The Design and Building Practitioners Bill (the Bill) has now been passed as of 3 June 2020 and assented on 11 June 2020.

An overview of the major reforms introduced by the Bill were discussed in our previous article here. This article digs deeper into the detail of the Bill, and looks at some of the more practical implications on builders and designers.

A quick re-cap

Consumer confidence in the construction industry has suffered as a result of a number of high profile building failures including Grenfell Tower in London, and more recently the Opal and Mascot Towers in Sydney. These cases brought to light both inadequate design and building practices, and questions around liability for defects, particularly where property had been on-sold.

At its heart, the intent of the Bill is to introduce and uphold a standard of competence, diligence and integrity that a member of the public is entitled to expect of a reasonably competent practitioner by introducing three keys elements:

1. Regulated designs;
2. Registration requirements for design and building practitioners;
3. Declarations of compliance for the design and building by practitioners.

A Statutory Duty of Care

Part 4 of the Bill builds on existing common law and statutory duties of care owed by designers and builders to property owners. There is now no doubt that builders and designers owe a duty of care to subsequent property owners. The Bill clarifies that the duty of care owed by builders and designers is to exercise reasonable care to avoid economic loss which is caused by defective design and building works.

Although the duty of care cannot be contracted out of, the defence under s 18F of the Home Building Act 1989 (NSW) is still available to contractors. The nature of the defence is discussed in detail in our previous article here.

Requirement for transparency

A core aspect of the bill is that all aspects of the construction process are laid bare and available, to prevent issues arising from unscrupulous contractors. To this end, the register of practitioners will be publicly available and may include details of prosecutions, penalties, warnings and conditions applicable to each registration.

Significantly, the bill also imposes upon builders the requirement to provide a list to Fair Trading of subcontractors and other third parties who have worked on the build. Provision of such a list will allow owners to easily identify all parties who contributed to the works, and hopefully minimise time and cost to investigate and identify the responsible party in the event of a defect.

Requirement for registration

Building and design practitioners must be registered in order to provide compliance declarations which effectively means that construction won’t be able to start, and an occupation certificate can’t be  issued without registration. Although the Bill specifies that, as a minimum, architects, engineers, drafts-persons and various designers will need to be registered as design practitioners, the Bill does not deal with exactly who will be able to or required to apply for registration, nor does it deal with recognition of current registrations and licences (licensed builders or architects for example).

The Bill is clear that should practitioners fail to register or keep current their registration whilst providing these services, they may be liable for a penalty from Fair Trading, or disciplinary action from the relevant professional body.

Requirement for Compliance Declarations

There will be three different types of compliance declarations:

1. A declaration from the design practitioner, to be given to the builder before building work starts, that the building has been designed in accordance with the Building Code of Australia and other applicable requirements, (design compliance declaration);
2. A declaration from the building practitioner, to be given before applying for an occupation certificate, that the building has been constructed in accordance with those certified designs (building compliance declaration); and
3. An optional declaration from a principal design practitioner that all relevant design compliance declarations have been provided (principal compliance declaration).

These declarations mean that for the first time, designers will need to ensure compliance of their designs, and builders will need to ensure that what they build complies with the design (including requirements of the Building Code of Australia).  The result is greater assurance to owners that building work will comply with the relevant laws and regulations.

The need for compliance declarations may have a number of time and cost impacts on projects including:

• On larger projects with multiple facets of design, builders may be faced with additional costs of engaging a principal design practitioner, with responsibility for ensuring that design compliance certificates have been provided for each regulated design; and
• The need for design compliance declarations to be obtained before starting work may result in delays to project commencement.

Requirement for insurance

The Bill provides that designers and builders must hold and maintain an adequate insurance policy, and if not, then they must not make a declaration that designs and built elements are compliant.

Although the regulations may introduce specific requirements for certain types of insurance that must be maintained, at a minimum, policies must cover liability which practitioners may become exposed to by providing declarations or doing the work.

Designers should have existing professional indemnity policies in place, and some builders may too. Existing policies should be reviewed to ensure that cover is sufficiently broad. Although details of requirements are scant, it seems likely that many current professional indemnity policies may not be adequate. Clearly builders who do not even have professional indemnity policy will need to purchase cover to meet the requirements of the Bill. It is not even clear that policies which meet the requirements of the Bill are available in the current market, so watch this space.

Implications of non-compliance

The Bill has included a suite of new and severe penalties should design and building practitioners fail to comply with the Bill. Such offences include, but are not limited to:

• Failure to adequately insure works/designs;
• Failure to provide adequate information;
• Providing false and misleading information;
• Failure to provide compliance declaration;
• Providing compliance declarations unregistered;
• Failure to build in accordance with regulated compliant designs;
• Failure to carry out works or performance solutions in accordance with regulated designs;
• Failing to provide information during and investigation; and
• Providing false and misleading representations.

Penalties range from $10,000 to $330,000 per offence and up to 2 years imprisonment for some.  Disciplinary action may also include a requirement to undertake training, suspension or cancellation of registrations, and disqualification of practitioners.

Where to from here?

Much of the detail of the legislation has been left to the regulations, and timing for enactment of these is uncertain. Regulations will have the capacity to give the legislation very broad application, including significantly:

• The types of building work to which the legislation applies;
• What constitutes a regulated design; and
• Who is a building contractor.

The passing of the Bill represents a new high in the level of industry regulation, which is driven by necessity to bolster public confidence in the industry and ensure that buildings are designed, built and certified correctly. If you would like to receive updates as to when the Bill will commence as an Act and enactment of regulations, please provide your email below, or reach out to Nick, or Simon  directly.

This publication is © Nexus Law Group and is for general guidance only. Legal advice should be sought before taking action in relation to any specific issues.