Domestic BuIlding Contracts and Tribunal BIll EXPLANATORY MEMORANDUM BACKGROUND

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1 L...,{. -.. "... ~... Domestic BuIlding Contracts and Tribunal BIll EXPLANATORY MEMORANDUM BACKGROUND The Act significantly reforms the domestic house construction and renovation industry in Victoria by (a) ensuring contracts comply with detailed minimum legislative criteria, (b) requiring domestic builders to be registered and take out approved insurance for work undertaken under a domestic building contract where the contract value exceeds $5,000 (a "major domestic building contract"), and (c) establishing a Domestic Building Tribunal to investigate and resolve consumer and builder complaints. The Act will ensure fairness to builders and consumers alike, and that appropriate standards of conduct are utilised at all times. PART I-PRELIMINARY Clause 1 states that the main purposes of the Act are to regulate contracts for the carrying out of domestic building work, to establish a Domestic Building Tribunal to resolve domestic building disputes, to require builders carrying out work under a major domestic building contract to be covered by insurance in relation to that work, and to amend the House Contracts Guarantee Act 1987, particularly in relation to phasing out the making of claims under that Act. Clause 2 provides for Part 1 of the Act to come into operation on the day on which the Act receives Royal Assent, and for the remaining provisions to come into operation on a day or days to be proclaimed. However, any of the remaining provisions that do not come into operation on or before 1 January 1997, come into operation on that day. Clause 3 contains a number of definitions for the purposes of the Act, including definitions of "building", "builder", "domestic building contract", "major domestic building contract" and "domestic building work". The only difference between "domestic building contract" and "major domestic building contract" is that the latter is limited to contracts whose contract price exceeds $5,000. Consequently there are certain provisions in the Act which will apply irrespective of the contract price (such as the implied warranties, certain restrictions and the jurisdiction of the Tribunal) and other provisions which apply only to major domestic building contracts (such as minimum contractual provisions, registration of domestic builders and required insurance). "Director" means Director of the Office of Fair Trading and Busines Affairs in the Department of Justice. "Domestic building dispute" is defined in clause 54 of the Act (see below). Clause 4 states that the objects of the Act are to provide for the maintenance of proper standards in the carrying out of domestic building work in a way that is fair to both builders and building owners, to enable disputes to be resolved as quickly, efficiently and cheaply as possible, and to enable building owners to have access to insurance if work carried out under a major domestic building contract is incomplete or defective. ~11-[4051--{j O O---{Rev. No. 4) (921) 1

2 Clause 5 outlines the types of building work to which the Act applies, which include (a) the construction, renovation, extension or repair of homes, (b) the provision of lighting, heating, air conditioning, water supply or sewerage of homes, (c) the demolition or removal of homes, (d) any work associated with (a) such as landscaping, paving, driveways, fencing or swimming pools; (e) any building constructed on a residential site which requires a building permit; (f) any site work, and (g) the preparation of plans or specifications for the performance of any of the work referred to above. Clause 6 outlines the types of building work to which the Act does not apply, which include (a) any work in relation to a non-residential farm building, (b) any work in relation to a building intended to be used solely for business purposes or to accommodate animals, (c) design work provided by an architect, engineer or draftsperson, and (d) the transporting of a building from one site to another. The regulations will exclude work performed by single trades in isolation, consistent with current exclusions. Clause 7 provides that the Act binds the Crown in right of Victoria and, so far as the legislative power of the Parliament permits, the Crown in all its other capacities. PART 2-PROVISIONS THAT APPLY TO ALL DOMESTIC BUILDING CONTRACTS Division I-General Warranties Clause 8 specifies certain implied warranties that are part of every domestic building contract. These warranties provide that the builder warrants: (a) that the work will be carried out to the appropriate standard and as agreed under the contract and accompanying documents; (b) that all materials used will be appropriate and, unless agreed otherwise, new; (c) that all relevant laws have been complied with; (d) that the work will be carried out with reasonable care and skill and completed in a timely fashion; (e) if the work consists of the construction of a home, that it will be suitable for occupation; and (f) that, if the building owner relies on the builder's skill and experience to achieve a particular purpose which is stated in the contract, the work and materials used will be reasonably fit for this purpose or expected to achieve that result. These warranties are equivalent to statutory warranties already applying in South Australia, Tasmania and the Australian Capital Territory. Clause 9 provides that, in addition to the building owner who was a party to a domestic building contract, successors in title to the building owner may take action to enforce any of the warranties listed in clause 8 as if that person was a party to the contract (subject to the time limits prescribed in section 134 of the Building Act 1993). This provision does not enable a person to take any action in respect of a loss for which a predecessor in title has released the builder from further responsibility. Clause 10 provides that any agreement or instrument which attempts to restrict or remove the right to take action for a breach of any of the warranties contained in clause 8 2

