Submission to the Department of Housing and Public Works. Building Industry Fairness (Security of Payment) Amendment Regulation

Transcription

1 Submission to the Department of Housing and Public Works Building Industry Fairness (Security of Payment) Amendment Regulation 20 September 2018

2 ABOUT THE HOUSING INDUSTRY ASSOCIATION INTRODUCTION RESPONSE TO PROPOSED REGULATIONS CPD FOR ADJUDICATORS ADJUDICATION GRADING MAXIMUM FEES CONFLICT OF INTEREST LIMITATIONS ON SUBMISSIONS FOR ADJUDICATION APPLICATIONS DEMERIT POINTS FOR FAILURE TO COMPLY WITH A DIRECTION TO RECTIFY OTHER AMENDMENTS TO REGULATIONS REQUIRED DIRECTIONS TO RECTIFY FEE PRESCRIBED BY REGULATION QBCC HOME WARRANTY INSURANCE SCHEME QBCC ACT THRESHOLD FOR BUILDING WORK...7 Housing Industry Association contact: Michael Roberts Executive Director Housing Industry Association 14 Edmondstone Street South Brisbane QLD 4101, Phone: m.roberts@hia.com.au - i -

3 ABOUT THE HOUSING INDUSTRY ASSOCIATION The Housing Industry Association (HIA) is Australia s only national industry association representing the interests of the residential building industry, including new home builders, renovators, trade contractors, land developers, related building professionals, and suppliers and manufacturers of building products. As the voice of the industry, HIA represents some 40,000 member businesses throughout Australia. The residential building industry includes land development, detached home construction, home renovations, low/medium-density housing, high-rise apartment buildings and building product manufacturing. HIA members comprise a diversity of residential builders, including the Housing 100 volume builders, small to medium builders and renovators, residential developers, trade contractors, major building product manufacturers and suppliers and consultants to the industry. HIA members construct over 85 per cent of the nation s new building stock. HIA exists to service the businesses it represents, lobby for the best possible business environment for the building industry and to encourage a responsible and quality driven, affordable residential building development industry. HIA s mission is to: promote policies and provide services which enhance our members business practices, products and profitability, consistent with the highest standards of professional and commercial conduct. The residential building industry is one of Australia s most dynamic, innovative and efficient service industries and is a key driver of the Australian economy. The residential building industry has a wide reach into manufacturing, supply, and retail sectors. The aggregate residential industry contribution to the Australian economy is over $150 billion per annum, with over one million employees in building and construction, tens of thousands of small businesses, and over 200,000 sub-contractors reliant on the industry for their livelihood. HIA develops and advocates policy on behalf of members to further advance new home building and renovating, enabling members to provide affordable and appropriate housing to the growing Australian population. New policy is generated through a grassroots process that starts with local and regional committees before progressing to the National Policy Congress by which time it has passed through almost 1,000 sets of hands. Policy development is supported by an ongoing process of collecting and analysing data, forecasting, and providing industry data and insights for members, the general public and on a contract basis. The association operates offices in 23 centres around the nation providing a wide range of advocacy, business support including services and products to members, technical and compliance advice, training services, contracts and stationary, industry awards for excellence, and member only discounts on goods and services. - ii -

