of an internal review decision to VCAT.  An application to VCAT will automatically stay the disciplinary decision (except decisions for immediate suspension of registration – these applications will require the VBA to have the opportunity to be heard on the matter).

Building surveyors

Conflicts of interest

The Bill seeks to bolster surveyor independence by providing that a registered building practitioner will be prohibited from appointing a building surveyor on a property owner’s behalf in relation to domestic building work.

Also, a building surveyor will be prohibited from accepting appointment by a registered building practitioner and must not carry out any functions where the surveyor or a related person (a partner, director, employer or employee of the surveyor) has a conflict of interest.

Compliance

Directed at improving compliance with document lodgement requirements, a building surveyor will need to certify that all documents required to be given to the relevant council pursuant to s 30 of the Building Act have been given to that council.

Prior to issuing a building permit a building surveyor will be required to ensure that the building practitioner’s name and registration details appearing on the building contract are identical to those details which appear on the builder’s certificate of insurance.

It will be mandatory for building surveyors to issue building practitioners directions to fix non-compliant work (the practitioner involved will commit an offence and be liable for disciplinary action if they do not comply with such directions).  Building practitioners may seek review of building surveyors’ directions at the Building Appeals Board.

The Bill also provides for the appointment of a manager of a building surveyor in circumstances where the surveyor is unable to complete their work (surveyor has died, is imprisoned, had their registration suspended or cancelled, or has become insolvent).  It is intended that this measure will reduce delays and disruptions to domestic building work.

Conclusions

The legislative intentions underpinning the Bill include strengthening consumer protection, providing for better and faster outcomes for consumers and builders, and to enhance the quality of building projects in Victoria.

Practitioner registration requirements will be strengthened as will the regulatory powers of the VBA and building surveyors.  Together with expanded practitioner disciplinary measures, the Bill amendments are a serious attempt by government to address a number of identified failings of the existing building system concerning the domestic building sector and domestic building practitioners.

The new conciliation process may assist in the earlier resolution of more straightforward claims involving just a building practitioner and property owner (and reduce the rates at which such disputes are litigated).  However, this additional step has the potential to slow the dispute resolution process and increase costs in complex disputes involving multiple parties that cannot be conciliated as a certificate of conciliation must be issued by the chief dispute resolution officer before an application to VCAT may be made.

The state government has foreshadowed further legislative changes are being considered for 2016, including to the building permit system.