3 is of no effect, except where the breach was known or should have been known to exist at the time of creation of the agreement/instrument. This provision is a significant consumer protection and addresses a major flaw in the operation of the law. It will prevent a builder procuring a waiver or release from the building owner from any building defects which may manifest in future. Currently, such releases are obtained from building owners even where the claim which gave rise to the release is relatively minor. Division 2-Restrictions Applying to the Nature and Contents of Contracts Clause 11 specifies the following limits on the amount of deposit payable under domestic building contracts: (a) 5% for contracts of $20,000 or more, and (b) 10% on contracts less than $20,000. Higher amounts may be set by regulation, and any breach of the maximum deposit by the builder will enable the building owner to avoid the contract, unless the Tribunal considers this to be unfair in the circumstances. A court or the Tribunal can order a refund of some or all of the amounts paid by the building owner under the contract if the builder is found to have breached the deposit requirement. Clause 12 provides that a contract for more than one sort of work or for any other reason must identify the domestic building work component and the amount of money the builder will receive for carrying out this work. The application of this provision includes contracts for, say, a mixture of commercial and domestic building work and contracts for the sale of land which include the carrying out of domestic building work prior to completion of the contract. Clause 13 provides that a builder must not enter into a cost plus contract unless the contract is of a class allowed by the regulations or the work involves the renovation of an existing building and it is not possible to calculate the cost of the substantial part of the work without performing some of the work. A builder must not enter into a cost plus contract which does not contain a fair and reasonable estimate of the total contract price. If a builder does not comply with this clause he or she cannot enforce the contract against the building owner, but the Tribunal may award the builder the cost of carrying out the work plus a reasonable profit, if it considers it not unfair to the building owner to do so. This provision effectively prohibits the use of cost plus contracts for new homes. Clause 14 provides that any term in a domestic building contract or other agreement that requires a dispute under the contract to be referred to arbitration is void. Clause 15 defines "cost escalation clause" to mean a contractual provision which permits the contract price to increase in the event of increased costs of labour or materials, or increased costs caused by delays. Domestic building contracts must not contain cost escalation clauses unless the contract price is greater than $500,000 or the cost escalation clause is in a form approved by the Director and complies with any prescribed requirements. Any cost escalation clause in a contract is void unless, before the contract was entered into, the builder gave the building owner a notice in a form approved by the Director and the building owner signed or otherwise formally acknowledged the clause. Clause 16 provides that a builder who enters into a domestic building contract must not demand, recover or retain an amount of money in excess of the contract price unless authorised to do so by this Act. 3

4 Division 3-Provisions Concerning Building Sites Clause 17 provides that the builder only has the right of a contractual licensee to enter property subject to a domestic building contract. Clause 18 provides that a domestic building contract does not give the builder an interest in the land nor entitle the builder to put a caveat on the title of the building site land. This provision is principally a clarification of the current law and does not prevent a builder from negotiating appropriate security for payment and entering into a separate document which may create a caveatable interest. Clause 19 provides that the builder must grant the building owner (or his or her representative) reasonable access to the building site. The building owner or his or her representative must not interfere with the building works being undertaken. The builder is not liable for any costs or delays that result from any such interference and which are notified in writing to the building owner. Division 4-Provisions Concerning Prime Cost Items or Provisional Sums Clause 20 provides that, in the case of domestic building contracts, the builder warrants that any provisional sums in the contract have been calculated by the builder with reasonable skill and care in the light of all information available at the date the contract is made including the nature and location of the building site. Clause 21 prohibits a builder from entering a domestic building contract that contains prime cost items (where the estimated cost of these is below the reasonable cost of supplying the item) and provisional sums (where the provisional sum is below the reasonable cost of carrying out the work to which the provisional sum relates). This provision will not apply to items or sums that are to be supplied or specified by the building owner or their agent. Where the builder's estimates are unreasonably excessive the building owner may apply to the Tribunal for a reduction in the amount payable for such an item or sum. Clause 22 provides that each prime cost item and provisional sum must be set out in separate schedules or documents which set out a detailed description of the item or the work to which the sum relates, a breakdown of the cost estimate for each item or sum and the builder's proposed profit charge, if any, and the method used to calculate this charge. Clause 23 requires the builder to supply evidence of the cost of prime cost items and provisional sums to the building owner. Division 5-0ther Matters Clause 24 provides that a builder may exclude from the contract price the amount any third person is to receive for work to be carried out in relation to (a) the conveying, connection or installation of services such as gas, electricity, telephone, water or sewerage, or (b) for the issue of planning or building permits. Where any of these amounts are excluded from the contract price, the builder must provide a reasonable estimate of how much the amounus is or are likely to be. 4

5 The purpose of this provision is to ensure that building owners are informed of the likely total cost for all work which they would assume would be performed as part of the building works. Clause 25 requires the builder to give a legible signed copy of the major domestic building contract, or a legible copy of any document forming part of any other contract, to the building owner no later than 5 clear business days after entering into the contract. Clause 26 requires the builder to supply copies of relevant documents received from statutory authorities, service providers or registered building practitioners to the building owner, unless the builder is aware that the building owner already has a copy of such documents. Clause 27 deems that a dispute exists between the building owner and builder if any money due under a domestic building contract is unpaid at the due date. Payment of any money under the contract does not preclude the building owner from instituting dispute proceedings against the builder. Clause 28 provides that fixtures and fittings appearing in the plans and specifications are included in the contract price, unless the contract contains a specific statement that they are not so included and the building owner acknowledges this in writing next to the statement. PART 3-PROVISIONS THAT ONLY APPLY TO MAJOR DOMESTIC BUILDING CONTRACTS Division I-Provisions That Apply Before a Contract Is Signed Clause 29 provides that a builder must not enter into a major domestic building contract unless (a) the builder is registered as a builder under the Building Act 1993 (if a natural person); or (b) in the case of a partnership, at least one of the partners is registered as a builder under that Act; or (c) in the case of a corporation, at least one of the directors is registered as a builder under that Act; or (d) the builder is exempt from registration by regulation under the Building Act This latter provision is intended to address the developer/financier who may fall within the definition of "builder" (being a person who manages or arranges the carrying out of domestic building work), but will otherwise be engaging a registered builder to perform the work. Clause 30 provides that a builder must obtain "foundations data" where proposed domestic building work under a major domestic building contract will involve the construction or alteration of the footings of a building. "Foundations data" is defined to mean any information concerning the building site reasonably needed to prepare a proper footings design for the site and an adequate estimate of the cost of constructing the footings. A builder must consider the need for compliance with relevant Australian Standards, a drainage plan, engineer's drawings and computations and any other information required by the regulations. A builder must supply copies of the foundations data to the building owner, unless the building owner already has copies of that data. This provision will ensure that builders bear the risk of deliberate, careless or unreasonable underquoting. If the builder obtains some or all of the foundations data the cost may be passed on to the building owner under a separate preliminary contract. 5

