Australia is seeing sweeping state-based legislative reform intended to regain public confidence in the building and construction industry. For example, in NSW, the Design and Building Practitioners Act 2020 will have a significant effect on establishing the liability of design and building practitioners within the construction industry and how they are insured. In contrast, the Victorian Government has established the Building Reform Expert Panel to lead its review of the building legislative and regulatory system, with changes to occur over two years and ultimately resulting in a new Building Act in 2023.
Wotton + Kearney’s national team of Construction PI specialists, led by Nick Lux , Andrew Brennan, Robert Finnigan, Andrew Moore, Charu Stevenson, Bill Conor and Luke Vincent is closely following this landmark reform and will provide continuing coverage and commentary on the insurance and state-based impacts through a series of updates and resources which you can find on this page. They will also comment on developments, updates and trends affecting the building and construction industry more generally.
Frameworks and timelines:
The expanded scope of building practitioners’ duty of care
Boulus Constructions Pty Ltd v Warrumbungle Shire Council (No 2)  NSWSC 1368
When the Design and Building Practitioners Act 2020 (NSW) (DBP Act) came into effect, section 37 imposed a new duty on building practitioners and persons who carry out construction work to exercise reasonable care to avoid economic loss to building owners, including subsequent owners.
The scope of the duty continues to expand in the wake of several judgments. The latest, Boulus, confirms that the new duty applies to directors and employees of building companies.
Partners Robert Finnigan and Dean Pinto and senior associate Aaron Bolton explain why this decision raises issues for professional indemnity, management liability and D&O insurers that have policies that could, in certain circumstances, respond to section 37 claims against directors.
Read in full here.
State legislation and construction cost updates (August 2022)
Victoria – Code of Practice for Building, Construction and Works
Introduced in March 2022, the Code of Practice for Building, Construction and Works regulates the conduct of all works that affect public space and was put in place to for the purposes of seeking to ensure the safety and amenity of the public. The Code aims to support the objectives of the Activities Local Law 2019 which is intended to provide for the ongoing health, security and welfare of Melbourne City’s residents, business and environment. The Code applies to all permits issued from 17 March 2022, however, permits issued prior to that date will still have to comply with certain requirements set out in the Code. The Municipal Council can conduct inspections or require documentation to determine compliance with the Code at any time. Penalties apply if there is a failure to comply with the Code and continued failure to comply could potentially lead to suspension or cancellation of any permits and approvals. Read in full here: https://bit.ly/3Kq7EzC
Construction costs – relief in 2023?
Global consultancy firm RLB forecasts the rate at which construction costs are rising will ease due to curtailing demand, likely caused by inflationary pressures. In particular, RLB cites, by way of example, a significant drop in the growth of construction cost in the Gold Coast from 11.5 per cent to 5.5 percent and a drop from 10.5 percent to 5.1 per cent in Brisbane in 2023. Escalating construction costs have contributed to a spate of building company collapses – the latest casualty appears to be Besse Construction in Queensland. Read in full here: https://bit.ly/3Tn3YCC
Western Australia – Security of payment reform: Stage 1 has commenced
On 1 August 2022, Stage 1 of the WA State Government’s 3-year Action Plan for Reform for the implementation of the Building and Construction Industry (Security of Payment) Act 2021 commenced. The Act includes new rights to payment under construction contracts, as well as means for contractors to recover payments owed through a process of rapid adjudication. All construction contracts entered into after 1 August 2022 will need to take account of these changes, particularly the Stage 1 requirements. Stage 2 of the Action Plan is anticipated to commence on 1 February 2023 and Stage 3 on 1 February 2024. Read in full here: https://bit.ly/3pT7OWQ
Release of the 2022 National Construction Code (July 2022)
The Australian Building Codes Board (ABCB) has released the first stage of the 2022 National Construction Code (NCC). This first release includes all three volumes, two new referenced standards and most of the amendments to the NCC (minus the energy efficiency and condensation management provisions which are still being finalised).
The states and territories have agreed to delay the adoption of the 2022 NCC until 1 September 2022 as a result of disruptions to the construction industry caused by the COVID-19 pandemic. The adoption of the NCC 2022 in September 2022 will be accompanied by transition periods for some requirements, and each state and territory will bring the 2022 NCC into effect in their own time and manner using their own regulatory regimes (including choosing to expand, remove or vary the NCC).
