From July 4, 2016, sweeping changes to construction law will start to take effect in Victoria. These changes will affect all construction disciplines, including architects, with the reforms being introduced on a staged basis over time up until July 2017.
The new legislation is called the Building Legislation Amendment (Consumer Protection) Act 2016 (“the new Act”), and it heralds reforms to the Domestic Building Contracts Act 1995, the Building Act 1993 and the VCAT Act 1998. All building practitioners will need to have some awareness of what the new rules will mean for them.
One of the major changes affects how domestic building disputes will be resolved in Victoria. In an adoption of a similar system to that found in NSW, there will be compulsory conciliation of a domestic building dispute before a party is allowed to refer a matter to the Victorian Civil & Administrative Tribunal (VCAT) for action.
Currently in Victoria, the VCAT has exclusive jurisdiction to resolve domestic building disputes, including for example an action by an owner against an architect for negligent design work. This will not change with the new laws. So what will be new for architects in Victoria involved with domestic building projects?
The new Act will insert a new Part 4 into the Domestic Building Contracts Act 1995 that will include a new section that defines a “domestic building work dispute.” The definition will include a dispute arising in regard to domestic building works between an owner and:
- a builder
- a building practitioner
- a subcontractor, or
- an architect
The “domestic building work” must relate to a domestic building contract or the carrying out of work under such a contract, a breach of the building warranties under section 8 of the DBCA, a failure to maintain the standard or quality of work, failure to pay money for works performed, and other potential arguments that could arise.
As you can see, a dispute between an owner and an architect in regard to potentially negligent design, or if the owner has failed to pay the architect for design work, would fall within this definition. Also, there may be a situation where it is unclear whether claimed building defects are due to poor builder workmanship or poor design, and an architect is joined into the fray, or if it is alleged that an architect has acted poorly in administering a building contract (for instance if he/she has failed to properly ‘rein in’ the builder or approved payment claims for incomplete stages).
So the new section 44 of the DBCA as added will specifically name an architect as a party to a domestic building dispute. This means the new conciliation system in the new Act that will be compulsory prior to going to VCAT will also affect architects who will need to also participate in this regime, including where they are trying to claim unpaid monies under retainer agreements.
There has been some confusion in that currently section 6 of the DBCA says this Act does not apply to (at subsection (e)): “design work carried out by an architect or a building practitioner registered under the Building Act 1993 as an engineer or draftsperson.”
On the face of it, this suggests an architect’s design work on a domestic building project is not domestic building work and therefore a dispute in relation to it would not be a domestic building dispute. However, there is a footnote in the Act to subsection 6(e) which reads “Although such design work is not domestic building work for the purposes of this Act, as a result of paragraph (c) of the definition of “domestic building dispute” in section 54, disputes concerning such design work may be dealt with by the Tribunal.”
Sure enough, architects are referred to in section 54 of the Act, so it would seem that even under the current regime, an architect’s design work may not be domestic building work, but disputes in relation to it can still be a domestic building dispute.
So what will the new conciliation system mean? Conciliation is akin to a mediation or an alternative dispute resolution process that does not entail going to a final hearing at court or a tribunal and having to call witnesses and give oral submissions, and then wait on a decision by a judge that could go either way. Such alternative dispute resolution minimizes the involvement of lawyers and is generally cheaper and faster when compared to having to prepare and attend a final contested hearing.
In New South Wales, for residential building disputes it is necessary to attempt conciliation of a dispute via the Department of Fair Trading prior to referring the matter to the NCAT for resolution. The new compulsory conciliation in Victoria will be along the same lines.
A new organisation (Domestic Building Disputes Resolution Victoria, or DBDRV) will be created which will operate in conjunction with Consumer Affairs Victoria. It will be mandatory for a party to a domestic building work dispute to attempt conciliation before one can start VCAT proceedings.
The aim is of course for less expensive and speedier dispute settlement, to incentivize parties to attempt this, and to reduce the number of disputes heading to VCAT. Time will tell whether this will actually achieve that outcome. It may be that many such disputes will end up on review at VCAT anyway for dispute resolution orders that can be made in regard to defective building works.
Building disputes, be they domestic or commercial, are often not ‘cut and dried’ battles between an owner and a builder. There are often circumstances where for example more than one party could be responsible for certain building defects, or if the cause could be the responsibility of the builder, a design cause by an architect, or a failure of an engineer or building surveyor checking the works.
This means there may be proportionate liability, where the finder of fact needs to divide up the loss and damage on a percentage basis between the parties found to be each partly responsible for loss and damage to an owner.
While the DBDRV will be theoretically able to conciliate matters involving multiple parties and proportionate liability, this may prove a little too cumbersome for the conciliators to handle and may mean the matters still need to be referred to VCAT if there is no settlement.
Once the changes are implemented and the new conciliation body is up and running, any party (including an architect) that wishes to refer a domestic building dispute to conciliation will need to send a written notice of referral in a form approved by the director of the DBDRV. The notice must be signed by the referring party or their representative, and must identify the relevant domestic building contract and the other party or parties to the dispute.
Once the request for conciliation is received, it will be referred by the DBDRV to a conciliation officer who will make a recommendation on whether the dispute is accepted or rejected for conciliation. If accepted, a conciliation conference will be conducted through the DBDRV.
If the matter is able to be conciliated/settled successfully by the parties, a written record of agreement will be prepared by the conciliation officer. There would probably also be terms of settlement signed by the parties to record the conditions of their agreement.
Alternatively, if the matter is not resolved at conciliation, a Certificate of Conciliation will be issued by the DBDRV which must include a statement of reasons on why the dispute was not resolved. In those circumstances, you would expect the parties to lawyer up if they have not previously done so, and refer the matter to VCAT for litigation.