NCC 2019 Amendment 1: Changes starting on 1 July 2020

/in

In response to the recommendations of the Shergold Wier Building Confidence Report, the Australian Building Codes Board (ABCB) and the Building Ministers’ Forum have undertaken an out of cycle amendment to the National Construction Code (NCC). While the NCC was not due for review until 2022, the amendment known as “NCC 2019 Amendment 1” will be adopted by all Australian jurisdictions on 1 July 2020.

The NCC is a performance-based code containing technical standards for the design, construction and performance of buildings as well as for plumbing work and drainage systems. It is published and maintained by the ABCB and adopted by each Australian jurisdiction through its own legislation. For example, in NSW the NCC is given effect by the Environmental Planning and Assessment Act 1979 (NSW), the Plumbing and Drainage Act 2011 (NSW) and subordinate legislation.

The aim of the NCC is to create a uniform set of technical standards that apply to all Australian jurisdictions. However, as identified in the Shergold Wier Building Confidence Report, there have been a number of systematic issues with the implementation and enforcement of the NCC which has prompted NCC 2019 Amendment 1.

What will change?

Following a period of key stakeholder consultation last year, NCC 2019 Amendment 1 will introduce the following changes:

  • a new provision regarding egress from early childhood centres (NCC Volume One);
  • clarification of the concession that permits the use of timber framing for low-rise Class 2 and 3 buildings (NCC Volume One);
  • clarification that anti-ponding board requirements only apply to roofs where sarking is installed (NCC Volume Two);
  • an update to the Governing Requirements for all Volumes to require labelling of aluminium composite panels in accordance with SA Technical Specification 5344; and
  • correction of minor errors, including the correction of typographical errors and errors in diagrams.

In addition to the above, the ABCB announced last month that NCC 2019 Amendment 1 will also include a provision mandating the process for developing Performance Solutions. This process is based on the ABCB’s existing Development of Performance Solution Guideline and requires that the process for documenting Performance Solutions be commensurate with the complexity and risk of the design.

Unlike the other amendments, this amendment will not commence until 1 July 2021. However, as the process is included in NCC 2019 Amendment 1 there is plenty of time for industry participants to prepare necessary documentation to encompass the process for Performance Solutions prior to the amendment taking effect next year.

Other changes expected

It was also proposed that NCC 2019 Amendment 1 would include the new defined term of “building complexity”. The draft definition proposes a risk-based system from levels 0 to 5 for classifying complex buildings, which assists to identify buildings where additional regulatory oversight is needed during the design, construction and certification processes.

 

The ABCB announced last month that this new definition would not be included in NCC 2019 Amendment 1, however it has been published on their website with a six month consultation period for comments and feedback.

A copy of the preview of NCC 2019 Amendment 1 is available on the ABCB website via the NCC Suite.

If you or someone you may know is in need of advice regarding NCC 2019 Amendment 1 or the NCC generally, please contact our office by phoning (02) 9248 3450 or by email at info@bradburylegal.com.au.

A Downer of a decision: The importance of articulating adjudication submissions

/in

In Diona Pty Ltd v Downer EDI Works Pty Ltd [2020] NSWSC 480 (Diona), the Supreme Court considered an application to set aside an Adjudicator’s Determination for failure to consider the terms of the contract as required by s 22(2)(b) of the Building and Construction Industry Security of Payment Act 1999 (the SOP Act).

Key takeaway:

  • It is important to ensure that adjudication submissions clearly articulate all relevant arguments and contractual provisions. Unclear, poorly framed or ambiguous submissions can be costly.
  • An adjudicator’s decision will not be declared void simply because it contains what one party considers to be an error or failure by the adjudicator to expressly address all arguments made in parties’ submissions.
  • Lawyers can be useful to assist in preparing an adjudication application and response. Having prepared and responded to numerous security of payment claims, the lawyers at Bradbury Legal are experts at ensuring your arguments are clearly articulated.

 

Background

Diona Pty Ltd (Diona) entered into a subcontract with Downer EDI Works Pty Ltd (Downer), for Downer to provide works in relation to safety upgrades on the Great Western Highway, Blackheath. Downer proceeded to adjudication on a payment claim under the SOP Act. On 16 April 2020, the relevant Adjudicator determined that Downer was entitled to a progress payment of $430,990.13 (Determination).

Diona made an application to the Supreme Court, seeking a declaration that the Determination was void and an injunction preventing Downer from requesting an adjudication certificate or filing the adjudication certificate as a judgment debt. Diona contended that the Adjudicator had incorrectly awarded a set off claim by Downer, in response to Diona’s liquidated damages claim, in the amount of $30,000 on account of two extension of time claims (EOT Claims).

