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Residential Focus

03 December 2019

#Property & Real Estate

Marie-Louise Scarf

Published by Marie-Louise Scarf , Jeffery Shi

Residential Focus

Update on NSW regulatory response to the “cladding crisis” and recent case law developments

After the fires in Grenfell Tower, Lacrosse Tower and the Torch between 2014 and 2017, the use of potentially combustible cladding, in particular aluminium composite panels (ACP) containing polyethylene, has become a major crisis in the Australian construction industry. 

Each of the state governments has responded to the issue differently. 

This article summarises the measures adopted by the NSW Government to address the defective cladding already installed and prevent any further defective cladding from being installed, since the inter-agency Fire Safety and External Wall Cladding Taskforce was established on 16 June 2017, consisting of the representatives from various departments.

The most recent development was the issue of a notice of intention to issue an ACP ban by the NSW Commissioner for Fair Trading last week. However, we have on 4 December 2019 confirmed with Fair Trading that the notice was issued in error, and that there is no intention to issue a further or updated ACP ban.

Addressing existing problem

A range of measures have been introduced to identify existing affected buildings and to provide their owners of buildings which include or will include these types of products with pathways to address the problem:

  • creating a registration regime requiring owners of private buildings to identify whether their buildings are likely to be affected by non-conforming building products (NCBPs) and to prepare a building fire safety risk assessment
  • expanding the definition of 'major defect' under the Home Building Act 1989 (NSW) on 20 April 2018, to include the use of a banned building product, giving beneficiaries a 6 year statutory warranty
  • on 23 October 2019, introducing the Design and Building Practitioners Bill 2019 (NSW) (Bill) which will impose a statutory duty on any person who carries out construction work, owed to every owner of land on which construction work is carried out (including subsequent purchasers), to exercise reasonable care to avoid economic loss caused by defects arising from the construction work.  It is not yet known if the duty will operate retrospectively and which kinds of construction work/ building the duty will apply to.  The Legislative Assembly passed the Bill on 13 November 2019, and the Legislative Council (LC) is currently reviewing it.  We estimate the LC will vote on the Bill either later this year or early in the new year.

Preventing future problems

In terms of restricting the future use of these types of products, the following measures have been introduced:

  • on 15 August 2018, the Commissioner  imposed a building product use ban on ACP with a core comprised of greater than 30 per cent polyethylene by mass (Ban)
  • legislating that, from 1 September 2018, a building product is not compliant, even if it has a Codemark certification, if it is a product prohibited under the Building Products (Safety) Act 2017 and in November 2019 issuing a flowchart for the review of potentially combustible cladding
  • introducing a requirement that, from 22 October 2018, Fire and Rescue NSW approve all performance solutions for the use of combustible cladding, and that it be provided with a copy of all construction certificates issued for particular building types.
  • amending state planning policies for exempt development so that, from 31 August 2018, building approval is required for any work that includes the use of combustible cladding
  • in late June 2019, amending the Building Professional Regulation to provide that a professional indemnity policy required for the purpose of obtaining registration is permitted to include exclusions regarding the use of non-compliant cladding
  • on 28 November 2019 the Commissioner indicated her intention to reissue the existing Ban with additional explanatory notes about its intended application.

Recent case law developments

On 15 November 2019 the NSW Civil and Administrative Tribunal delivered judgment in the case of The Owners Strata Plan No 92888 v Taylor Construction Group Pty Ltd and Frasers Putney Pty Ltd [2019] NSWCAT (Unreported, 15 November 2019).

It found that the Tribunal held the builder and the developer of the residential apartment building 100 per cent liable for the replacement of combustible timber cladding “Biowood” installed at the property.

The claim by the owners corporation was for breach of statutory warranties in section 18B of the Home Building Act 1989 (NSW).

This case demonstrates the difference between cases commenced in the Tribunal in NSW (where it is not possible to apportion statutory warranty claims or bring cross claims against consultants in NCAT) and in Victoria (where the Lacrosse claim was decided and the relevant consultants were joined to the proceeding and found partially liable for the defective cladding).

What 2020 holds and how we can help

We will provide a further update once the LC vote on the Bill has occurred. In particular we await a draft Regulation, which, it is assumed, will fill in the detail as to the Bill’s intended application.

Authors: Marie-Louise Scarf & Jeffery Shi

In the media

A lot of noise, so what was achieved?
When it comes to efforts to introduce statutory registration for engineers, there has been a lot of activity in 2019, especially in NSW and Victoria (27 November 2019).  More...