6 Division 2-What Contracts Must, and Must Not, Contain Clause 31 specifies the general contents and requirements of a major domestic building contract, including certain information required to be contained in a contract such as a cooling off notice and a check list. Clause 32 provides that a builder must not include in a contract an estimate of how long it will take to carry out the work unless he or she has made allowance for inclement weather, weekends and public holidays and any other delays reasonably likely to occur. If the contract includes an estimate of the time needed, the contract must also state how many days have been allowed under each of the categories referred to. If it is not possible to estimate the period of a particular delay, the builder may comply by identifying the likely cause of the delay and stating in the contract that it is not possible to adequately estimate the period of the delay. This provision seeks to address a current major source of dispute arising from a builder's deliberate or careless underestimate of the construction period and the consequent difficulties created for the building owner in detennining the likely completion date and being able to rely upon remedies under the contract for late completion. Clause 33 provides that a major domestic building contract (which is not a contract to which a cost escalation clause applies) which allows for a price change must contain a warning next to the price, in a form approved by the Director, and must specify the contract's provisions which allow for the change. If a contract does not contain such a warning, the price can only decrease and not increase. Building owners typically have great difficulty understanding when and how their apparently "fixed price" contract may increase. This provision will ensure that adequate and clear explanation is provided within the contract. Division 3-Cooling-Off Period After Signing a Contract Clause 34 provides that a building owner may withdraw from a major domestic building contract within 5 clear business days without penalty if the builder is given written notice. After receiving notice of the tennination, the builder is entitled to retain $100 plus out-of-pocket expenses previously approved by the building owner but must refund all other money received from the building owner. A building owner is not entitled to tenninate a contract if: (a) he or she has entered into a previous similar contract with the builder in relation to the same home or land; or (b) the building owner has received independent legal advice before entering into the contract. Clause 35 provides that a building owner may withdraw from a major domestic building contract if the cooling-off warning (contained in clause 31 (1) (n)) is not given. To do this, the building owner must give the builder written notice of his or her intention to withdraw within 7 days of becoming aware of the omission. The builder is entitled to a reasonable price for the work carried out under the contract to the date the contract is ended. 6

7 Division 4-Provisions Applying After the Contract Is Signed Clause 36 requires the builder to give a copy of other documents specified by the Minister, by Order published in the Government Gazette, to the building owner, unless the builder is aware that the building owner already has a copy of the prescribed document/so Clause 37 requires that a builder who wishes to vary the plans or specifications attached to the major domestic building contract must receive written consent from the building owner unless the variation is necessary due to circumstances beyond the builder's control and the builder is directed to make the variation by an authorised person, such as a building surveyor. Where the builder has received such a direction, he or she cannot proceed until the building owner is able to challenge such direction (for example by seeking variation to building permitiregulations under the Building Act 1993). When seeking a variation the builder must write to the building owner setting out the desired variation, the reason for the variation and the delays and costs (if any) the variation would cause. Whether the variation is requested by the builder or directed by an authorised person, the builder cannot recover any money in respect of the variation unless he or she has complied with this clause and can establish that the variation was not reasonably foreseeable. Where the variation was not reasonably foreseeable, the builder is entitled to recover the actual cost of performing the work plus a reasonable profit margin. Where a builder fails to comply with this clause or cannot establish that the variation was not reasonably foreseeable, the Tribunal may, if satisfied that there are exceptional circumstances or the builder would suffer exceptional hardship and it would not be unfair to the building owner to do so, award the builder the cost of carrying out the variation plus a reasonable profit. These provisions do not apply to prime cost items or provisional sums. Clause 38 requires a building owner who seeks a variation to the plans or specifications set out in a major domestic building contract to give the builder written notice of the proposed variation. The builder must then give the building owner a written notice indicating the overall effect of the proposed variation, whether delays or additional costs will result from carrying out the variation and the extent of these delays/costs. The builder is not required to give this notification if he reasonably believes the variation will not cause delay and will not add more than 2% to the contract price stated in the contract. Where notification to the building owner is required, the builder must not commence the variation until the building owner has requested the builder to proceed after receiving the builder's notice. A builder cannot recover any money in relation to the building owner-requested variations unless this provision is complied with or the Tribunal orders as for clause 37. The provision does not apply to prime cost items or provisional sums. Clause 39 provides that, unless a contrary intention appears, if the plans or specifications are varied in accordance with clause 37 or 38, any references to those plans or specifications, or to the contract price and completion date or days needed to complete the work are to be read as references to them as varied. Clause 40 prescribes limits on progress payments depending on the stage of building contemplated in the contract and the stage reached during the building process. In the case of contracts to which the specified limits do not apply, the builder must not demand or receive any amount that is not directly related to the progress of the building work being carried out. The building owner and builder are able to determine alternative progress payments in the manner prescribed in the regulations. If a court finds that a builder has received an amount either in excess of the prescribed limit or not directly related to the 7

8 progress of the work, it may order the builder to refund some or all of the amount to the building owner. The provision does not apply to contracts between a builder and the Crown or a public statutory authority. Division 5-End of the Contract Clause 41 enables the building owner to end a major domestic building contract where the price rises by 15% or more over the contracted amount, or where the contract is not completed within one-and-a-half times the period it was to have been completed by and the cause of such changes was not reasonably foreseeable by the builder. The building owner must give the builder written notice including his or her reasons for ending the contract. If ended under this provision, the builder is entitled to a reasonable price for the work completed at the time the contract was ended. This provision does not apply in the case of prime cost items, provisional sums or variations requested by the building owner. Clause 42 provides that the builder must not demand final payment under a major domestic building contract until the work has been completed as required in the plans and specifications and the following has been provided to the building owner: (a) a copy of the occupancy permit, if the building permit for the work so requires, under the Building Act 1993; or (b) in any other case, a copy of the certificate of final inspection. Division 6-0ther Matters Clause 43 requires that, in the case of display homes open for inspection (or buildings suitable for use as a home), a copy of the plans and specifications of the home and a copy of a contract to build a similar home must be prominently displayed. If the builder on whose behalf the display home was made available enters into a contract to build a similar home, this home must be constructed using the same plans and specifications and at least to the same standard of materials and workmanship, unless the contract otherwise specifies. PART 4-INSPECTORS Clause 44 provides that a party to a dispute may ask the Building Control Commission ("the Commission") to appoint an inspector to examine building works to determine whether the builder has complied with the plans and specifications. Clause 45 provides that the Commission may appoint prescribed building practitioners (whether or not they are employees of the Commission) as inspectors following payment of the required fee. Clause 46 provides that an inspector has the right to enter the building site and inspect the work at any reasonable time. However, if the site is still being used as a residence while the work is being carried out, an inspector may only enter the site between 8 a.m. and 6 p.m. after having given the occupier of the residence at least 24 hours notice. It is an offence to obstruct an inspector in the course of his or her duties. Clause 47 provides that an inspector may conduct tests in any inspection carried out under this Act. 8

