By now everyone would have heard of the structural issues affecting the Opal tower. The spotlight has fallen onto failed industry regulation and the ultimate responsibility for defects arising from, design and certification. The cladding issue is another example of this ever-increasing problem.
Can it really be the case that innocent builders or even worse, owners end up footing the bill for this fiasco? What options are available to address this significant problem? A proactive approach needs to be taken to address these issues rather than collective ignorance and shirking responsibilities.
Many builders are worried about jobs with design issues, especially in light of the case The Owners Strata Plan No 66375 v King  NSWCA 170, which affirmed that builders are held liable for design defects by virtue of the warranties contained in section 18B of the Home Building Act 1989 (NSW) (“the Act”).
Naturally, the builder or contractor is the first port of call for a claim in the event of defective work, even when the builder knows the defect is a design or product issue and the builder has been instructed to carry out the works anyway. In those cases, a builder can use section 18F of the Act as a defence (if managed correctly).
However, even if the 18F defence is setup well:
- The builder is still being sued in the first instance, causing a high cost and stress burden on the business.
- The defence is not available on commercial projects and on residential projects above 3 stories as the Home Building Compensation insurance scheme does not apply.
Several things are required to enliven the 18F defence, which are;
- the builder/contractor must give written notice to whom the work was contracted to be done that the works have a design problem and, advising against proceeding; and
- the builder is subsequently instructed, preferably in writing, to perform works that go against advice given by the builder; or
- The builder/contractor relies on advice (preferably in writing) from a relevant independent professional
It should be noted that even though the 18F defence does not apply to larger projects, the exact same approach should be taken to establish a defence in any other construction dispute.
Change of Plans?
Where the builder receives instructions that differ from the plan in the absence of design detail, or there has been a change in design that may affect the build, they should keep the requirements of the defence firmly in mind.
The onus is entirely on the builder/ contractor to manage this and set itself up for this available defence. Builders should adopt adequate verification of change procedures to avoid ambiguity and reduce their risk exposure.
Should a builder/contractor identify a change in their instructions that may prove to be unsatisfactory for any purpose, it is extremely important for the builder/contractor to immediately provide written advice on that change, providing:
- what the new instructions are;
- what the builder has suggested and why or how it differs from the change proposal;
- a note that the builder has been instructed to proceed, despite their advice on the contrary; and
- a request that the new instructions be confirmed before works commence.
A builder may also approach what is known as a ‘Relevant Professional’ under the Act, who is someone with specialised knowledge in a particular aspect of the building such as an architect, engineer or surveyor to provide written advice.
The Relevant Professional must be independent and must not have been a close associate of the builder/contractor for 3 years prior to the job.
Relying on written advice provided by a Relevant Professional will also provide the builder with a complete defence under section 18F of the Act, or in the context of a commercial project, the basis for a very strong defence in contributory negligence.
When dealing with design issues, it pays to be extremely cautious. Despite the extra cost, ensuring all instructions and advice relied on is in writing (as required by the Act) will provide the builder/contractor with a complete defence in the event of a dispute and defective works arising from design issues.
Verbal discussions are not sufficient and ‘just getting on with it’ is no longer an option. Should the builder suspect any issues a second opinion is strongly recommend, including from a lawyer or ‘Relevant Professional’.
Although this may be time consuming and will increase the cost of the job, it is far better than being dragged into litigated proceedings. Builders should implement project management systems that facilitate a section 18F defence protocol to minimise risk in the event of a dispute, in the face of seemingly lacking favorable industry regulation.
The Opal Tower showcased the eye-opening insight of when design issues arise. There is a lack of clear regulation which, in any other case, can leave innocent builders exposed to significant risk. In this regard it is prudent that builders keep on top of this aspect of project management and seek advice where applicable.
If you would like further information on the section 18F defence, contact our lawyers, Nicholas Achurch or Marcus McCarthy.
Lawyer, Nexus Law Group
+612 9016 0141
Principal, Nexus Law Group
+612 4961 0002