8 Dec 2014

Since 7 June 2012, a new statutory regime has governed the process of certifying building designs and structures by building surveyors.  That regime appears in the Building Act 2011 and Building Regulations 2012.  The following themes emerge out of the new regime:

 

(a)  the need for building surveyors to compete for work in the marketplace;

(b)  reapportioning the risk of civil liability; and

(c)  balancing the private interests of building services contractors and owners of developed property and their neighbors with the public interest in sustainable and safe urban development.

 

A competitive market for building certification work

Under the new regime:

(a)  building surveyors employed by local governments have to compete for work; and

(b)  where the job has been given to a surveyor employed by local government (for example, on referral by a local council of an uncertified application under subsection 17(1) of the Building Act), it does not have to go to an employee of the referring council or of the council that governs the district where the applicant’s land is located.

 

Statutory apportionment of risk of civil liability

Some of the preconditions to issuing a certificate or permit by a permit authority are based on the proper performance by building surveyors of their functions under the Act.  This might have been supposed to expose building surveyors to the risk of becoming liable whenever their error or omission occasions loss or damage, were it not for sections 143 and 144 of the Building Act.

 

Sections 143 and 144 of the Building Act: What has changed

Sections 143 and 144 have brought about these changes:

(a)  section 143 imposes an obligation of “good faith” on those engaged in activities under the Act;

(b)  the obligation applies to anyone who is acting in performance of a function, or purporting so to act, that is, acting in the belief (whether true or not) that he or she is performing a function under the Act (which would include building certification);

(c)  if a private building surveyor breaches the duty of good faith, they will no longer be protected from liability in tort (that is, for breaching any legal duty of care that arises independently of any contract);

(d)  under section 144:

(i)            a permit authority, in issuing a permit or certificate under the Act, is entitled to rely on the facts and opinions asserted in a building surveyor’s certificate; and

(ii)           a building surveyor, in issuing his or her certificate, is entitled to rely on a fact or opinion asserted in a technical specialist’s certificate.

 

Commentary on the new provisions

Duty of good faith

There is no one legal definition of “good faith” that applies uniformly in every case.  At a minimum, a duty of good faith requires a decision-maker to exercise independent judgment, taking into account all relevant facts and circumstances, and the interests of all parties concerned, rather than exclusively the interests of the applicant: Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NC & Ors [2005] VSCA 228, [28] per Buchanan JA.

 

Those who do not act in good faith when acting as private building surveyors lose the protections afforded under s143(1) from liability for any loss or damage thereby caused.  Together with the extended protection from liability of those who purport to perform a function under the Act, this means that private building surveyors are protected from liability in tort as long as they honestly believe that they are discharging their obligations under the Act, that is, if they perform their statutory functions faithfully and without fear or favour.  This proviso may have been inserted in response to the experience in the east of some building surveyors giving, or at least appearing to give, primacy to the financial interests of contractors or landowners in getting defective applications for building or occupancy permits “over the line” quickly.

 

Immunity from liability in tort

I have emphasised the words in tort because they are significant.  These words mean that the statute will only protect surveyors from liability for breach of a duty of care arising otherwise than under a contract.  Where a negligent act or omission breaches a duty that a surveyor owes under a contract with a builder or landowner, the Act will not protect the surveyor from liability for any loss or damage the surveyor causes by breaching that contract.  To avoid contractual liability, the surveyor will need to negotiate for an appropriate indemnity clause to be included in their service contract.

 

Shifting liability to technical specialists

Technical specialists are experts in a relevant field of learning or expertise.  In the building context, examples include structural engineers, geotechnical engineers and architects.

 

Where assessment of design or building compliance requires technical expertise, surveyors are relieved of any personal obligation to ensure the accuracy or soundness of underlying facts and opinions.  Such cases would be almost universal, as the erection even of simple structures (single dwellings, for example) at least requires soil classification and structural integrity checks.  In such cases, a building surveyor is entitled to rely on facts observed and opinions expressed by technical specialists (i.e. engineers and architects).

 

Significantly, engineers and architects, who already carry a higher standard of care as professionals, are afforded no protection from liability under the Act.  Nor are construction contractors (or “building services contractors” as they are now called), who may also be liable under the Building Services (Complaint Resolution and Administration) Act 2011 if their conduct (which may or may not amount to negligence) causes loss or damage.  Thus, the new regime effectively shifts the risk of civil liability for building defects away from building surveyors and Government (Local and State) and towards engineers and architects (who will be insured) and building contractors (who may or may not be insured).