9 Clause 48 requires an inspector to report to all parties to the dispute following an inspection, in writing if requested by a party. The report must include recommendations as to rectification if the inspector believes the plans and specifications have not been adhered to. If the inspector believes there has been a breach of the Building Act 1993 or regulations made under that Act, this must be made known to both parties to the dispute and a report given to the relevant building inspector responsible for enforcing that Act. Clause 49 provides that the carrying out of any recommendations contained in an inspector's report does not absolve the builder from completing the contract in accordance with the plans and specifications set out in the contract. Clause 50 provides that any party to the dispute may: (a) use an inspector's report during mediation and any proceedings before the Tribunal, and (b) call the inspector to give evidence during any proceedings before the Tribunal. PART 5-THE DOMESTIC BUILDING TRIBUNAL Division I-Establishment and Functions Clause 51 establishes the Domestic Building Tribunal ("the Tribunal") which consists of a Chairperson and members appointed by the Governor in Council. Qualifications for appointment are set out in Schedule 1, and a Deputy Chairperson may be appointed. Clause 52 provides that the functions of the Tribunal are to hear and determine the following matters: (a) domestic building disputes (defined in clause 54); (b) disputes relating to domestic building owners' insurance claims and insurers' decisions in relation to such claims; (c) requests to stop domestic building work that does not comply with the relevant contract; and (d) matters referred to the Tribunal under the House Contracts Guarantee Act The Tribunal is also authorised to do anything else required or permitted by the Act. Division 2-What Can the Tribunal Do? Subdivision I-Domestic Building Disputes Clause 53 provides that, in the course of settling building disputes, the Tribunal may make any order it considers fair. The Tribunal may do one or more of the following: (a) utilise mediation; (b) order the payment of money, including money owing, damages or restitution; (c) vary any term of a domestic building contract; (d) declare that a term of a domestic building contract is or is not void; (e) declare void any unjust term of a contract or vary a contract to avoid injustice; (j) order the refund of money paid under a domestic building contract; (g) order rectification (or completion) of defective (or incomplete) work. In deciding whether a contractual term is unjust, the Tribunal can look at: (a) the contract as a whole; (b) the extent to which the term and its effects were explained to the building owner; (c) the relative bargaining power of the parties; (d) the consequence of fulfilling the term (for both parties); (e) the building owner's capacity to reject or negotiate the term; (j) the obtaining of legal or other advice; (g) whether undue pressure was used to obtain the building owner's consent to the contract or the term; (h) whether the term is commonly used in other contracts; (i) the justification for using the term; (j) whether the term is harsh, unconscionable or oppressive; (k) the subsequent conduct of 9

10 the parties; and (l) any other factor the Tribunal thinks is relevant. The Tribunal is not, however, to consider injustice which may arise from the term which was not reasonably foreseeable when the term was agreed to. That is, everything else being equal, there is no ability for the Tribunal to rewrite a bad bargain or otherwise accommodate changed economic circumstances. The Tribunal will be able to determine a claim by an insurer seeking to enforce a right of indemnity against a builder. Clause 54 defines "domestic building dispute" broadly and includes a claim or dispute in relation to domestic building work (including a claim or dispute in negligence, nuisance or trespass related to the performance of domestic building work): (a) between building owners and builders, building practitioners (which includes building or quantity surveyors, building inspectors, engineers and draftspersons), architects and/or sub-contractors; (b) between builders and other builders, building practitioners, sub-contractors and/or insurers; or (c) between a building owner or a builder and an architect, engineer or draftsperson in relation to design work. This definition is significant as it defines the scope of the jurisdiction of the Domestic Building Tribunal to hear and determine disputes. Clause 55 provides that only a party to a dispute or the Director (on behalf of one or more building owners who are parties to a dispute) can apply to the Tribunal for an order to resolve a dispute. Clause 56 provides that the Tribunal may require any other person to take part in a proceeding before it. Clause 57 provides that matters which are mainly the result of a domestic building dispute which are initiated in the Supreme, County or Magistrates' Court must be transferred to the Tribunal if requested by a party, the Court has not heard any oral evidence and the Tribunal has power under this Subdivision to hear the matter. Clause 58 provides that the Tribunal may hear disputes while the contract is still in operation, i.e. prior to completion of the work. Clause 59 provides that the Tribunal may hear a dispute regardless of related criminal or disciplinary proceedings for breaches of this or other Acts or regulations, whether such proceedings are contemplated, ongoing or completed. Subdivision 2-Review of Insurers' Decisions Clause 60 provides that the Tribunal may review and change an insurer's decision in respect of the insurance required for major domestic building contracts under the Building Act However, this Provision does not apply to an insurer's decision: (a) to refuse to insure or renew or extend insurance to a builder; or (b).concerning premiums or charges to be paid for any insurance or the conditions under which any insurance will be offered, renewed or extended. Clause 61 provides that any person affected by a decision of an insurer in relation to domestic building work can ask the Tribunal to review that decision. The application to the Tribunal's Registrar must be made before the expiry date of any direction given by the 10