Diona argued that the Adjudicator had not fulfilled the requirements of s 22(2)(b) of the SOP Act because the Adjudicator had failed to give any reference to, or consideration of, Diona’s contention in its adjudication response submissions that Downer was not entitled to these extensions of time, due to the operation of a time bar in the contract.

 

Did the Adjudicator consider the time bars?

The central question was whether the Adjudicator considered the provisions of the contract. Under section 22(2)(b) SOP Act, an adjudicator must consider the provisions of the construction contract.

To determine if the Adjudicator did consider the contractual provisions, especially those containing the time bar, the Court looked at the submissions made by both parties and the Adjudicator’s determination.

The Court noted that Downer had ‘devoted a number of pages to its contentions concerning extension of time and, in particular, its asserted entitlement to EOT 18 and EOT 21’. This was contrasted with Diona’s submissions, the Court found did not properly engage with Downer’s EOT Claims. Diona’s submissions stated:

‘Determinations of claims for…extension of time…by Diona are final and cannot be disturbed except by raising a Claim under the Contract, see relevant clauses of the Subcontract.’

The Court highlighted a part of the Adjudicator’s reasons which stated:

‘The Act at section 22(2)(b) requires the adjudicator to consider the provisions of the construction contract when making the determination’

Having regard to the Adjudicator’s express reference to s 22(2)(b) of the SOP Act, the Court stated that there were several reasons why the Adjudicator did not refer to the dispute clause in the Determination. Firstly, the Adjudicator may have felt that Diona did not properly articulate and develop the time bar argument. Alternatively, the Adjudicator may have misunderstood the submissions. The Court concluded that:

‘The Adjudicator may have come to the wrong decision about Dower’s entitlement to EOT 18 and EOT 21. But that, without more, is not a basis to set aside the set aside the determination.’

The argument that Diona sought to raise, while potentially valid, was not properly articulated. Therefore, it could not be inferred that the Adjudicator had failed to consider the provisions of the subcontract as required by s 22(2)(b) of the SOP Act.

 

So what?

The significance of this case is that it shows that what appear to be errors or failures to consider an argument by an adjudicator will not always result in a basis to set aside the adjudicator’s determination. The adjudicator’s decision can be rough and ready, provided the adjudicator makes their decision in accordance with the SOP Act. Payments made under SOP Act are on account only and may be determined on a final basis at a later stage.

 

A tale of two Acts

/in

Last week the NSW Parliament passed two significant pieces of legislation for the construction industry. The first, passed on Tuesday 3 June 2020, was the Design and Building Practitioners Bill 2019 (at the time of writing, awaiting assent). The second, passed on 4 June 2020, was the Residential Apartment Buildings (Compliance and Enforcement Powers) Bill 2020 (which will commence on 1 September 2020).

Design and Building Practitioners Act 2020 (the DBP Act)

The DBP Act sets up a legislative regime which regulates design practitioners who provide designs for certain types of building works.

The DBP Act introduces a number of new regulatory provisions in relation to:

  • obligations of design practitioners, principal design practitioners and building practitioners;
  • restrictions on carrying out of professional engineering work and specialist work;
  • introduction of a statutory duty of care in favour of owners corporations and associations; and
  • registration, disciplinary action, investigations and enforcement decisions in relation to design practitioners

Important definitions:

The Act introduces several new terms into the law in order to set up the regulatory framework. The most notable definitions are set out below:

Building element means:

  • fire safety systems for a building within the meaning of the Building Code of Australia;
  • waterproofing;
  • an internal or external load-bearing component of a building that is essential to the stability of the building or a part of it;
  • a component of a building that is part of the building enclosure;
  • those aspects of the mechanical, plumbing and electrical services for a building that are required to achieve compliance with the Building Code of Australia;
  • other things prescribed by the regulations.

Design compliance declaration means a declaration as to whether or not:

  • a regulated design prepared for building work complies with the requirements of the Building Code of Australia;
  • the design complies with other applicable requirements prescribed by the regulations;
  • other standards, codes or requirements have been applied in preparing the design.

Essentially, the design compliance declaration confirms that the design practitioner has complied their obligations at law and under contract.

Regulated designs means:

  • a design that is prepared for a building element for building work;
  • a design that is prepared for a performance solution for building work (including a building element); or
  • any other design of a class prescribed by the regulations that is prepared for building work.

Being an incredibly broad definition means that anyone that provides design services, such as engineers, architects and other design consultants, will likely be covered by the DBP Act and therefore subject to its requirements.

Compliance declarations

The DBP Act requires a registered design practitioner and principal design practitioners to provide a compliance declaration to a person if:

  • the practitioner provides the person with a regulated design prepared by the practitioner; and
  • the design is in a form suitable for use by that person or another person in connection with building work.

