Unsurprisingly, there were always going to be calls for change after a landslip cause by wild weather ruptured gas mains and began to eat away at the ground beneath a heritage listed house and a 12-unit apartment block in the Sydney suburb of Collaroy in August, 2014.
Whilst a subsequent report prepared by staff of the Warringah Council concluded that both the council and the certifier had acted appropriately, it recommended amongst other things an end to the practice of certifiers being chosen by private developers. According to media reports at the time, Councillor Sue Heins described a ‘screaming conflict of interest’ and an impression that certifiers were certifying ‘everything to pass.’ To be clear, no suggestion of improper behaviour on any party is being made in relation to this case.
Of course, the importance of certifiers or surveyors acting without conflict of interest is not limited to private certifiers who are either engaged and remunerated by private clients or who work as employees of private sector companies which in turn are engaged and remunerated by private clients.
In 2009, for example, a Victorian Ombudsman report found that Brimbank City Council building inspector Peter Anastasi acted with a conflict of interest when he failed to notify the Council of his intention to purchase one of the properties he was inspecting. After purchasing the dwelling, the Ombudsman alleged, Anastasi then used his position at council in order to order repairs to the property that he was in the process of acquiring.
The above examples underscore the importance of building certifiers (referred to interchangeably as building surveyors) maintaining independence and avoiding conflict of interest, irrespective of whether or not they are private surveyors or municipal surveyors. As the primary professional charged with ensuring that buildings are safe to occupy, energy efficient, accessible and in line with relevant legal requirements, the surveyor’s role in terms of the public interest is a critical one.
Further, as statutory appointees, certifiers and surveyors have a primary duty of care to the public and are required by law to maintain independence and impartiality. In New South Wales, for example, all accredited certifiers are deemed to be public officials under the Independent Commission Against Corruption Act 1998 (ICAC Act) as well as public authorities under the Ombudsman Act 1974 Ombudsman Act. As such, they have a primary legislated duty to serve the public interest irrespective of commercial pressures or client pressures. Specific legislation, such as Section 66 of the Building Professionals Act in New South Wales and Section 79 of the Building Act in Victoria, prohibits them from performing certification work in cases where they have a conflict of interest.
In the April edition of its newsletter, the Building Professionals Board (BPB) in New South Wales described a number of what it said were recent examples in which interesting questions surrounding the independence of the certifier arose.
In one case where a certifier was appointed as the principal certifying authority without knowing that his son was a tradesperson for the development, the Board says there was a conflict of interest as the certifier in question would inspect the work of his own son. Even if he arranged for another certifier to conduct the critical stage inspections, that other certifier’s independence would have been questionable as both certifiers worked for the same company and the other would still have sent final inspection reports to the original certifier, who at any rate would have been required to carry out the final inspection himself.
In another example, the certifier and the builder each had office space on the same floor of a commercial building. A dispute arose between the builder and the certifier’s client (the property owner), who was wary about discussing the builder’s actions with the certifier amid fears of collusion.
In this situation, the Board says it might be difficult for certifiers to maintain complete independence from people with whom they interact in the office. Such situations, it said, should be avoided where possible.
Speaking particularly about New South Wales, a spokesperson for the BPB said courtesy of their aforementioned status under the ICAC Act and the Ombudsman Act, certifiers are expected to hold the same level of independence and impartiality as was the case for any other public official.
“From a certifier’s point of view, avoiding conflicts of interest is critical to ensure his/her decisions serve the public interest and uphold all applicable legislative requirements,” the spokesperson said.
According to the spokesperson, sources of pressure for certifiers can arise from their relationship with developers and builders along with the exercise of discretionary decision making powers in certifying work.
Common ways in which these pressures manifested themselves include:
- The performance of a significant portion of their work for the same builder or developer (and thus reliance upon that party for ongoing work)
- Being asked for advice during early stages of a development
- Being pressured into providing an occupancy certificate, perhaps through promises of future work if a certificate is issued despite a missed inspection; being pressured into accepting spurious reasons for inspections being ‘unavoidably’ missed or to accept photographs of the work that is to be inspected; or being asked to issue the certificate with an assurance that necessary paperwork will come later
- The exercise of discretionary decision-making powers, including whether or not a proposed change during construction is sufficiently material to warrant a modified development consent or complying development certificate.
Kim Lovegrove FAIB, a partner and senior construction lawyer at Lovegrove & Cotton and a consultant for building regulatory law reform at the World Bank, says certifiers have a prima facie duty to be independent and to protect the public interest. He says this responsibility is mandated by legislation across every jurisdiction. This duty is in effect, he says, irrespective of whether or not the certifiers are municipal building surveyors employed by the local council or private surveyors employed either within their own practice or as employees within a company.
“Prima facie, they have to be independent and have to be objective,” Lovegrove said, speaking about certifiers in Australia. “They are statutory appointees that by law are appointed to ensure that the as-built product is fit for occupation.
“There is no mystery about that. That is their legislated mandate.”
Lovegrove acknowledges that surveyors face a conundrum in terms of being engaged and remunerated by fee paying clients whilst having a prima facie duty to protect the public interest. Nevertheless, he says it is imperative for them to fulfil their public interest duty. Anyone not doing so jeopardises their own interests, the interests of their client and ultimately, those of building occupants, he said.
According to Lovegrove, one problem revolves around fee cannibalisation and the practice of some certifiers submitting unrealistically low bids in order to secure work. Such practices, he said, compromise their ability to perform their work properly whilst still earning an adequate financial return from their efforts and inevitably led to corners being cut.
To combat this, Lovegrove would like a floor on surveyor fees. He would also like to see surveyors subject to mandatory annual auditing.
Again speaking about New South Wales, the BPB spokesperson says certifiers should adopt a number of steps in order to avoid or manage conflicts of interest.
First, it is important to understand all laws and exemptions relating to conflict of interest which apply to them as well as any applicable guidance from the regulator within their jurisdiction. Since part of managing and avoiding conflicts of interest revolves around managing client expectations, it is also useful to provide clients with up-front guidance as to what they as certifiers are and are not able to do. Those performing ongoing work with a client would be advised to periodically review their work with that party so as to ensure they had not unknowingly provided preferential treatment in past interactions.
In terms of avoiding perceived conflicts of interest, it is useful to discuss any situation which may give rise to such perceptions with peers, lawyers and/or the relevant regulator to obtain an independent perspective about whether or not conflicts do exist.
In the particular case of NSW, the spokesperson said the certifier must have a written contract in place and be paid up front prior to certification work being carried out – a requirement which frees them from pressure associated with clients withholding payment.
Finally, at a corporate level, companies could maintain a register of declared interests and talk through upcoming projects at meetings in order to adequately manage these conflicts. This is particularly useful in larger companies where the declared conflicts of individual employees may not otherwise be known or understood by colleagues.
Lovegrove says it is imperative that surveyors do not allow commercial imperatives to interfere with their duty to the public.
“All of the acts of Parliament have a plethora of enforcement methods which they (surveyors) can utilise (to enforce compliance with the Building Code),” he said. “It is critical that they don’t show any shyness with regard to utilising those orders. Those orders are paramount protection mechanisms for the public.
“There might be those who feel reluctant to hit their client with these orders because they are concerned that that will be the last gig that that client will give them. Well, so be it.
“If they accede to the commercial imperative in terms of I want the next job, then they are going to repudiate the public imperative and place one or many in harm’s way.”