Significant changes ahead for the building and construction industry

The NSW Government has released draft legislation designed to increase compliance and enforcement in the building and construction industry for public consultation. Consultation closes on 16 October 2019.

The proposed Design and Building Practitioners Bill 2019 is in response to the recommendations provided by the Shergold-Weir Report.[1]  

Key aspects of the proposed legislation include: 

• significant registration and insurance obligations for design and building practitioners;
  
  
• requiring design and building practitioners to issue compliance declarations stating that works have been completed in accordance with the Building Code of Australia (BCA);
  
  
• the introduction of a new compliance and enforcement regime which includes investigative powers and significant penalties for non-compliance; and
  
  
• providing for a statutory avenue to enable subsequent owners to claim against builders for any economic loss incurred as a result of defects. 

The proposed bill and what it means 

Application 

The proposed legislation currently limits its application to ‘building work’, which includes ‘the construction of a building of a class prescribed by the regulations’.[2] 

The class of buildings to which the proposed legislation will apply will be prescribed in the regulations when issued. It is likely that the regime will cover buildings, rather than a wider class of infrastructure and engineering works. 

Compliance 

The proposed legislation provides for a more comprehensive compliance process through certification by registered professionals, who are required to have insurances, and will increase oversight of the design and construction process by: 

1. Requiring that design practitioners who prepare designs covered by the regime issue Design Compliance Declarations, which state that design has been completed in accordance with the BCA.[3]
   
   
2. Requiring that building practitioners who undertake works covered by the regime issue Building Compliance Declarations which state that buildings have been constructed in accordance with the BCA.[4]
   
   
3. Introducing the optional role of Principal Design Practitioners, who coordinate Design Compliance Declarations for building practitioners.[5]
   
   
4. Requiring that when variations are made, design practitioners re-issue Design Compliance Declarations and all changes are documented by building practitioners.[6] 

Registration 

The proposed legislation mandates that any design or building practitioner who makes a Design Compliance Declaration or Building Compliance Declaration be registered on a register of practitioners maintained by the NSW Department of Customer Service.[7] 

Industry bodies, including Engineers Australia, have criticised the registration regime in the draft legislation as inadequate, as it fails to introduce a compulsory registration scheme for all engineers in NSW. Compulsory registration was a recommendation of the Shergold-Weir Report. 

Indemnification

The proposed legislation requires that Design and Building practitioners are able to discharge their liabilities adequately (whether by insurance or any other arrangements approved by the legislation). [8]

Having regard to the current state of the insurance market (in particular professional indemnity insurances), it will be useful to understand the insurance industry’s appetite to provide insurances for design and building practitioners and, consequently, the ability of those professionals to procure those insurances to obtain registration. 

Enforcement, penalties and investigation powers of the Secretary 

The proposed legislation provides the Secretary of the Department of Customer Service with various investigative and disciplinary powers, including the ability to: 

• determine an applicant’s fitness for registration;
  
  
• gather evidence and information in relation to applications and investigations into potential wrongdoing;
  
  
• issue show cause notices in respect of potential disciplinary action;
  
  
• issue stop work orders for contravention of the proposed legislation; and
  
  
• impose conditions, suspend or vary a practitioner’s registration.[9]

A penalty regime has also been proposed, which imposes penalties which range from 100 penalty units to 2,000 penalty units (for a person) and from 1,000 penalty units to 3,000 penalty units (for a body corporate), depending on the severity of the contravention. The regime also includes terms of imprisonment for design and building practitioners who knowingly issue false or misleading compliance declarations.[10]   

Duty of care 

The proposed legislation extends the duty of care owed by a builder to subsequent owners, regardless of whether the building work was carried out under a contract or another arrangement,[11] and provides a statutory avenue to overcome the limitations that exist at common law. The current common law position, established in Brookfield Multiplex,[12] is that building contractors owe a duty of care to avoid pure economic loss to initial owners, but not to successors in title.

Under these proposed changes, builders will be liable to subsequent owners for defects and resulting economic loss. 

Feedback

Feedback is currently being sought by the NSW Government on the proposed legislation, and can be provided online until 16 October 2019. Further consultation on the regulations is expected in 2020.