Proposed legislation imposes new duties on manufacturers and suppliers of building products

The NSW Government has released three new Bills which propose a number of significant reforms for the building and construction industry. The Bills form part of the government's ongoing "Construct NSW strategy", which aims to restore consumer confidence in residential apartment buildings.

A significant feature of the proposed reforms is the imposition of multiple new positive duties on any person deemed to be in the "chain of responsibility" for a building product. This expressly includes the manufacturers, importers, suppliers and users of a building product, and those whose design incorporates the product.

What are the three new duties?

The proposed new duties are found in Part 2A of the Building and Construction Legislation Amendment Bill 2022 (NSW) which, if enacted, will amend the existing Building Products (Safety) Act 2017 (NSW).

Duty to ensure a non-compliance risk does not exist

The overarching and most significant new duty appears at section 8E, which says that any person in the chain of responsibility for a building product must ensure that a non-compliance risk does not exist in relation to the product.

The proposed legislation accordingly introduces two entirely new concepts:

1. Chain of responsibility: This is very broad and includes any person who designs, manufactures, imports, and supplies the product, as well as any person who uses the product and prepares a design which incorporates the product. It also includes any person who knows, or reasonably ought to know, that the product will, or is even likely to, be used in a building.

2. Non-compliance risk: This risk is deemed to exist if the building product (or its intended use) does not comply with an applicable requirement of the National Construction Code (NCC) or a relevant regulatory provision. The risk is also deemed to exist if the building product merely may not conform.

The standard for all of the duties proposed under the new legislation is one of reasonableness; a person who owes a duty must discharge the duty as far as is reasonably practicable and taking into account various risk management factors. These include the likelihood of the existence of a safety risk and the harm that could result from the risk, as well as the cost associated with removing or minimising the risk and whether this is proportionate to the risk.

Duty to provide required information

The proposed legislation also imposes new specific duties on various people within the chain of responsibility to provide information in relation to building products (at section 8F).

The "required information" that has to be provided relates to the suitability of the product and must be specific to each intended use of the product, including any conditions, instructions or maintenance information that must be observed in order to ensure the suitability and compliance of the product in its intended use.

The required information will need to be provided at each separate stage of the design and construction process as follows:

1. The designer of a building product must provide the required information to any person who receives the design to give effect to the design of the product (such as a manufacturer).

2. A manufacturer, importer or supplier must provide the required information to any person it sells, supplies or transfers the product to (or facilitates the sale, supply or transfer to).

3. A person who prepares a building design that incorporates or recommends the use of a building product must provide the required information to any person to whom they provide the design. (This means that architects and engineers will need to provide to their clients and builders the required information in relation to all building products referred to in their designs.)

4. A person who uses a building product in a building (i.e. a builder) must provide the owner of the building with the required information.

Duty to notify Secretary of non-compliance risk

Finally, the legislation imposes a duty on everyone in the chain of responsibility to notify the Secretary within seven days if they become aware of or merely (reasonably) suspect that a non-compliance risk or safety risk exists in relation to a building product or the intended use of a product.

A breach of any of the duties attracts penalties under the legislation of up to $55,000 for an individual and $165,000 for a corporation.

Implications

These proposed reforms mirror those introduced in Queensland in 2017 under the Queensland Building and Construction Commission Act 1991.

While the concept of a positive duty being owed by manufacturers and suppliers of building products is not completely new, as the statutory duty of care introduced by the Design and Building Practitioners Act 2020 (NSW) (DBP Act) also extends to manufacturers and suppliers, these new duties are much more prescriptive. For example, they impose an obligation on suppliers and manufacturers of building products to consider and then set out the suitability and NCC compliance of their products for each and every potential intended use of the product.

The reforms also supplement the obligations imposed on design and building practitioners under the DBP Act and the Design and Building Practitioners Regulation 2021 (NSW) in relation to class 2 buildings, which significantly increased the level of required design and compliance documentation at the preliminary stages of a project. The new duties will further increase these obligations by introducing a duty for each person involved in the design, specification and installation of a building product to provide relevant information regarding its compliance.

In the context of the current cladding "crisis", and the alleged misrepresentations made by manufacturers and suppliers of combustible cladding which are now the subject of multiple class actions, it is easy to see the reasoning behind the introduction of these new duties. As an unintended consequence, however, they also risk driving up the costs of building products in NSW and hindering innovation and the use of novel building products that may have significant societal benefits, such as being more environmentally friendly.

The proposed legislation is currently in the consultation phase. The NSW Government has invited submissions on the proposed legislation by 25 November 2022.

For more information on the implications of the proposed legislation, please contact a member of our team.

Photo by Bernard Hermant on Unsplash.