MBA: Slow infrastructure project roll-out drags construction to three-year low
Construction activity continues to sink lower with few signs yet that new infrastructure projects are coming to life on the ground. The ABS figures indicate that the volume of construction work done during the September 2019 quarter slipped by 0.4% compared with the June 2019 quarter (27 November 2019).  More...

Engineers sign up to mitigate impact on climate change
Thousands of professional engineers, engineering students and hundreds of organisations are expected to sign a declaration committing to steering the profession towards reducing carbon emissions in Australia (27 November 2019).  More...

Surveyors warn PI insurance market facing ‘collapse’
The professional indemnity (PI) insurance market will collapse within the next 12 months unless the Federal Government steps in with a rescue package, surveyors have warned. AIBS says insurers have moved to withdraw indemnity covers for many types of commercial buildings, domestic swimming pools, wind farms, solar farms and wheat silos (25 November 2019).  More...

HIA welcomes Government commitment to reducing red tape
HIA welcomes the Government’s announcement that as part of its move to bring forward billions of dollars in infrastructure, it will also be cutting red tape that hinders the progress of projects that are vital to Australian housing (22 November 2019).  More...

House price rebound concentrated at top-end of the market
The sharp turnaround in house prices has prompted property economists to revise forecasts upward, with Sydney and Melbourne leading the robust growth in housing demand (21 November 2019).  More...

Major planning reform to drive jobs and investment in NSW
Public Spaces Minister Rob Stokes. said a series of reforms would be introduced to the planning system over the coming months to slash assessment timeframes, reduce red tape and fast-track projects in high growth areas (27 November 2019).  More...

Fair Trading NSW: Proposed ban on the use of certain types of aluminium composite panels
Notice of her intention to impose building product use ban for aluminium composite panels with a core comprised of greater than 30% polyethylene by mass in any external cladding, external wall, external insulation, façade or rendered finish in certain multi-storey buildings, subject to specific exceptions. (28 November 2019).  More...

Hundreds of building sites inspected for run-off during waterway blitz
Ongoing education and enforcement of sediment controls on building sites are key to preventing runoff from entering our local waterways, according to results from the latest Get the Site Right campaign (26 November 2019).  More...

Lack of information on apartment defects leaves whole market on shaky footings
The litany of defects, poor building standards and regulatory failures have serious implications for apartment owners, occupiers and buyers alike. Fears of a loss of confidence in the sector have unfortunately come true (21 November 2019).  More...

Published

ABCC industry update November-December 2019 edition
This issue includes; ABCC findings from zero drugs and alcohol on building sites campaign; Securing payments for subcontractors and Wages and entitlements - proper record keeping (26 November 2019).  More...

BDAV: Building defects affecting residents
A recent study lead by Deakin University and funded by the PICA Group sought to identify types of building defects and how they impacted on the building and its occupants. Of the 3227 defects analysed, defects relating to building fabric and cladding (40%) were the most prevalent, followed by fire protection (13%), waterproofing (11.5%), roof and rainwater disposal (8.5%), and then structural issues (7%) (20 November 2019).  More...

Australia Bureau of Statistics
Construction Work Done, Australia, Preliminary, Sep 2019 (cat no. 8755.0) (11 November 2019).

Practice and courts

ASBEC: Members approve ResponsibleSteel™ Standard
ResponsibleSteel members have approved the ResponsibleSteel Standard – the world’s first international, multi-stakeholder standard for responsible production for steelmaking and processing sites. The Standard will be officially launched at the ResponsibleSteel Forum II on 1-3 December. ResponsibleSteel is now developing tools to help organisations implement the Standard (25 November 2019).  More...

HIA submissions
Planning and building process review response to discussion paper (2MB) ( 25 November 2019).

AIBS member statement - Professional Indemnity Insurance
AIBS have released a member statement providing an update on the current Professional Indemnity Insurance situation (22 November 2019).  More...

ABCB: Registration is open for the 2020 NCC Seminars!
Next March and April the ABCB will be presenting in a capital city near you (November 2019).  More...

NABERS Reminder: Auditors, Supervisors, and Trainers Panel Announced
Congratulations to the new Panel Selection for NABERS Auditors, Supervisors, and Trainers, for October 2019-October 2022.  More...

