The Resolution of Domestic Building Disputes in Victoria: New Dispute Resolution Framework
Feb 2017 |
Introduction
In April 2016 the Victorian Government introduced the Building Legislation Amendment (Consumer Protection) Act 2016 (Vic) (Act), which has changed, and will continue to change, the domestic building regime in a number of important areas.
The Act is in response to the Victorian Auditor-General’s Office report of May 2015 on Victoria’s Consumer Protection Framework for Building Construction, which was critical of inadequate protection for consumers.
The Act amends both the Building Act 1993 (Vic) and the Domestic Building Contracts Act 1995 (Vic). The changes effected by the Act are being rolled out in stages. Tranches 1 and 2 came into effect in July and September 2016. In summary, those changes included:
- Abolishing the Building Practitioner’s Board and transferring the Board’s functions, powers and responsibilities to the Victorian Building Authority (VBA);
- Extending the VBA’s powers to owner-built sites;
- Creating new offences for working without a building permit;
- Updating the powers of building surveyors to fix building work;
- Providing a checklist that building surveyors must use when lodging building permits with Council;
- Prohibiting builders from appointing a building surveyor on an owner’s behalf, and prohibiting building surveyors from accepting such appointment (although builders may recommend a private building surveyor to an owner); and
- Requiring builders to provide owners with a copy of the Domestic Building Consumer Guide before they sign a major domestic building contract.
New dispute resolution framework
The Act creates a new framework for the conciliation and resolution of domestic building disputes. Conciliations will be delivered by Domestic Building Dispute Resolution Victoria, which is modelled on similar bodies used in workers compensation and retail tenancy disputes. According to the responsible Minister, the purpose of the service is to resolve disputes in a quick and fair manner.
A ‘domestic building dispute’ is a dispute in relation to domestic building work between an owner and a:
- Builder;
- Building practitioner (which includes building surveyors and engineers);
- Sub-contractor; or
- Architect.
Domestic Building Dispute Resolution Victoria will be headed by a person known as the Chief Dispute Resolution Officer, who will be supported by qualified conciliators and technical assessors able to assess domestic building work. The service will be funded by the existing Domestic Builders Fund, which is administered by Consumer Affairs Victoria.
Significantly, save for injunctive relief, all domestic building disputes must be conciliated at Domestic Building Dispute Resolution Victoria, prior to any application being lodged in the Victorian Civil and Administrative Tribunal (VCAT). It is hoped by the Victorian Government that conciliation will significantly reduce costs for both consumers and builders, as well as avoid the stress of legal proceedings.
Conciliators will seek to resolve disputes by agreement of the parties. Assessors will examine and report on domestic building works if requested to do so by the Chief Dispute Resolution Officer.
Interestingly, where the parties are unable to resolve disputes at conciliation, the Chief Dispute Resolution Officer has the power to issue a ‘dispute resolution order’. These orders can variously require:
- The rectification of defective or incomplete work;
- Payment into a specially established trust fund pending completion of rectification work;
- Payment to the builder; and
- The builder to meet the cost of rectification by an alternative builder where it would be unreasonable to allow the original builder to attempt rectification, due to the poor quality of work.
If a party refuses to participate in conciliation, or refuses to participate in good faith, the dispute can still be conciliated. If an assessor is appointed and a dispute resolution order is issued, the party that does not participate in good faith will be liable for the costs of the preparation of the report, and if they apply to VCAT for a review of the order and are unsuccessful, costs will be awarded against them.
A party who is the subject of a dispute resolution order can seek review of that order in VCAT. However, VCAT has the power to make a costs order against the party who seeks review, if VCAT finds that the application is frivolous or lacking in substance, or if the outcome is no better than that achieved through conciliation or the dispute resolution order. Furthermore, the breach of a dispute resolution order by a builder will be grounds for disciplinary action.
If a dispute resolution order is not complied with, the innocent party (whether builder or consumer) is entitled to terminate the contract and seek compensation in VCAT.
Implications
Although the mandatory conciliation of domestic building disputes is not unique to Victoria (a similar framework exists in Queensland), certain aspects of the framework are.
It will be interesting to see how often dispute resolution orders are issued by the Chief Dispute Resolution Officer: such orders, used judiciously, have the potential to bring disputes to a speedy conclusion, to the mutual benefit of consumers and the building and construction industry.
Our expectation is that the conciliation process will reduce the caseload of VCAT, which has sometimes struggled to cope with the burden of conciliating and determining a large number of domestic building disputes.
We anticipate that professional indemnity and contract works insurers may wish to have legal representation at conciliation conferences. Based on the practice adopted by the Accident Compensation Conciliation Service, it is likely that legal representation will be possible if all parties agree.
The Victorian Government has previously indicated that Part 2 of the Act, which contains the new dispute resolution framework, will commence in early 2017. Accordingly, these changes should be just around the corner.
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