Failure to comply with the compliance declaration provisions by registered design practitioners can result in fines of up to $165,000 for corporations and $55,000 for other persons. However, if a person makes a design compliance declaration that the person knows to be false or misleading, they could face a fine of up to $220,000, two years imprisonment, or both.

Duty of Care

The DBP Act imposes a duty of care on persons who carry out construction work to exercise reasonable care to avoid economic loss caused by defects:

  • in or related to a building for which the work is done; and
  • arising from the construction work.

The legislation states that this duty of care is owed to each owner of the land that the construction work is carried out. The duty of care also owed to all subsequent owners of the land.

The consequence of this provision is that builders and developers may end up having a duty of care in respect of defects for up to 6 years from the date that the loss was suffered. Builders will also want to consider these potential liabilities in conjunction with the 10 year limitation period for defective building work under the Environmental Protection and Assessment Act. The 10 year period for defective building work commences from the date of completion.

Other things to note with the statutory duty of care:

  • it cannot be delegated;
  • it cannot be contracted out of;
  • it operates in addition to the statutory warranties in the Home Building Act.

Practical considerations:

  • Like the Environmental Protection and Assessment Act, the DBP Act relies on the Regulations to give form and substance to many of the operative provisions of the DBP Act. At the time of writing, the Regulations for the DBP Act were not available for review.
  • Design professionals and head contractors will need to update their insurances to ensure they are compliant with the new provisions and duties of design professionals.
  • Builders and others that engage in construction work will now have a much greater duty of care to the land owners.

Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (the RAB Act)

The RAB Act is more restricted in its application, applying only to residential apartment buildings. The purpose of this legislation is to prevent developers from carrying out building work that might result in serious defects to building work or result in significant harm or loss to the public, current occupiers and future occupiers of the building.

Notification for intended completion

From 1 September 2020, developers will be required to provide the Secretary of the Department of Customer Service a notification that they expect completion to occur and an occupation certificate issued within 6 – 12 months from the application. The Secretary is given the ability to make orders prohibiting the issue of an occupation certificate in relation to residential apartment buildings and may prevent the registration of a strata plan for a strata scheme in certain circumstances.

Investigations

The RAB Act authorises the following people to carry out investigations:

  • Building Commission;
  • an employee of the Department of Customer Service;
  • investigators under the Fair Trading Act 1979;
  • a council investigation officer under the Environmental Planning and Assessment Act 1979; and
  • a person set out in the regulations of the RAB Act.

These authorised officers are given various information gathering powers including being able to request information or records from persons where it is connected with an authorised purpose. Further, an authorised officer is able to enter premises without the need for a search warrant and will be able to undertake actions including:

  • examine and inspect any thing;
  • take and remove samples of a thing;
  • take photographs or other recordings that the authorised officer considers necessary;
  • copy of any records; and
  • seize a thing that the authorised officer has reasonable grounds for believing is connected with an offence against the RAB Act or its regulations or a serious defect in a building.

These powers are extensive and serious. Builders and developers should be seek legal advice. The Secretary for Customer Service is also empowered to issue stop work orders and rectification orders. Failure to comply with these orders may result the Secretary taking any action necessary or convenient to ensure the order is complied with. The cost of these actions are then able to be recovered by the Secretary.

Practical considerations:

  • Developers are required to give at least 6 months’ notice (but no more than 12 months) before an application is made for an occupation certificate.
  • Developers and builders should seek legal advice as to their rights in respect of the RAB Act. The powers of the authorised officers are extensive and the consequences for breach are serious.

Summary

The DBP Act and the RAB Act represent a major regulatory change from the NSW Parliament which will have serious consequences for building professionals. While these legislative reforms are aimed at promoting confidence in the building industry in light of developments such as Mascot Towers and Opal Tower, they radically shift the current status quo for building professionals. Those who carry out building work, from consultants and designers to builders and developers should seek specific legal advice as to where they stand in respect to these new legislative regimes.

Case article – Brolton Group Pty Ltd v Hanson Construction Materials Pty Ltd

/in

In Brolton Group Pty Ltd v Hanson Construction Materials Pty Ltd [2020] NSWCA 63 (Brolton), the NSW Court of Appeal considered the jurisdictional and procedural fairness grounds of an adjudicator’s determination.

Background

Brolton was contracted by Hanson to build a quarry processing plant at Bass Point. The parties agreed on a guaranteed maximum price of $85 million (excluding GST) in which Brolton was entitled to claim monthly progress payments on the last Tuesday of each month. Hanson claimed liquidated damages and the contract was eventually terminated on 3 October 2018. In August 2019, Brolton served a payment claim on Hanson. The payment claim claimed work up to September 2018 as well as interest on unpaid amounts to August 2019. The adjudicator determined in favour of Brolton, issuing an adjudication amount of $2,877,052.75. Hanson challenged the decision in the Supreme Court, with the Supreme Court finding in favour of Hanson. This resulted in the appeal by Brolton to the NSW Court of Appeal.