11 insurer as part of its decision or, if the decision does not contain such a direction, within 28 days from the date the person receives notice of the decision. Clause 62 provides that the Tribunal may decide any claim made by a building owner if the insurer fails or refuses to decide the claim within a reasonable time. Clause 63 provides that the Tribunal may require other persons who may be affected by an application to take part in the hearing of the application. Subdivision 3-Stop Orders Clause 64 provides that the Tribunal may order building work to stop, or not commence, if it is satisfied: (a) that such work is not, or would not be, in accordance with the agreed plans and specifications; or (b) that an application by the building owner under sections 157 or 160 of the Building Act 1993* that may affect the plans and specifications is still on foot. The Tribunal may make such an order without hearing the person against whom the order is to be made. In making the order, the Tribunal may require undertakings as to costs and may permit an order to be lifted if certain conditions are met. * Applications under these sections are made to the Building Appeals Board for a determination as to the application or effect of, or compliance with, the building regulations (section 157) or a determination that a provision of the building regulations (as defined in that section) does not apply or applies with variations to a building or land specified in the application (section 160). Clause 65 provides that the only persons who can apply to the Tribunal for a stop order are the Commission, the Director, the relevant insurer, and the affected building owner. Clause 66 provides that a person affected by a stop order may apply for review of the decision to make the order if he or she was not given an opportunity to be heard by the Tribunal. No application fee is payable in respect of such an application, and the review must be conducted as soon as practicable after the application is made. After reviewing its decision, the Tribunal may confirm, vary or quash its initial order and make any additional order necessary. Clause 67 provides that a person must comply with a stop order, but penalties only apply if the person was heard by the Tribunal or has received formal notice of the order and this Subdivision. Subdivision 4-Miscellaneous Matters Clause 68 provides that a person may apply to the Tribunal to have a building exempted from the operation of section 137B of the Building Act 1993 (see clause 142). The Tribunal may grant the exemption, with any conditions it thinks appropriate, if it is satisfied that there are exceptional circumstances or compliance is impossible or would cause undue hardship. ' Division 3-How Proceedings (Are To Be Started Clause 69 provides that proceedings are started before the Tribunal by filing a completed application form with the office of the Registrar of the Tribunal and paying the fee required by the regulations. The Director is not required to pay an application fee. 11

12 Clause 70 provides that the Registrar must notify the parties when and where the application will be heard, and must give a copy of the application to the person against whom the order is sought, any party to be joined in the hearing and any other person specified by the Chairperson. Division 4-How Proceedings Are to Be Conducted Subdivision I-Mediation Clause 71 provides that the Registrar may refer a matter to mediation and must notify the parties of the time and place for the holding of the mediation. Any notified party may refuse to attend the mediation and the Registrar must advise the other parties of this refusal. The Registrar may by notice to the parties cancel the mediation if he or she believes that the mediation would be unsuccessful or not possible. The Registrar must then advise all parties when and where the Tribunal will hear the application. The Registrar is to comply with any direction of the Chairperson. Clause 72 provides that a mediator has the same immunity as a member of the Tribunal. Clause 73 provides that if mediation is successful, the mediator must report the terms of settlement to the Tribunal. The Tribunal must make a determination giving effect to the settlement, and may make any other orders it considers appropriate to carry out the settlement. Clause 74 provides that if mediation is unsuccessful, the mediator must report this to the Registrar, noting any matters which the parties agree are the issues in dispute. No other matters arising from the mediation are admissible before the Tribunal or in related proceedings. The Registrar must notify all parties as to when and where the Tribunal will hear the application, once the fee (if any) required by the regulations has been paid. Subdivision 2-Hearings Clause 75 provides that all Tribunal hearings are to be conducted either by the Chairperson or by a member of the Tribunal assigned by the Chairperson. Clause 76 requires that all Tribunal hearings are to be public unless the Tribunal directs otherwise due to special circumstances. Clause 77 provides that the Tribunal is not bound by the rules of evidence, may inform itself in any manner it thinks fit, must conduct hearings as informally as justice permits and may regulate its own proceedings. The Tribunal is bound by the rules of natural justice except where such rules are limited by the Act. Clause 78 requires any Tribunal member to disclose any conflict of interest in relation to a proceeding and withdraw from that proceeding unless the parties consent to his or her continued involvement. The Chairperson may direct a member to disclose any conflicts of interest and withdraw from the particular proceeding. Clause 79 provides that hearings may be conducted using any system of telecommunication appropriate, and may, if the parties agree, decide any matter on documents alone. 12

13 Clause 80 provides that the Tribunal must allow parties a reasonable opportunity to call or give evidence, cross-examine witnesses and make submissions to the Tribunal. Evidence may be given orally or in writing and, if the Tribunal requires, must be given on oath or by affirmation or by affidavit or statutory declaration. Clause 81 provides that the rule against self-incrimination does not apply to hearings before the Tribunal, but if a person claims that their evidence is incriminating, it cannot subsequently be used in any criminal proceedings against the person, except in proceedings for perjury. Clause 82 provides that a hearing may proceed in the absence of a party if he or she has received at least 10 days notice of when and where the proceeding is to be heard (or any shorter period agreed to by that party) and has failed to appear. Clause 83 provides that a party to a proceeding before the Tribunal may: (a) appear personally; (b) be represented by a lawyer or experienced advocate if another party who is permitted such representation is so represented or if all parties agree or the Tribunal so directs; or (c) be represented by any person permitted or specified by the Tribunal. Both the Director and the Commission may appear personally at any proceeding or may be represented by an officer or lawyer or experienced advocate. Bodies corporate may be represented by office holders of the body corporate. Clause 84 provides that members of the Tribunal possess the same protection and immunity as a Supreme Court Judge, parties to a hearing possess the same protection and immunity as a barrister appearing before the Supreme Court, and witnesses possess the same protection and immunity as a witness has in proceedings in the Supreme Court. Clause 85 provides that a copy of any determination of the Tribunal must be given to all parties to the proceeding. Any party to the proceeding may request a copy of the reasons for the determination and these must be provided within 14 days after the Tribunal makes the determination on payment of the fee (if any) required by the regulations. Clause 86 provides that a person must not insult or disturb a member of the Tribunal during a proceeding, repeatedly interrupt a proceeding, or do any other act which would be regarded as contempt of court. Division 5-0ther Powers of the Tribunal Clause 87 provides that the Tribunal may give any directions necessary to expedite and resolve matters before it, including requiring the production of documents or any relevant information or evidence. Clause 88 enables the Tribunal to require a person (by summons issued by the Registrar or a member of the Tribunal) to appear and produce any specified documents. A person summoned to appear before the Tribunal, if that person so requests, must be paid such fees and allowances as are determined by the Tribunal. Clause 89 provides that the Tribunal may attempt to settle a proceeding at any time, and may direct that related applications may be heard and determined together. Clause 90 provides that a builder may seek to freeze the assets of a building owner who owes the builder money, but only if it can be shown that the building owner is going 13

