New domestic building dispute resolution process in Victoria

Construction eBulletin - 16 May 2017

Summary

The Building Legislation Amendment (Consumer Protection) Act 2016 (Vic) was passed in 2016, introducing a number of changes to the regulation of building work in Victoria with the aim of enhancing consumer protection for domestic building work.  Some of these changes came into effect on 26 April 2017.

Builders, building surveyors, sub-contractors, architects, and others involved in the building industry in Victoria should be aware that the legislation also introduces other significant changes which have not yet come into effect, and that the Victorian government has introduced further legislation proposing even further changes.

In this eBulletin, we discuss the latest changes that commenced on 26 April 2017.  Given the significant impact of these changes, we have considered the changes in some detail.


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The Building Legislation Amendment (Consumer Protection) Act 2016 (Vic)

In 2016 the Building Legislation Amendment (Consumer Protection) Act 2016 (Vic) was passed in Victoria.
This legislation introduces a number of changes to the regulation of building work in Victoria to enhance consumer protection for domestic building work under both the Building Act 1993 (Vic) and the Domestic Building Contracts Act 1995 (Vic), as well as other changes designed to improve the operation and enforceability of these Acts.

Changes effective from 26 April 2017

Parts of this legislation came into effect on 26 April 2017. In summary, the key changes relate to the resolution of disputes between owners and builders, building practitioners, subcontractors, and architects, which includes:

  • the establishment of an organisation known as Domestic Building Dispute Resolution Victoria (DBDRV);
  • the requirement for disputes to be referred to DBDRV before proceedings can be commenced in the Victorian Civil and Administrative Tribunal (VCAT);
  • a conciliation process for domestic building disputes;
  • the appointment of assessors to consider if domestic building work is defective, or incomplete, or does not comply with building laws;
  • the ability of the DBDRV to make binding dispute resolution orders; and
  • a right to seek review of a dispute resolution order at VCAT (subject to cost implications if you are unsuccessful).

Below, we discuss some of these changes in more detail.

Establishment of DBDRV

On 26 April 2017, DBDRV was established as a compulsory first step for the resolution of domestic building disputes involving owners.

Any party can refer a dispute involving the carrying out of domestic building work or involving a domestic building contract to DBDRV, but one of the parties must be the owner. All such disputes must be referred to the DBDRV before a party can commence proceedings in the VCAT.

The DBDRV's website describes this new process as being "Free. Fair. (and) Fast."

Before asking the DBDRV to consider a dispute, it is assumed that the party will have already taken reasonable steps to resolve the dispute and the application can be rejected if this has not occurred. The application can also be rejected on other grounds including that there is no reasonable likelihood of the dispute being settled by conciliation other than because a party is not willing to engage in conciliation or that the application is frivolous, lacking in substance, vexatious, or not made in good faith.

If the DBDRV does not accept a dispute then it must give reasons for rejecting the application and a "certificate of conciliation" must be issued. If a certificate of conciliation is issued then the parties can apply to VCAT to resolve the dispute if they wish.

DBDRV's Conciliation Process

If an application is accepted by the DBDRV it is referred to conciliation. The conciliation conference can be conducted in person either on site or elsewhere, by telephone or by other electronic communication, or by a combination of methods.

Any information disclosed during the conference about contraventions by building practitioners of building laws can be used in disciplinary proceedings.

If the dispute is resolved by conciliation, a written record of the agreement will be made. If a party fails to comply with the agreement, the other party may notify the DBDRV and the agreement may be cancelled.
If the dispute is not resolved by conciliation, the DBDRV is to give notice to each party of the reasons why the dispute was not resolved, and following an opportunity by the parties to make submissions about the reasons, a certificate of conciliation will be issued allowing the parties to apply to VCAT to resolve the dispute if they wish.

Stop Work Notices

Regardless of whether a dispute is referred to conciliation, if a party makes an application to the DBDRV then the DBDRV can issue a stop work notice requiring the builder to stop all or some of the work for a period of up to 30 days, which can be extended for a 30 day period. A penalty may be imposed if a builder does not comply with the stop work notice.