The second release of the NCC 2022 is scheduled for August 2022 and will include the complete final version of the NCC (including the energy efficiency and condensation management provisions, and any state and territory variations and advice on any transition periods).
Read in full here.
Major Changes to the NCC 2022
The four major changes to the NCC are:
- New liveable housing requirements for Class 1a building (houses and townhouses) and Class 2 sole-occupancy units (individual apartments) which will increase the stock of accessible housing.
- A new structure and clause referencing system has been used to create better consistency across all volumes.
- A significant format change to the Housing Provisions Standard to align the structure of the volumes.
- A new requirement for lead free plumbing products to provide long term health improvements for all Australians.
Other changes include:
- new DTS provisions for early childhood centres, waterproofing of wet areas and weatherproofing of external walls;
- a number of amendments to the fire safety of external walls, amendments to falls for floor wastes in bathrooms and laundries;
- minor amendments to the number of required exits;
- new performance requirements for water efficiency, sanitary plumbing and drainage pipe sizing, heated water temperature delivery and drinking water pressure limits;
- new provisions for on-site wastewater management and a new Verification Method for sanitary plumbing and drainage pipe sizing; and
- the adoption of the latest additions of several new Australian Standards as part of new DTS provisions.
Read in full here.
Model guidance for consistent national construction reforms (May 2022)
The ABCB has issued an Implementation Report and model guidance documents that address most of the recommendations contained in the 2018 Building Confidence Report. While significant consumer and industry benefits associated with consistent adoption of the model guidance have been identified, the decision to implement the model guidance ultimately rests with state and territory governments. https://bit.ly/3Lmv5Zq
COVID-19 construction pause (October 2021)
Victoria’s construction industry warns of long term impact and build-time delays due to two-week shutdown – 29 September 2021
The two week construction ban in Melbourne and regional Victorian areas subject to lockdown restrictions has placed greater strain on the construction industry with the associated costs and delays expected to be felt by construction businesses for some time to come. Read in full here: https://bit.ly/3p3Gbel
Developers slam Victoria’s construction ban – 23 September
The two week construction ban has been estimated to have cost the Victorian economy between $2 billion and $4 billion. The strain is being felt by commercial and domestic builders alike due to delays to building inspections and COVID compliance requirements. Read in full here: https://bit.ly/3CpEmfO
‘We’ve set higher standards’: Victoria construction industry returns under strict Covid rules – 5 October 2021
Although the two week ban has now been eased, restrictions remain in place as to the number of staff permitted on domestic and commercial construction sites. Construction sites will now be placed under further scrutiny and must have a designated COVID marshal at all times the site is operational. Read in full here: https://bit.ly/3FRpcBR
Construction defects – builders winding up during COVID, leaving owners with defective buildings (August 2021)
Building supply shortages – 17 May 2021
2021 has seen a construction boom fuelled by people investing money improving their homes whilst overseas holidays remain out of reach. However, increased demand for building supplies and the loss of local timber due to the 2020 bushfires has meant that builders have not been able to reap the full rewards with many facing unforeseen increased material costs and significant delays in completing works. Read in full here.
Builders going bust despite boom due to material shortages – 18 June 2021
Despite Australia being in the midst of a construction boom spurred by people investing in home renovations instead of overseas holidays, builders are losing money due to supply shortages causing material price increases and costs associated with delays to construction timeframes. Read in full here: https://bit.ly/3Bq0x4j
Sweeping changes to the National Construction Code in 2022
NCC 2022 will be the next and arguably the most significant amendment to the national building code since its inception in terms of the volume of changes and the scope and impact of the proposed reforms, particularly for houses and low-rise apartments. Read in full here: https://bit.ly/3jsWeiw
HIA predicts Australia’s construction boom will hit a wall by mid-2022 – 23 August 2021
Despite the strong outlook for the next twelve months, without a return of demand for new housing from overseas migration, there will be a decline in new home commencements over the next few years. From mid-2022, adverse impacts will emerge from two years of lost population growth, higher building costs and a shadow of demand created by the HomeBuilder grant initiative.
