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10 May 2018

Major projects & construction 5 Minute Fix 10

By THE MAJOR PROJECTS AND CONSTRUCTION TEAM

Get your 5 Minute Fix of major projects and construction news. This issue: expert determination clauses, compliance and enforcement systems for the building and construction industry, changes to the Northern Australia Infrastructure Facility Investment Mandate, non-delegable duties of care in construction projects, and good news for infrastructure in the Victorian budget.  

Will your expert determination clause keep you out of court?

Expert determination is an increasingly popular method of dispute resolution; contrasted to litigation, it can be a more expedient and cost efficient process.  These benefits are unlikely to be enjoyed if the relevant dispute resolution clause is susceptible to competing interpretations.  Where the meaning of an expert determination clause is equivocal, parties may find themselves in court seeking to enforce the expert determination process, disputing the scope of the expert determination clause or challenging the finding of the expert.

Frank Bannon, Danielle Briers and Georgina Papworth analyse recent cases that illustrate the pitfalls that can be encountered in documenting an expert determination process

Building Confidence: Improving the effectiveness of compliance and enforcement systems for the building and construction industry across Australia

Mid last year the Building Ministers' Forum (BMF) commissioned an independent review of existing compliance and enforcement systems for the building and construction industry.  The results of that review were recently released in a report, "Building Confidence: Improving the effectiveness of compliance and enforcement systems for the building and construction industry across Australia", which identifies serious and widespread compliance failures in the sector and makes some 24 recommendations designed to address those weaknesses and implement a national best practice model.

The report's authors, Professor Peter Shergold AC and Ms Bronwyn Weir, focus on deficiencies in the implementation of the National Construction Code (NCC) and propose a comprehensive package of legislative reforms, improved regulatory practice and, more ambitiously, cultural change.  They recommend:

Recommendations 1 to 4 propose a "nationally consistent" approach to the registration of building practitioners, noting that:

  • despite fire safety systems being a critical component of commercial buildings, most jurisdictions do not register fire safety practitioners (similarly, most do not require fire system safety maintenance contractors to be registered); and
  • three jurisdictions do not require structural engineers to be registered, despite the reliance of multi-storey buildings on that occupation;

The report also recommends compulsory training and "continuing professional development" for building practitioners, including training specifically in relation to the NCC.

Recommendations 5 to 7 focus on the need to improve regulatory oversight, in particular noting a "very high level of self-certification of the design and construction of commercial buildings";

Recommendation 8 proposes requiring developers, architects, builders and other participants to engage with fire authorities as part of the design process;

Recommendations 9 to 11 identify the tension between the statutory functions performed by private building surveyors and their commercial relationship with designers, owners and builders, and propose minimum statutory controls to "mitigate conflicts of interest", including a code of conduct;

Recommendation 12 suggests that each jurisdiction establish a central database to collect and share building information and intelligence;

Recommendations 13 to 17 are directed to inadequacies in design documentation, relevantly documentation used to support the building approvals process. They propose requiring designers to prepare documentation that demonstrates compliance with the NCC, and that amended documentation be subject to review throughout a project.  The report suggests the latter proposal is of particular significance in the case of commercial buildings delivered under a design and construct model, where limited documentation at the outset lends itself to design development, substitution of products and so on;

Recommendations 18 to 19 propose more frequent and robust inspection regimes, including "greater oversight of the installation and certification of fire safety systems in commercial buildings";

Recommendation 20 is concerned with the availability of construction documentation post-completion, in particular for subsequent purchasers;

Recommendation 21 is concerned, importantly, with building product safety.  Noting that steps are already being taken in a number of jurisdictions to redress the use of unsafe building products, the report recommends that the BMF agree "its position on the establishment of a compulsory product certification system for high-risk building products", in particular after referring to concerns with the CodeMark certification system; and

Recommendations 22 to 24 propose measures for implementing the foregoing recommendations over a three year period.