 

This risk allocation matrix seems consistent with broader moves towards professionalisation of the construction industry in such a way as ultimately will allow it to become self-regulating.  This objective of professional self-regulation may be inferred, for example, from provisions in the Act which give each of the Building Commissioner, the Minister (and upon advice from the Minister, the Governor) and the State Administrative Tribunal, limited powers to legislate (i.e. to make new laws) in the interests of safety, health, amenity and sustainability (see, for example, sections 45 and 93).  These provisions seem purpose-built to allow a maturing “building profession” to decide for itself how its practices will adapt to scientific and technological advancements, with appropriate assistance from the public sector, and consistently with overarching principles of safe and sustainable urban development.

 

The statutory protection from liability in tort does not extend to permit authorities (although, where the permit authority is a Local Council, as it will be except in the case of public works, its employees and contractors are similarly protected under section 9.56 of the Local Government Act 1995).

 

However, bear in mind that:

(a)  permit authorities are otherwise relieved of any obligations with respect to the accuracy of any fact stated or the soundness of any opinion expressed in any certificate issued by a surveyor (see section 144 of the Building Act 2011); and

(b)  the Act requires permit authorities to do no more than:

(i)             check that each of the criteria for issuing a building permit under section 20 or a permit or certificate allowing occupancy or use of the structure under section 58 have been met;

(ii)           grant the application if they have; and

(iii)          refuse it otherwise.

 

Together, these provisions confer nothing more than a “rubber stamping” function on the permit authority.  There is no exercise of discretion or decision-making involved in this role.  On the contrary, the Act says that if all the prescribed criteria have been met ,the relevant permit or certificate must (not may) be issued. The Act does not otherwise empower the permit authority to issue any such permit or certificate.

 

It follows that:

(a)  if a permit authority simply does as the Act requires and “rubber stamps” a permit or certificate application in reliance on the surveyor’s certificate, it will escape liability under the Act for loss or damage caused by any error or omission in the certificate; but

(b)  if the permit authority decides to exceed the statutory requirement and check the surveyor’s certificate for errors or omissions, and it does so negligently, then it may have to pay compensation for its “misfeasance”.

 

So understood, the new regime, to the extent that it applies to government authorities, does not change the pre-existing law that if a public authority was empowered, but not required, to do an act or make a decision, then:

(a)  It could not be held liable to compensate anyone for loss or damage suffered because it did or decided nothing; but

(b)  It could be held liable for any loss or damage occasioned by its negligent act or decision.

 

Remember, though, that permit authorities are now, and are always likely to be, government agencies. This means they have a duty to serve the public.  It is easy to imagine instances where the public interest in safe and sustainable urban development will require Local Governments to work with building contractors and landowners to get a marginally defective permit application “over the line” rather than simply refusing it based on a strict demarcation of statutory roles and responsibilities.  To do this, without otherwise interfering with the performance of statutory functions by surveyors, contractors and technical specialists, is unlikely to expose a Local Government to any risk of liability in tort.

 

Under the Building Act 2011, private enterprise has been given the opportunity to compete for contracts to certify design and structural compliance, a job formerly reserved exclusively to building surveyors employed by local councils.  However, in doing so, the Act:

(a)  allows private building surveyors to keep enjoying the same immunities that public building surveyors have always enjoyed under section 9.56 of the Local Government Act 1995;

(b)  preserves the role of public building surveyors;

(c)  thereby places public and private surveyors on the same competitive footing; and

(d)  for the first time, exposes private and public surveyors to a risk that is common to all private service providers: that is, the risk of liability for breach of contract.

 

This, and the extension of existing protections from civil liability to Local Governments in their role as permit authorities, means that the risk of civil liability outside of contract lies where it has always lain: with building contractors and technical specialists.

 

However, a more fundamental shift may be observed in the social role of construction contractors and technical specialists under the new regime which I refer to as “professionalisation”.  The Act may be seen to accommodate this shift by providing a framework for incremental self-regulation by the industry/profession in a way that serves overarching objective of safe and sustainable urban development without the need for continuing legislative interference.

 

This is general information only, and does not constitute specific legal advice. If you would like further information in relation to this matter or other legal matters please contact our office on Freecall 1800 609 945 or email us now.

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