Cladding compensation period extended for building owners
Building owners will be given more time to commence legal proceedings against builders responsible for installing combustible cladding with new legislation recently being introduced by the Victorian government increasing the time limit for commencing a claim from the previously extended 12 years to 15 years. The legislation will extend the time in which cladding claims can be brought to 15 years where the limit for such claims would have been reached between 16 July 2019 and 1 December 2023. Read in full here: https://bit.ly/3ltTRvJ
Technology and digitisation in construction (July 2021)
Technology can help in COVID Economic Recovery – 22 April 2021
Post COVID-19, Australia has a “massive pipeline of infrastructure work”. Technology may play an important role in both the planning of projects and determining which projects should proceed. Read in full here: https://bit.ly/2TdgIlg
5 technologies helping to maximise infrastructure investment in 2021 – 24 May 2021
The federal government has announced that it is investing $110 billion into public assets as part hiaof its 10 year infrastructure program. Following this investment, this article considers the 5 technologies the government is already “leveraging” to “deliver better infrastructure”. Read in full here: https://bit.ly/3wIhnbP
Easier access to strata information
As part of its digital reform, the NSW Government is considering feedback following the launch of the Strata Portal (one part of the broader Strata Hub). The aim is to then launch the Strata Hub by late 2021. Read in full here: https://bit.ly/2U18Nbe
Construct NSW Update Report – February 2021
The Office of the NSW Building Commissioner has advanced its digital reform initiatives as referred to in our October 2020 publication. This report outlines which platforms have been finalised, and the status of the remaining initiatives. Read in full here: https://bit.ly/3xDxkS0
Legislative reform of the building and construction industry in Victoria (May 2021)
Victoria’s establishment of Building Reform Expert Panel – April 2021
The Victorian Government has established a Building Reform Expert Panel and is currently seeking input from the public in order to introduce regulatory and legislative reform. The changes are to occur over two years and will ultimately result in a new Building Act in 2023. Public submissions close on 19 May 2021. Read in full here: https://bit.ly/33wvdls
Building reform discussion paper released – 26 April 2021
The Australian Institute of Architects submissions to the Victorian Building Reform Expert Panel will respond to whether separately regulating design practitioners and architects, “fragments regulatory oversight of persons involved in building design”. Read in full here: https://bit.ly/3uGi45v
Victoria building consultation flags insurance reform – 12 April 2021
The Building Reform Expert Panel is considering the introduction of project-based insurance as it can provide a “single, first resort, insurance instrument that unites the interests and strengthens the accountability of all parties involved in a single building project..”. Read in full here: https://bit.ly/2SIfldJ
Unprecedented opportunity to fix our building regulatory system – 8 April 2021
Victoria’s Building Reform Expert Panel is seeking submissions on the issue of the conflict of interest where a developer appoints their own private building surveyor. The MAV’s reform model would involve the VBA assigning private building surveyors to complete inspections. Read in here.
W+K articles and updates:
NSW: The next phase of building reform in NSW begins – 24 November 2022
The next phase of building reform in NSW has commenced with the introduction of four proposed changes to the legislative framework. We explain how the proposed reforms, if enacted, will bring further significant change to the NSW building industry and ultimately provide transparency and certainty for insurers. Read in full.
NSW: Latent Defects Insurance likely to be a game-changer in NSW – 15 November 2022
A new insurance product, Latent Defects Insurance, is set to transform the insurance framework for high-rise residential buildings – especially if it becomes mandatory in NSW. We explain how the potential changes are likely to strengthen insurers’ abilities to assess and price risk in the NSW construction industry. Read in full.
NSW: The expanded scope of building practitioners’ duty of care – 7 November 2022
The recent Boulos judgment raises important issues for professional indemnity, management liability and D&O insurers that have policies that could, in certain circumstances, respond to section 37 claims against directors. Read in full.
NSW: Cladding decision highlights need for plaintiff’s specific proof – 12 August 2022
The Supreme Court of NSW recently handed down a decision on a damages claim regarding building cladding. The Court found that the plaintiff had failed to demonstrate that cladding was combustible and that an ‘alternative solution’ could not be performed to make it comply with the Building Code of Australia. Read in full.
National: Rise and fall clauses could be another tool to hang on a constructor’s belt – 9 June 2022
With construction industry participants seeing an increase in costs, rise and fall clauses have been floated as a solution for easing current cost pressures. We explore this potential risk management tool for the industry and how it might be viewed by the insurance industry. Read in full.