NSW Fair Trading: Intended Ban Notice: aluminium composite panels
Any person or corporation who does not comply with the requirements of the ban can be subject to fines. A corporation found to be using a banned building product can be fined up to $1.1 million and individuals can be fined up to $220,000. If you have any enquiries about the proposed building product use ban please contact NSW Fair Trading online (28 November 2019).  More...

Building Information Modelling (BIM) for WHS management
What is the best practice and implications of using BIM in WHS management?
Timeline of project: Project completion: Mid 2021.  More...

Cladding Guideline
Standards Australia has developed a permanent labelling system of aluminium composite panel products to support the identification of these products throughout their life-cycle (November 2019).  More...

NSW Fair Trading: Part 6 of the EP&A Act postponed until 1 December 2019
The Part 6 provisions of the Environmental Planning and Assessment Act have been postponed and will now start on 1 December 2019. This delay will allow time for the sector to adjust to the regulatory changes that have been progressing around fire safety and the Building and Development Certifiers Act 2018.  More...

Planning Circular – Commencement of Part 6 (building and subdivision certification provisions)
FAQ - Occupation certificate
FAQ - New mandatory compliance powers for private principal certifiers
FAQ - New subdivision works certificate
Environmental Planning and Assessment Act 1979
Environmental Planning and Assessment Regulation 2000
If you have any queries, please contact the Department of Planning, Industry and Environment.  More...

Cases

 Blue Haven Pools South Pty Ltd v Maloney (No 2) [2019] NSWCATAP 284
A hearing on costs is dispensed with under s 50(1)(c) of the Civil and Administrative Tribunal Act 2013 (NSW). COSTS Civil and Administrative Tribunal Act 2013, Civil and Administrative Tribunal Rules 2014

Visual Building Construction Pty Ltd v Armitstead (No 2) [2019] NSWCA 280
Appeal dismissed with costs
CONTRACTS – termination – whether building contract validly terminated – whether, in the circumstances, 10 business days notice giving opportunity to remedy default needed to be given prior to termination – alternative bases for termination – Shepherd v Felt & Textiles of Australia Ltd. the Statutory Warranty Provisions of the Home Building Act in that the work was not done in accordance with ... done in accordance with and or complied with the Home Building Act or other Law. Environmental Planning and Assessment Act 1979 (NSW) ss 109F(1A), 121B, 149E(1)(a); Local Government Act 1993 (NSW) 

Da Silva v Building Professionals Board [2019] NSWCATOD 177
ADMINISTRATIVE REVIEW – accredited certifier – whether construction certificate plans inconsistent with development consent – whether development consent authorised variations – finding of unsatisfactory professional conduct – appropriate penalty

Macaulay v Bayside Council [2019] NSWLEC 1568
ORDERS – unauthorised attic construction – compliance with National Construction Code – Building Code of Australia

Florida Kitchens Pty Ltd v Number One Cutting (T/S Number One Marble and Granite) [2019] NSWSC 1568
APPEAL – security for costs – appeal from NCAT to Supreme Court – 106 grounds of appeal – decision of an Associate Justice – 30 grounds of appeal – whether appeal or judicial review – whether error of law – House v The King error

Wang v Building Professionals Board [2019] NSWCATOD 174
ADMINISTRATIVE REVIEW – accredited swimming pool certifier – lack of understanding of legislative requirements - finding of unsatisfactory professional conduct – appropriate penalty

Dyldam Developments Pty Ltd v The Owners – Strata Plan No 85305 (No 2) [2019] NSWCATAP 272
COSTS – appeal from Consumer and Commercial Division – whether r 38 and r 38A Civil and Administrative Tribunal Rules 2014 apply – whether appropriate order is order for costs in the cause

Legislation

Bills passed by both Houses of Parliament – 22 November 2019
Better Regulation Legislation Amendment Bill 2019
Schedule 1 amends the following Acts—(a)Building and Construction Industry Security of Payment Act 1999 No 46,(b)Building and Development Certifiers Act 2018 No 63,(c)Building Professionals Act 2005 No 115,

Bills assented to
Better Regulation Legislation Amendment Act 2019 No 23 — Assented to 26 November 2019
For the full text of Bills, and details on the passage of Bills, see Bills.

Disclaimer
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this newsletter is accurate at the date it is received or that it will continue to be accurate in the future.

Marie-Louise Scarf

Published by Marie-Louise Scarf , Jeffery Shi

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