14 to move, sell or dispose of the assets for the purpose of defeating any payment order the Tribunal may make against the building owner. Clause 91 provides that the Tribunal may dismiss vexatious proceedings and order that compensation be paid to the inconvenienced party. Clause 92 provides that, where a party to a proceeding is conducting the proceeding in a way that unnecessarily disadvantages another party, for example, by failing to comply with an order of the Tribunal or by conducting the proceedings vexatiously, the Tribunal may order the party causing the disadvantage to compensate the other party for any costs incurred unnecessarily. If the party causing the disadvantage is the applicant, the Tribunal may dismiss the application or if another party who filed a counterclaim, dismiss the counterclaim. If the person responsible for causing the disadvantage is the representative of a party, rather than the party him or her self, the Tribunal may order that the representative in his or her own right compensate the other party for any costs incurred unnecessarily. Clause 93 provides that the Tribunal may award costs as it considers fair, having regard to: (a) the conduct of the parties; (b) the nature and complexity of the proceeding; (c) the relative strengths of the claims made by the parties; (d) any other matters set out in the regulations; and (e) any other matters the Tribunal thinks relevant. There is no presumption that the successful party will be awarded costs. Clause 94 enables the use of experts (who are to have the same immunities as Tribunal members) by the Tribunal, either as advisers or persons to whom technical matters can be referred for investigation and report. Any reports so produced must be given to each party to the proceeding, and become evidence before the Tribunal. The parties are responsible for any costs incurred under this clause, and are to pay those costs in the proportions determined by the Tribunal. Clause 95 empowers the Tribunal to: (a) enter and inspect property; (b) authorise Tribunal staff to enter and inspect property and prepare a report to the Tribunal; or (c) order a party to the proceeding to allow any person who is to give evidence reasonable access to any relevant property. It is an offence to obstruct any of the persons referred to from conducting an inspection, and the Tribunal is entitled to draw an adverse inference against a party who fails to comply with an order referred to in (c) above. Clause 96 authorises the Tribunal to suppress the name of any person who is a party to, or participates in, proceedings before it. Clause 97 provides that the Tribunal may dismiss all, or any part, of a proceeding before it if it is of the opinion that: (a) the matter would be more appropriately dealt with by a court (having regard to such matters as the size and legal complexity of the claim); or (b) the matter falls within the jurisdiction of the Building Practitioners' Board or the Building Appeals Board. Clause 98 provides that the Tribunal may refer questions of law to the Trial Division of the Supreme Court for its opinion. The Supreme Court must give its opinion on the question referred to it. While a matter is before the Supreme Court, the Tribunal cannot make a decision in relation to that matter, and it cannot make a decision which is inconsistent with the opinion of the Supreme Court. 14

15 Clause 99 provides that the Tribunal may extend any time limits or waive procedural requirements, even if the application to do so is out of time. However, the Tribunal may not do this if prejudice or detriment would be caused to a party or potential party which could not be remedied by costs or damages. Clause 100 enables the Tribunal to order the amendment of documents or correct clerical mistakes in documents before it, or orders made by it. Clause 101 provides that the Tribunal may request an investigation by the Commission, the Director, or the Building Practitioners' Board into a matter that has arisen before the Tribunal. However, there is no compulsion to comply with such a request. Clause 102 provides that the Tribunal may refuse to hear, or continue to hear, any matter or proceeding if the fees required by the regulations have not been paid. Division 6-Settlement Offers Clause 103 provides that where: (a) a party to a proceeding gives another party an offer in writing, which complies with this Division, to settle the matters in dispute; (b) the other party does not accept the offer within the time specified; and (c) the decision of the Tribunal on the matters in dispute (in its opinion) is not more favourable to the other party than the offer, the Tribunal must award the party who made the offer any costs incurred by that party in conducting the proceeding after the offer was made. If proceedings involve more than 2 parties, this clause only applies if the acceptance of the offer would have resulted in the settlement of the matters in dispute between all the parties. Clause 104 provides that an offer may be made either with prejudice (meaning that the offer or any of its terms may be referred to during the proceeding before the Tribunal) or without prejudice (meaning that the Tribunal is not to be told of the making of the offer until after it has delivered its decision). If not specified, an offer is to be treated as having been made without prejudice. A party may serve more than one offer. If an offer provides for the payment of money, the offer must specify when that money is to be paid. Clause 105 provides that an offer must be open to be accepted until immediately before the Tribunal delivers its decision, or until the expiry of a specified period after the offer is served (not being less than 14 days), whichever is shorter. An offer cannot be withdrawn while it is open to be accepted without the permission of the Tribunal. A party can only accept an offer by giving the party who made the offer a signed notice of acceptance, and may accept an offer even though it has made a counter-offer. Clause 106 provides that, if an offer is accepted, but the terms of the offer are not complied with by the offeror, the party who accepted the offer may require the Tribunal: (a) to make a determination giving effect to the terms of the offer; (b) if the offeror was the applicant, to dismiss the application and, if the party who accepted the offer had filed a counterclaim before the offer was made, to make a determination awarding the party all the things asked for in the counterclaim; or (c) if the offeror was not the applicant, to make a determination awarding the party who accepted the offer all the things asked for in the party's initial application to the Tribunal. 15