The Court’s decision

Brolton raised two main grounds of appeal. The first and most pertinent issue, concerning jurisdiction, centred predominantly on the availability of a reference date on which Brolton could make its payment claim.
Importance of jurisdiction and the trouble of jurisdictional error
Under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act) section 22, an adjudicator is given the statutory authority to determine the amount of a progress payment, the date on which such amount became payable and the rate of interest payable on any such amount. The importance of section 22 is that it sets out the jurisdiction of an adjudicator. As the saying goes, with great power comes great responsibility. While the adjudicator is given the power to make these determinations, section 22 sets out the limited factors that the adjudicator can consider. These are the responsibility components of the adjudicator’s determination. Two of the relevant factors to consider in Brolton was the provisions of the SOP Act and the payment claim.
While adjudicators are given the power to make determinations, they can only do so in certain circumstances or if there are specified preconditions. In the legal world, this is called a ‘jurisdictional fact’. As Gleeson JA described in Brolton (at paragraph 28), the term jurisdictional fact is used to describe ‘any precondition which a statute requires to exist in order for the decision-maker to embark on the decision-making process’. Jurisdictional facts fall into two types:

1. The existence of an identified state of affairs; or
2. A state of satisfaction of the decision-maker as to an identified state of affairs.

A jurisdictional fact gives a decision-maker the power to make the decision. If it exists, then an adjudicator can make a determination. In this way, the reference date activates the adjudicators powers to make a determination under the SOP Act.
Under the SOP Act, a claimant is only able to make a payment claim when there is a reference date under the construction contract. Therefore, the existence of a reference date is a jurisdictional fact that falls into the first category. This is because the existence or non-existence of a reference date is objective and does not depend on whether the adjudicator is satisfied that a reference date exists. Where an adjudicator exercises its power, but the jurisdictional fact does not actually exist, the adjudicator has made a jurisdictional error..
Getting back to the case, in submitting its payment claim, Brolton claimed in its adjudication submissions that the reference dates for August 2018 and September 2018 were available for the payment claim. Hanson also contended that the September 2018 reference date was available for the progress payment. However, the adjudicator ‘went rogue’ and determined that the reference date was in fact 23 October 2018. There were a few issues with this. Firstly, the 23 October 2018 was not the last Tuesday of the month (which in fact was 30 October 2018). Secondly, the contract had been terminated on 3 October 2018, meaning no further reference dates arose. As the clause entitling Brolton to a progress payment did not continue beyond the termination of the contract, the adjudicator had made a jurisdictional error. The reference date the adjudicator relied on did not exist, and therefore the determination was void and the $2.8 million decision was overturned (as if it had never been made).

Although Hanson succeeded on the first issue, the Court was still minded to consider the second issue on appeal. The second issue concerned the procedural fairness of the adjudicator’s decision. Like jurisdiction, procedural fairness is a legal term that has important consequences for adjudication determinations. Procedural fairness is an aspect of natural justice, a foundational legal principal that sets the standards of how people are to exercise their authority. The concept of procedural fairness means the process in which a decision is made should be just. Procedural fairness requires that parties have the right or opportunity to have their case heard by the decision-maker. If there is a substantial denial of natural justice, the decision-maker’s determination will be void. In this case, the issue of procedural fairness arose because the adjudicator determined that the relevant reference date was a date not submitted by either party. Brolton argued that while procedural fairness was denied to the parties, it was immaterial and should not void the adjudicator’s decision. The Court found that the findings by the adjudicator were a material breach of procedural fairness and therefore there was a breach of natural justice.

Take-away points

While this article has discussed a few technical legal concepts, the main take away points from Brolton are that:
• A progress payment must be linked to a specific reference date. If an adjudicator incorrectly attributes a payment claim to a reference date which does not exist, the determination will be void.
• It is not enough that another reference date is available for the payment claim to be linked to. If the adjudicator goes rogue and determines a reference date not submitted by the parties, the decision will be void.
• Claimants should identify and make it abundantly clear the relevant reference date to which a payment claim relates and make submissions in the adjudication application as to what the relevant reference date is.
• Reference dates are essential for an adjudicator to make a determination. A failure by the adjudicator to appropriately determine a reference date can have dire consequences to claimants.
• Note: The recent amendments to the NSW SOP Act have eliminated the post-termination payment claim issue. Section 13(1C) now states that for construction contracts that have been terminated, a payment claim may be served on and from the date of termination. This change will only apply to contracts entered into after 21 October 2019.