The Building Legislation Amendment (Consumer Protection) Act 2016 (Vic) introduced significant changes to the building industry, intended to enhance consumer protection through stricter regulation and enforcement provisions.
The first stages of reforms were actioned in July and September 2016.
This article explains the final phase of the reforms which commenced in July 2017 and which changed the way domestic building disputes are handled. The new processes aim to resolve disputes efficiently, inexpensively and without recourse to litigation.
How has domestic building dispute resolution changed?
Traditionally, parties involved in a building dispute had a choice in how the matter might be resolved. Most commonly, parties would apply directly to the Victorian Civil and Administrative Tribunal (VCAT). Alternatively, a building owner could complain to the Director of Consumer Affairs who would either refer the matter to conciliation or proceed to VCAT on behalf of the owner. A further option would be for that party to request the Victorian Building Authority to inspect the works in dispute and prepare a report for VCAT proceedings.
Alternative dispute resolution in building matters has traditionally been optional resulting in no adverse consequences for non-participation.
The reforms however make conciliation attempts mandatory before parties may progress to VCAT or Court proceedings to determine a domestic building dispute.
A first-stop shop for domestic building disputes
The reforms have appointed a Chief Dispute Resolution Officer (CDRO) to Domestic Building Dispute Resolution Victoria (DBDRV), an independent government agency established under the Domestic Building Contracts Act 1995 (Vic).
The CDRO has overall management for the dispute resolution service provided by DBDRV. With the support of dispute resolution officers (conciliators) and in-house technical assessors, the CDRO will assess the suitability of referrals, oversee conciliations and issue Dispute Resolution Orders (see below).
Dispute resolution is mandatory – apart from applications for injunctive relief, a party wishing to resolve a domestic building dispute must progress through the processes set out under the new regime.
Ideally, DBDRV is equipped to conciliate complex matters involving multi-parties without resort to the notoriously-lengthy and expensive processes involved with litigation.
Parties involved in a domestic building work dispute (building owners, builders, architects and subcontractors) can access the services provided through DBDRV for resolution of a ‘domestic building work matter’.
A ‘domestic building work matter’ is ‘any matter relating to a domestic building contract or the carrying out of domestic building work’ and includes an alleged:
- breach of warranty for a range of building and construction works including construction or removal of part or all of a dwelling, renovations, extensions and home repairs, landscaping and paving, swimming pool and spa works;
- failure to maintain the standard or quality of workmanship under a domestic building contract;
- failure to complete domestic building work in accordance with the time specified in a domestic building contract;
- failure to pay money for the provision of building work as detailed in a domestic building contract.
Generally, before referring a matter to DBDRV the parties must have taken reasonable steps to resolve the issues in dispute. This will usually require that the aggrieved party has notified the other party clearly (and preferably in writing) of the issue in dispute, given them an opportunity to respond to the complaint and advised them of the intention to refer the matter if it is not resolved.
The referral must be made within ten years of completion of the building works which is determined as the date an occupancy permit or certificate of final inspection issues or, if the completion date is uncertain, the date of the domestic building contract.
The conciliation process
Application is made by written referral by the aggrieved party or a party’s representative to the CDRO. The referral must identify the parties involved, the relevant domestic building contract, and particularise the matters in dispute.
The CDRO will assess the referral and, if relevant, refer the matter to a conciliation officer. If the CDRO assesses the referral as unsuitable for conciliation a Certificate of Conciliation is issued giving reasons why the dispute is not suitable for conciliation.
If the referral proceeds to conciliation, the parties are given notice of the conciliation conference which may be held face-to-face (for example, at the building site), by teleconference or other electronic means, or a combination of these.
Statements made by the parties during the conciliation are not admissible as evidence in subsequent VCAT or Court proceedings unless all parties agree. However, any written documentation from the conciliation officer to the parties to the dispute, or anything provided by an assessor appointed to assess building work, including any report produced by the assessor may be used in future evidence. Further, information or documents disclosed to determine whether to make a Dispute Resolution Order or certain disciplinary proceedings may be used.
If the parties fail to reach a solution at the conciliation the conciliation officer will issue a Certificate of Conciliation.
Dispute Resolution Orders
The CDRO has broad powers and may, after receiving a referral, issue a Dispute Resolution Order (DRO) if satisfied that the parties have not resolved one or more of the domestic building work matters.
A DRO is a binding order. The DRO may require a builder to rectify or complete building works, stop work for up to 30 days, or pay the reasonable costs for building work carried out by another builder. A DRO may require a home owner to pay for building services provided under the domestic building contract or to deposit funds into a DBDRV trust fund. A DRO may also conclude that the building work disputed is not defective nor incomplete.
Disputes may still be conciliated where a party does not participate – the result is likely an order against the non-participating party (or party who participated in bad faith) including an order for the costs of the assessor’s report.
Builders who breach a DRO may face disciplinary action.
During the dispute resolution process, assessors will be able to request information or assistance from third parties at a building site and order invasive or destructive testing of building works in dispute.
Parties will be able to appeal to VCAT or a Court but only after having participated in the prescribed processes administered through DBDRV. In this respect VCAT will be given additional powers to award costs against a party who has not participated in mandatory conciliation or who has not participated in good faith. A party whose application is frivolous or insubstantial may also face cost orders from VCAT.
The grounds for review of a DRO by VCAT include:
- the description of the alleged defective or incomplete building work is inaccurate;
- the due date for carrying out work is unreasonable;
- a requirement to take action or refrain from taking certain action is unreasonable.
The reforms at a glance
- Unless seeking injunctive relief, parties to a domestic building dispute must first take part in conciliation through DBDRV.
- Non-participation in conciliation or participating in bad faith may have negative implications in subsequent proceedings. A non-participating party may be ordered to pay the costs of the assessor’s report and, if appealing to VCAT may face costs orders.
- The CDRO and Assessors have broad powers and may issue a DRO requiring parties to fulfil certain obligations.
Conclusion
The reforms aim to provide a more efficient and cost-effective means of resolving disputes whilst minimising those that proceed to VCAT.
Builders should be aware of the new requirements for resolving domestic building disputes and review DBDRV processes to ensure they are familiar with the reforms.
If you or someone you know wants more information or needs help or advice, please contact us on (03) 9592 3356 or email office@citypacific.com.au.