Such a notice has the effect of extending the time for completion of building work under a domestic building contract by the time the work is stopped by such a notice.

The DBDRV can cancel the stop work notice at any time and it ceases to have effect if a certificate of conciliation is issued, which may occur because the dispute was either not referred to conciliation, or the conciliation is concluded by agreement or by notice that the dispute was not resolved.

Assessors

An assessor (who is an architect or a registered building practitioner or other prescribed person) can be appointed during or after conciliation if the dispute has not resolved to determine if the domestic building work is defective or incomplete, and the number of days required to rectify or complete the works. A person at a building site must give reasonable assistance including providing information and documents to the assessor.

If the assessor prepares a report (which is not required if a dispute settles during the conciliation process), a copy is given to each party and a party has a short time in which to make submissions in relation to the report.

If the assessor is of the opinion that there have been contraventions of building laws, they must say so in the report and provide a copy of the report to the VBA, which may refer the alleged contraventions to the relevant council and the building surveyor. Also the assessors report can be relied upon in subsequent legal proceedings.

Dispute Resolution Orders

Where a dispute is referred to conciliation but does not resolve, the DBDRV can issue a dispute resolution order.

A dispute resolution order may require:

  1. the builder to rectify defective work or damage, or complete the work (and specify a reasonable period for this to occur),
  2. the payment of money by an owner to the builder or the trust fund;
  3. the owner to do or not do something;
  4. the builder to pay the cost of building work carried out by another builder; and/or
  5. the owner to rectify or complete work where there is a finding that the work is so defective that it is not appropriate to allow the builder to rectify or complete the work.

A finding in a dispute resolution order can be taken into account in subsequent legal proceedings.

A party can ask the DBDRV to consider amending or cancelling a dispute resolution order if it does so within 10 business days of receiving the order and there has been a substantial change in the nature of the dispute or the circumstances of the parties since the assessors report was prepared. The DBDRV can also amend or cancel an order at any time on its own volition.

The DBDRV is required to notify any relevant domestic building insurance insurer of any dispute resolution order issued and whether it was complied with.

A failure by a building practitioner to comply with a dispute resolution order is a ground for disciplinary action and can result in the DBDRV issuing a breach of dispute resolution order. If notice of a breach of dispute resolution order is issued, the party not in breach can terminate the domestic building contract.
The DBDRV can cancel a breach of dispute resolution order notice if the parties to the dispute notify the DBDRV that the dispute has settled.

VCAT applications

Except if a party is seeking an injunction, no proceedings can be issued at VCAT or in a court for a domestic building work dispute involving an owner, unless a certificate of conciliation has been issued by the DBDRV.
If a certificate of conciliation is issued which says that a party refused to participate in conciliation or did not participate in good faith, and that party is unsuccessful in their VCAT application, then costs must be awarded against that party unless the other party has not acted appropriately and it would be unfair to do so.

An application to VCAT can be made if a party wishes to seek a review of a dispute resolution order or a notice of breach of a dispute resolution order, however there are strict time requirements that must be complied with.

Cost may be awarded against an unsuccessful applicant seeking a review at VCAT of a dispute resolution order

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Other changes on the horizon for the Victorian building industry

The legislation also introduced other significant changes which came into effect on 4 July 2016 and 1 September 2016, and there are still further changes to come into effect. The timing for implementation of further changes is by 1 July 2017. These changes include new offences for building surveyors, building inspectors, and domestic builders carrying out work when not appropriately registered, and detailing what a building surveyor must consider before issuing a building permit. We will provide further information about those changes once those changes have been announced.

The Victorian government also introduced legislation late in 2016 which, if passed, will provide for the ability of companies to be registered as builders and will require the VBA to undertake a more thorough assessment of a builder's financial and personal history before granting registration. We will also provide further information about these changes if they come into effect.

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Authors

Nicole Feeney | Special Counsel
Elon Zlotnick | Senior Associate

Further information

All information on this site is of a general nature only and is not intended to be relied upon as, nor to be a substitute for, specific legal professional advice. No responsibility for the loss occasioned to any person acting on or refraining from action as a result of any material published can be accepted.

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