The BMF has indicated its in-principle support for the report, and will consider its findings and recommendations, and any resultant actions, in detail at the next BMF meeting. 

The following points of interest also emerge from a statement issued by the BMF:

  • in view of Ministerial support for preventing the use of potentially hazardous aluminium cladding, consultation with industry will be undertaken during May and June 2018; 
  • Ministers have requested that SOG "report on existing responsibilities of parties to meet the cost of rectification of non-compliant use of combustible cladding and remedies"; and
  • the BMF was briefed by Mr John Murray AM on the national "Review of Security of Payment Laws: Building Trust and Harmony".  The recommendations the subject of that review are to be considered by the States, Territories and the Commonwealth. 

Changes to the Northern Australia Infrastructure Facility Investment Mandate

On 18 April 2018, the Minister for Northern Australia, Matthew Canavan, announced that changes would be made with respect to key elements of the Northern Australia Infrastructure Facility (NAIF) Investment Mandate to increase its flexibility and improve its potential to support projects that deliver more jobs and economic opportunities to Northern Australia.

The changes are in response to the recommendations made in the final report of the independent expert review of NAIF which was provided to the Government in January 2018. The proposed changes include:

  • removing the 50% limit on NAIF finance;
  • removing the mandatory eligibility criteria for project proponents to demonstrate that financial assistance is necessary to enable the Project to proceed, or to proceed much earlier than it would otherwise to be eligible for financial assistance; and
  • broadening the definition of "economic infrastructure". 

Learn about the recommendations and the key changes proposed to the NAIF Mandate from Margaret Michaels and Nicole Besgrove here

When a non-delegable duty of care could arise in your construction projects

The New South Wales Supreme Court recently had cause to consider the circumstances in which a non-delegable duty of care might arise in a construction project.  The Court's decision is illustrative of both the doctrinal uncertainty that has attended this evolving concept, and the more stringent threshold that needs to be satisfied in order for the duty to be owed. Learn more about the Bettergrow v Transgrid case here

Infrastructure a winner in the 2018/2019 Victorian budget

Ahead of the Commonwealth budget, the Victorian Treasurer released the 2018/2019 Victorian budget on 1 May 2018.

The Budget allocates a record $13.7 billion to state infrastructure spending, with notable winners being:

  • roads: including $2.2 billion to upgrade 13 arterial roads across north and southeast suburbs, $941 million to regional roads and $110 million for further planning works for the North East Link, which has also been a winner in the Federal Budget; 
  • rail: including $572 million to upgrade the Cranbourne, Pakenham and Sunbury train lines and $50 million for planning fast rail to Geelong;
  • hospitals: including $115 million to expand the Wonthaggi Hospital and $50 million to upgrade rural and regional health infrastructure;
  • schools: including $353.2 million to build 12 new schools, add facilities to seven others already under construction and planning and $180.8 million to build, plan and upgrade 60 regional schools; and
  • sporting facilities: including $225 million to redevelop Etihad Stadium and $241.6 million to upgrade sports facilities at suburban grounds, local clubs and high-performance centres. 

 The Budget also includes an allocation of $25 million in funding to facilitate the inspection of buildings for dangerous and combustible materials and prosecute non-compliant individuals and organisations.

Pink batts class action commences against the Commonwealth

Over 140 businesses have joined a class action seeking $150 million in damages from the Commonwealth Government for losses suffered when the Home Insulation Program was shut down in 2010 due to safety reasons.

The Program aimed to achieve an ambitious fifteen-fold increase in the number of insulation installations into Australian houses per year, which equated to more than annual number of installations prior to the implementation of the Program being carried out each month under the Program.

The class action follows the 2014 Royal Commission into the matters arising from the development and implementation of the Program, notably the deaths, injuries and impacts on business involved in the Program. The Royal Commission concluded that the deaths would not have occurred had the Program been properly designed and implemented. 

The trial has commenced before Justice Dixon in the Supreme Court of Victoria and is scheduled to conclude this month. 

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.