NSW: Risk profile for construction professionals rises with new Supreme Court decision – 31 May 2022
The Supreme Court of NSW has handed down another decision that considers the scope of the duty arising under the DBPA and to whom it is owed. In Pafburn, the court established the duty is prima facie owed by those who are able to control how the construction work is carried out, even if they were not involved in the carrying out of the construction work itself. Read in full.
NSW: NSW Supreme Court clarifies scope of statutory duty of care for construction industry – 23 May 2022
On 19 May 2022, the Supreme Court of NSW handed down the first substantive decision on the application of the statutory duty of care introduced by Part 4 of the Design and Building Practitioners Act 2020 (NSW) arguing that the statutory duty of care extends to ‘building work’ on any building or structure, including any part of a building or structure. Read in full.
National: Model guidance for consistent national construction reforms – 19 May 2022
The ABCB has issued an Implementation Report and model guidance documents that address most of the recommendations contained in the 2018 Building Confidence Report. While significant consumer and industry benefits associated with consistent adoption of the model guidance have been identified, the decision to implement the model guidance ultimately rests with state and territory governments. Read in full.
VIC: Cladding appeal decision provides further clarity about the ‘attachment’ exception – 25 October 2021
A recent decision to uphold a NCAT appeal decision has provided a useful judicial articulation of some of the relevant clauses from the Building Code of Australia regarding cladding compliance. The decision also provides further clarity about the ‘attachment’ exception which, in certain circumstances, permits the use of combustible cladding. Read in full.
Brokers: Legal developments in the building and construction industry – 10 October 2021
W+K Construction PI specialists Nick Lux and Robert Finnigan feature in the October issue of NIBA Insurance Adviser magazine providing an update on Australia’s building and construction industry reforms, including key regulatory and risk developments affecting the sector and their implications for insurance brokers. Read in full here.
VIC: Why the Lacrosse appeal raises new questions about professional indemnity risks – 31 March 2021
Following our summary of the Lacrosse appeal decision, W+K’s Construction PI team examine the key issues addressed by the Court, including liability apportionment, Building Code of Australia requirements and the use of the peer professional opinion defence. Read in full here.
VIC: Lacrosse appeal [largely] upholds initial landmark decision – 26 March 2021
The Victorian Court of Appeal handed down its much-anticipated judgment in the Lacrosse matter on 26 March, essentially upholding the trial judge’s findings in the landmark 2019 decision. W+K’s Construction PI team provide a summary of the findings. Read in full here.
NSW: Mandatory insurance requirements begin to take shape – 3 December 2020
The NSW Government released the Draft Design and Building Practitioners Regulation 2020 (NSW) for public consultation, which is designed to support an effective legislative framework for industry reform. W+K’s Construction PI team look at the implications for insureds, insurers and brokers. Read in full here.
NSW: Digital reform initiatives to reboot NSW building industry – 6 October 2020
The NSW Government is implementing building reforms with the aim of changing the culture and capability of the NSW building industry. Two key digital initiatives are designed to boost both compliance and long-term confidence. W+K’s Construction PI team look at how these changes will better inform insurers in assessing and pricing risk. Read in full here.
NSW: New RAB Act gives regulator real power to tackle construction defects – 31 July 2020
The NSW Government has introduced sweeping legislative changes that are intended to regain public confidence in the construction industry, including the Building Commissioner’s significant new powers designed to prevent developers from constructing defective buildings under The Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (NSW) (RAB Act). W+K’s Construction PI team look at the implications for insurers. Read in full here.
NSW: Compliance declarations – NSW’s new regime for construction professionals set to improve the industry’s risk profile – 21 July 2020
The NSW Government’s new compliance declaration regime requires building practitioners with reporting obligations to be registered and ‘adequately insured’. W+K’s Construction PI team discuss how the reforms will change the risk profile of the industry by better placing insurers to assess risk when underwriting construction professionals. Read in full here.
NSW: A new duty of care changes the liability landscape – the impact of the Design and Building Practitioners Bill 2020 – 9 June 2020
With the Design and Building Practitioners Bill 2020, the NSW Government has introduced sweeping legislative changes that are intended to regain public confidence in the construction industry. W+K’s Construction PI team look at these landmark legislative changes and the implications for insurers. Read in full here.
W+K national contacts:
For more information on any of these updates or to talk to us directly, please contact our National Construction PI team. Download team card.