Recent legislation and a Court decision which may impact building professionals and their insurers.

In June 2020, the NSW government enacted the Design & Building Practitioners Act 2020 (NSW) (Act).  Section 37 of the Act extends the duty of care owed by builders to subsequent purchasers. We note that from 1 July 2021, the Act requires that registered practitioners, which includes design practitioners, professional engineers and building practitioners, issue compliance declarations.  The declarations will include statements that the design complies with the Building Code of Australia and/or other regulatory requirements and the building work is in accordance with the design. There are significant penalties under the Act if the declaration is made by an unregistered practitioner or a false and misleading declaration is made.

A recent judgment of the NSW Court of Appeal in Mistrina Pty Ltd v Australian Consulting Engineers Pty Ltd [2020] NSWCA 223 examined the structural engineering compliance certificate certifying that the design of the raft slabs complied with the Building Code of Australia. The Court held that the engineer was liable for damages for loss of profits which were in excess of the actual rectification costs.

In September 2020, the Victoria government introduced the Cladding Safety Victoria Bill 2020 (Bill). The Bill increases the current time limit to pursue legal action from 10 years to 12 years. The extension of time will give owners more time to pursue “cladding building action” against builders and building professionals and allows the government to recover costs associated with the government cladding rectification programme (Cladding Safety Victoria). A “cladding building action” means “a building action in connection with or otherwise related to a product or material that is, or could be, a non-compliant or non-conforming external wall cladding product”. The extension of time will only apply where a “cladding building action” is statute barred between 16 July 2019 and 12 months after the new provision comes into effect.

In summary, the Bill:

• Establishes Cladding Safety Victoria (CSV) as a separate entity from the Victorian Building Authority;
• Enables CSV to prioritise buildings for cladding rectification and the amount of government financial assistance to fund the rectification work;
• Provides the regulations giving powers to govern the functions of CSV;
• Amends the Building Act 1993 (Vic) to extend the limitation period for cladding building actions from 10 to 12 years, after the date of issue of the Occupancy Permit;
• Provides the State government with subrogated rights to pursue relevant building practitioners to recover rectification funds approved by CSV; and
• Introduces an additional building permit levy to fund cladding rectification work.

The Bill is yet to be enacted but is anticipated to come into operation by 1 July 2021.

The recent Court decision and new legislation may result in increased exposure to claims for building professionals and their insurers.

Karen Wong
Claims Manager