16 Division 7-Disputing the Tribunal's Decision Clause 107 provides that a party to a proceeding may apply for a reconsideration of a Tribunal decision where he or she believes there has been a clerical mistake or factual error which could have influenced the Tribunal's decision. Such applications must be made within 14 days of the original decision, or within 14 days of the party receiving reasons for the original decision. New evidence may not be heard in hearing this application. Seeking a reconsideration of a decision does not prevent the decision from taking effect. Clause 108 provides that a party to a proceeding may apply for a review of a domestic building dispute decision if new evidence has become available which is of such a material nature that it is likely that it would have caused the Tribunal to have reached a different decision. A party must make such application within 60 days after the date of the Tribunal's determination, and the application must be accompanied by a copy of the new evidence (or a description of it) and a fee of $250 or any higher amount set by the regulations. Clause 109 provides that a member of the Tribunal must, within 30 days of an application under section 107 or 108 being filed, determine whether the Tribunal may have power to grant the application. This must be done solely on the basis of the written application and any documents accompanying it. If the Tribunal member believes the Tribunal may have power to grant the application, the member must instruct the Registrar to list the review for hearing and notify all parties to the initial proceeding of the review. After conducting a review, the Tribunal may confirm, vary or reverse its determination and may make any order necessary to give effect to the new determination. Clause 110 provides that a party to a proceeding may appeal to the Court of Appeal from a decision of the Tribunal on a question of law only. Such an appeal must be made within 28 days after the party received a copy of the Tribunal's decision or within 28 days of receiving reasons for the decision if these reasons were sought within 14 days of the decision. The Court of Appeal may make an order varying, setting aside or affirming the Tribunal's decision or requiring it to re-hear the matter with or without further evidence. Division 8-Enforcement of orders and determinations Clause 111 provides that Tribunal orders must be complied with. Clause 112 provides that a party may register a Tribunal determination in the Supreme Court, which then gives the determination the same effect as a Supreme Court Order. Registration of the determination is achieved by filing a copy of the determination (certified by the Tribunal Registrar as being accurate), free of charge, with the Prothonotary of the Supreme Court. The determination must be accompanied by an affidavit stating: (a) that the person against whom the determination was made has been asked in writing to comply with the determination; and (b) describing the extent to which the determination has not been complied with. Division 9-Administrative Matters Clause 113 provides that the Chairperson is responsible for the administration of the Tribunal. 16

17 Clause 114 provides that the Chairperson may issue practice notes concerning the practices and procedures to be followed by the Tribunal and persons appearing before it. Clause 115 provides for the role of a Deputy Chairperson: he or she will act as the Chairperson when that position is vacant or the Chairperson is unable to perform his or her duties. Clause 116 provides for the appointment or employment of: (a) a Registrar of the Tribunal; (b) one or more Deputy Registrars; and (c) other officers and employees. The Registrar may delegate in writing his or her functions (except this power of delegation) to a Deputy Registrar. The Chairperson may appoint an acting Registrar if the position is vacant or the Registrar is absent from duty or unable to perform his or her duties. Clause 117 provides that the Registrar must keep a register of Tribunal proceedings and determinations. The register must be available for inspection whenever the registry is open. Parties to proceedings may inspect without charge the part of the register that relates to that proceeding. Any person may inspect the part of the register that contains determinations and obtain a copy of any determination on payment of any fee set by the regulations. Clause 118 provides that the Registrar may waive, reduce or refund (wholly or partly) fees payable or paid under the Act. Clause 119 provides that the Registrar or Deputy Registrar may issue certificates as to any matter contained in the register and this certificate is admissible in evidence in any proceeding as evidence of the matter certified. Clause 120 provides that judicial notice is to be taken of the Registrar's signature. Clause 121 sets out interim fees which are to apply until the relevant regulations are made. These include: (a) an application fee (also applicable to counterclaims) of $200 (for claims up to $25,000) or $250 (for claims in excess of $25,000 or where no specific amount is claimed); (b) for claims or counterclaims in excess of $25,000, a fee of $100 payable in the event of an unsuccessful mediation; and (c) a daily hearing fee of $100 payable for each day after the first day, if the hearing is not completed within 1 day. Whilst these fees are competitive with any corresponding fees charged by courts, the fee structure is designed to discourage frivolous claims and encourage early resolution of disputes. PART ~GENERAL Clause 122 provides that the Director must publish in the Government Gazette: (a) any details which the Director requires to be provided in domestic building contracts; and ( b) the approved form of any document required by the Act to be in a form approved by the Director. Clause 123 provides that the Director may provide advice about the operation of the Act and publish suggested major domestic building contracts and terms for domestic building contracts. Clause 124 provides that the Director must establish a Domestic Builders Fund into which must be paid all fees received or recovered by the Tribunal, money transferred from the Building Administration Fund (under the Building Act 1993), Parliamentary 17

18 appropriations, all fines, any money authorised to be paid to the Fund by any person or body and income from the investment of the Fund. Money is to be paid from the Fund to administer/enforce this Act and the regulations, to pay the Tribunal and mediators, and to provide for education programs and advice to building owners and builders. The Director may invest any part of the Fund not immediately required in any approved manner. Clause 125 provides that an inspector may serve an infringement notice on any person believed to have committed an offence listed in Schedule 2. An infringement notice must be in a form approved by the Director and must set out a description of the offence, the penalty, and the place at which and the time within which the penalty must be paid. Clause 126 provides that an infringement notice may be withdrawn within 28 days after it was served and any money paid prior to withdrawal must be refunded. Withdrawal of the notice does not prevent the commencement or continuation of proceedings for the offence. Clause 127 provides that, subject to clause 126, if an infringement notice is complied with before a summons is served, no further proceedings may be taken and no conviction is to be recorded. If proceedings are taken in respect of an offence for which an infringement notice was served and a court finds the person guilty of the offence, the finding is not to be taken as a conviction for any purpose except the making of the finding itself and any later proceedings relating to the finding. Clause 128 provides that if a person is convicted of one of a number of specified offences, being continuing offences, that is, offences for which a default penalty is provided, or is served with an infringement notice in relation to one of those offences, the person is guilty of a further offence in respect of each day the offence continues. Clause 129 provides that, where an offence against the Act is committed by a corporation, and the offence is proved to have been committed at the instigation of, or with the consent or connivance of, or as a result of wilful neglect on the part of, an officer of the corporation, that officer is also guilty of the offence. Clause 130 provides that if a builder which is a partnership commits an offence under this Act or the regulations, references to a builder or a person in the offence provision/s are to be read as references to each member of the partnership. Clause 131 provides that proceedings for an offence against this Act may be started within 3 years after the alleged commission of the offence. Clause 132 prohibits contracting out of this Act. Any provision in a domestic building contract which is contrary to the Act, or purports to annul, vary or exclude any provision of the Act, is void, and any term of any other agreement that seeks to exclude, modify or restrict any right conferred by this Act is also void. However, the parties to a domestic building contract may agree on more (but not less) onerous obligations to be imposed upon the builder. Clause 133 provides that, unless a contrary intention appears in the Act, a builder's failure to comply with any requirement in the Act in relation to a domestic building contract does not make the contract illegal, void or unenforceable. Clause 134 limits the jurisdiction of the Supreme Court so that matters more appropriately heard by the Tribunal are transferred to that body. 18

