The building and construction industry attracts notable government intervention to balance varying interests, one of which is the need for consumer confidence and protection.
This article highlights topical challenges confronting government bodies, particularly in NSW. It explores the timeline of legislative and policy initiatives of the NSW Government and how they are playing out in practice.
Insurance crisis - introduction of the Civil Liability Act in 2002
Many will recall the "insurance crisis" of the 1990s and early 2000s when insurance premiums increased in response to the level of personal injury litigation. It led to increasing difficulties in obtaining public liability insurance because of cost, or unwillingness to insure high-risk entities.
Part of the government response to address these difficulties was the introduction of the Civil Liability Act 2002 (Cth) (CLA) which substantially modified the common law of negligence. The CLA altered the principles of the "duty of care" and causation and restricted the recovery of damages from personal injury. The intention was to reduce liability, restore personal responsibility for complainants and create stability for complainants and insurers alike.
The CLA includes proportionate liability provisions which allow liability for loss to be divided among 10 multiple parties based on each party's degree of responsibility. This effectively means a plaintiff needs to bring claims against a number of defendants to recover its loss.
Interplay with the building & construction industry
The duty of care is not a foreign concept within the building and construction industry. In the 1990s, the High Court released a decision contrary to the long-standing position with respect to the duty of care owed by builders to subsequent purchasers. In the well-known decision of Bryan v Maloney, the High Court found that a builder did in fact owe a duty of care in negligence to subsequent owners of a property. That principle, however, was subsequently overturned in Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 which effectively ended the duty of care in negligence for residential building work.
In 2020, the NSW Government interjected through the Design and Building Practitioners Act 2020 (NSW) (DBP Act). This Act introduced the now well-known statutory duty of care, which is found in section 37, as well as increased regulatory oversight and powers.
In the intervening four years, a large body of dialogue and litigation has ensued in respect of the DBP Act. One interesting area is the interplay between proportionate liability in the CLA and the DBP Act, and whether liability under the DBP Act could be apportioned among multiple parties.
Earlier cases indicated that the proportionate liability provisions did apply to a claim for damages arising from a breach of the duty to exercise reasonable care to avoid economic loss caused by defects under section 37 of the DBP Act. However, the NSW Court of Appeal in The Owners Strata Plan No 84674 v Pafburn Pty Ltd has recently confirmed that the proportionate liability regime in the CLA does not apply to the statutory duty of care found in the DBP Act.
This means that developers and builders cannot apportion liability to subcontractors or consultants and cannot reduce their liability to a plaintiff by deflecting blame to other parties. This decision ensures that property owners, including government bodies, will be able to hold parties accountable for economic loss arising from building works. It also upholds the intention of the DBP Act to ensure accountability within the construction industry, which shines through provisions such as section 39, which states that the statutory duty of care cannot be delegated.
On 11 April 2024, however, the High Court of Australia granted special leave to appeal the Court of Appeal's decision, so the state of law in this area remains uncertain.
Quantity versus quality?
The NSW Government is also grappling with the need to ensure quality builds while also addressing housing supply and affordability. It has introduced a raft of policies, plans and legislation in an attempt to secure a supply of housing to meet demand. This has led to concerns about quality and the potential impact on people's confidence in the construction industry.
The DBP Act and Residential and Apartment Buildings (Compliance and Enforcement) Act 2020 (NSW) (RAB Act) aim to alleviate some of those concerns. From 1 December 2023, the NSW Building Commission took on the role of regulator of the building and construction industry in NSW, with a focus of rebuilding trust and capability in the construction sector and delivering on the NSW Government's housing commitments.
Using powers granted under the RAB Act, the Commission's 'Project Intervene' seeks to ensure serious defects in residential apartment buildings are addressed. One such power is the ability to issue a "building work rectification order". The aim of such orders is to reduce the number of construction disputes that end up before the courts.
Dealing with increased litigation of building disputes
As we have seen, many government initiatives, including the CLA and RAB Act, attempt to limit expensive and time-consuming litigation in the building and construction space. Nonetheless, there is still a need for appropriate resourcing to deal with disputes between developers, owners and builders.
Presently, the NSW Civil and Administrative Tribunal (NCAT) may hear building claims up to $500,000. Seemingly, the intention is to alleviate pressure on the courts by transferring building claims to NCAT.
Recent decisions have included discussion on whether NCAT has jurisdiction to hear and determine claims under section 37 of the DBP Act. Unlike the Home Building Act 1989 (NSW) (HBA), which specifically confers jurisdiction to NCAT to hear claims for breaches of the statutory warranties in section 18B of the HBA, no such provision exists in the DBP Act.
In Deaves v Sigma Group NSW Pty Ltd claims were brought in NCAT by homeowners against a developer and builder under each of section 18B of the HBA, and section 37 of the DBP Act. The Appeal Panel held that a claim for breach of the statutory duty of care was a "building claim" under section 48K of the HBA, as it concerned a claim for a sum of money which arose "from a supply of building goods or services".
In McLachlan v Edwards Landscapes Pty Ltd, the Supreme Court determined that the Local Court was entitled to transfer a proceeding to NCAT which concerned claims under the HBA and DBP Act. With respect to the claim under section 37 of the DBP Act, the Court stated, "if...the plaintiff's case somehow managed to go beyond the claim for breach of the statutory warranties...then the plaintiff could continue litigating them" in NCAT.
Each of these authorities appears to suggest that NCAT can determine claims for breach of the statutory warranties under the HBA and claims for breach of the duty of care under the DBP Act. This undoubtedly impacts the landscape of building defect litigation and will influence practical decisions such as where to commence proceedings.
In our experience, NCAT is under increasing strain to address the rising number of building claims coming before it. The pressure on courts and tribunals may be exacerbated by some of the issues discussed in this article, including:
- the rush to supply affordable housing – which may be perceived as leading to lower quality workmanship in new builds – the effect of which remains to be seen
- the retrospective operation of the statutory duty of care
- the jurisdiction of NCAT to hear claims for breach of section 37 of the DBP Act.
Conclusion
The upshot is that despite government bodies' already active approach in the construction sector, including regulatory oversight and intervention, similar action will be required in the future to ensure and maintain consumer confidence and protection.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.