19 Clause 135 provides that regulations, of either general or limited application, may be made under this Act in relation to fees for applications, the giving of notices, hearings and certificates, and any other matters required or permitted to be prescribed under the Act. PART 7-AMENDMENT OF THE BUILDING ACT 1993 Clause 136 inserts new definitions into the Building Act 1993 including "domestic builder", "major domestic building contract" and other related matters. Clause 137 provides that building surveyors cannot issue a building permit in relation to domestic building work under a major domestic building contract unless the building practitioner holds a certificate under Part 11 of the Building Act 1993, or is a registered architect, and has the required insurance cover for that work. Where a new builder has been engaged for such domestic building work for which a building permit has been issued, the new builder must notify the relevant building surveyor, within 14 days of commencement, of the required insurance by which the new builder is covered. Clause 138 repeals section 27 of the Building Act 1993 which related to building work covered by the House Contracts Guarantee Act Clause 139 substitutes and amends section 135 of the Building Act 1993 to enable the Minister for Planning, by order published in the Government Gazette, to require building practitioners in specified categories to obtain insurance of a specified type and amount. A person is covered by the required insurance if: (a) the person holds the required insurance; (b) the work carried out is covered by the required insurance; (c) in the case of a person managing the carrying out of the work, if their work and the building work itself is covered by the required insurance; or (d) the person is not a party to the required insurance but is specified or referred to as a person to whom the insurance cover extends. Section 48 of the Insurance Contracts Act 1984 of the Commonwealth gives a person referred to in paragraph (d) a right to recover the amount of the person's loss from the insurer under the insurance even though the person is not a party to the insurance. "Insurance" is widely defined, and includes professional indemnity insurance, guarantees, indemnities, and public liability insurance. The Ministerial Order to be made under this section for domestic builders will set out in detail the precise parameters of the required insurance including permissible exclusions. Clause 140 substitutes section 136 of the Building Act 1993 to make it an offence for a builder to work as a builder or as a building manager without the required insurance. Substantial penalties apply for breach of this provision. Clause 141 amends section 137 of the Building Act 1993 to make it an offence under that Act to claim to be covered by the insurance required by this Act when uninsured. Substantial penalties apply for breach of this provision. Clause 142 inserts new sections 137A, 137B, 137c, 137D and 137E into the Building Act Section 137 A provides that the Ministerial Order under section 35 which prescribes the required insurance for domestic builders may, subject to such exemptions and exclusions set out in the order, cover losses resulting from: (a) breaches of the implied warranties 19

20 contained in the Domestic Building Contracts and Tribunal Act 1995; (b) defective building work, (c) non-completion of the work; or (d) the builder's misleading or deceptive conduct in contravention of State or Commonwealth consumer protection law, but will not cover losses resulting from the criminal conduct of the builder. The required insurance will protect the person for whom the domestic building work was performed and extend, where relevant, to successors in title of the owner of the building or land. Section 137B makes it an offence for an owner-builder to sell a building within 7 years of its completion without having obtained a report containing the matters required by the Minister for Planning as published in the Government Gazette and the required insurance which may be limited only by any defects disclosed in the report. A registered builder is exempt from obtaining a defects report if the required insurance is in place. Where these and certain other procedural steps have not been complied with, the contract is voidable at the purchaser's option at any time prior to completion of the contract. A person who seeks to have 4 or more homes constructed by one builder may apply to the Director for exemption from the requirement to be insured in relation to that building work, and effectively defer compliance with this section until any of the homes are to be sold. This latter provision merely provides an option to a financier/developer who may not wish to obtain the benefit of insurance cover but will be required to provide such insurance protection to a purchaser at the time of sale. Section 137c prescribes certain warranties in relation to owner-built homes. These provide that the vendor warrants: (a) that the domestic building work was carried out properly and to the appropriate standard; (b) that materials used were suitable for their intended purpose, and were new unless otherwise stated in the contract; and (c) that the work was carried out in accordance with all applicable laws and regulations. Successors in title are covered by these warranties. Any provision attempting to limit or remove the warranties is void except where the person knew or ought reasonably to have known of the breach. Section 137D provides that insurance required in respect of owner-built homes: (a) may insure each person entitled to the benefit of any of the warranties contained in section 137c against any loss resulting from a breach of that warranty, and (b) must provide that the insurer is not liable in respect of any defect which is referred to in the report provided to the purchaser under section 137B. Section 137E provides that a person must not enter into a contract for the sale of land on which a home is being constructed, or is to be constructed before the completion of the contract, unless the building work is or will be constructed under a major domestic building contract or Part 2 of the House Contracts Guarantee Act 1987 applies to the building work. This means that the vendor must either be a registered domestic builder or engage a registered domestic builder under a major domestic building contract. This provision seeks to ensure that the purchaser will have the protection of minimum contractual provisions and/or implied statutory warranties and the required insurance. Clause 143 amends section 146 (2) of the Building Act 1993 to provide that, unless the Building Appeals Board otherwise directs, an appeal under section 138 of that Act (appeals in respect of building and occupancy permits), section 139 of that Act (appeals in 20