4 1. INTRODUCTION On 10 September HIA were provided the opportunity to provide feedback on Building Industry Fairness (Security of Payment) Amendment Regulations 2018 (BIF Amendment Regulation). While HIA supports a number of measures proposed by the BIF Amendment Regulations, significant concern remains regarding moves to limit the materials that can be submitted during the adjudication process which HIA believes could have a number of unintended consequences. HIA also suggests that this amendment process provides an opportunity to remedy matters arising from the Queensland Building and Construction Commission Regulation HIA provides our comments below. 2. REPSONSE TO PROPOSED REGULATIONS 2.1 CPD FOR ADJUDICATORS HIA is aware of a number of dubious decisions made by Adjudicators and have made complaints on behalf of HIA members regarding these particular decisions. In response the QBCC Registrar has indicated to HIA that they have little ability to take action against such Adjudicators. In this context HIA supports the principle that Adjudicators should be appropriately qualified with requirements regarding ongoing education. HIA would not oppose measures that would provide the QBCC Registrar with additional disciplinary powers in relation to Adjudicators. Many Adjudicators are registered solicitors or barristers however the discussion paper makes no mention of whether existing CPD requirements could count towards CPD points as an Adjudicator. This requires clarification. 2.2 ADJUDICATION GRADING HIA does not oppose this proposal. 2.3 MAXIMUM FEES HIA does not oppose the proposed maximum fees to be paid to an adjudicator for claims made to $25,000. HIA notes that these are of similar value to those already available to an adjudicator CONFLICT OF INTEREST HIA supports the proposed provision in relation to conflicts of interest. 2.5 LIMITATIONS ON SUBMISSIONS FOR ADJUDICATION APPLICATIONS HIA opposes the proposal to limit adjudication applications and respondent submissions. HIA has a number of concerns with the approach. Firstly, this proposal will affect a significant proportion of adjudications. Based on QBCC Annual Reports the majority of claims are under $25, As such a cautious approach should be taken. Secondly, the proposed approach unduly impacts the natural justice rights of parties to a payment dispute. Parties are entitled to make their case whether that takes 2 pages or 30 pages. The Regulator has no role in making a judgement as to the appropriateness of the approach taken by the parties to a dispute. Finally, the proposed approach will inevitably result in evidence that is imperative to an application, as well as being highly relevant to an adjudicator s decision being excluded, unfairly prejudicing the parties. As such a blanket exclusion is inappropriate % Page 4 of 7 Proposed BIF Amendment Regulation

5 10 page limitation There is no justification in support of the proposed 10 page limitation. The proposal would appear to be completely arbitrary. Further, it is overly simplistic to assume the value of a claim is indicative of the complexity of the matter. Matters under $25,000 may require more than 10 pages. The proposed regulation notes that this 10 pages does not include the contract, payment claim and other matters. If this regulation is to proceed HIA would argue that witness statements and/or statutory declarations should also be excluded. Text Messages There is an inherent contradiction between the proposed regulations and the Building Industry Fairness (Security of Payment) Act 2017 (BIF Act). The proposed regulation states that the following will not form part of the 10 page submission limitation: (a) the contract between the parties to the adjudication; (b) the payment claim and related documents; (c) the payment schedule and related documents; (d) any documents already provided to the other party pursuant to the contract (for example, notices of variation, extensions of time, programs of work etc.); and (e) any expert reports in relation to the matters in dispute. It is possible that a text message or other form of electronic messaging may constitute or contribute to the construction contract within the meaning of the Act but then be prohibited from an adjudication submission by the regulations. Under Section 61(1)(a) of the BIF Act a construction contract can be written or oral, or partly written and partly oral. In addition, section 64 provides that a construction contract means: a contract, agreement or other arrangement under which 1 party undertakes to carry out construction work for, or to supply related goods and services to, another party. Not all construction contracts that fall within the ambit of the BIF Act will come in the form of a written contract. HIA is concerned that the proposed regulation may have the effect of excluding from the rapid adjudication process those contracts entered into, or supplemented by other forms of communication including text messages. It will particularly effect small businesses who, while not ideal, may use such communications as a form of contracts administration. There is no valid basis for their exclusion. Photographs The proposed regulations seek to exclude photographs from adjudication application submissions because these tend not to be relevant to the adjudicator s decision and can be difficult to verify. HIA opposes this proposal. HIA understands that the QBCC internal review unit regularly conduct desktop reviews of major QBCC decisions often based solely on photographs and written submissions, for example, the QBCC internal review unit will, and currently do, review Directions to Rectify decisions about defective work (some of which is quite major and complex) with nothing more than photographs. It would seem contradictory for the QBCC internal review unit to be able to use photographs but prevent parties to a payment dispute from doing the same. If a photograph supplied as part of an adjudication submission is blurry or of no use an adjudicator has the discretion to give it little weight. Page 5 of 7 Proposed BIF Amendment Regulation

6 2.6 DEMERIT POINTS FOR FAILURE TO COMPLY WITH A DIRECTION TO RECTIFY HIA does not oppose the introduction of a sliding scale for the issuing of demerit points for a failure to fix defective work. Whilst HIA understands that the proposed regulation would enable greater consistency in relation to the allocation of demerit points, HIA would suggest that the proposed regulation needs to avoid being overly prescriptive and that each case be judged on its merits. The wording contained in the discussion paper makes note that The QBCC will also be able to allocate additional demerit points (up to 10) regardless of whether it is a first or subsequent offence, based on the nature of the building work involved. HIA understands that this is meant to be instead of. For example, if it is a first offence and is a structural defect, the QBCC may consider it worthy of 10 demerit points or just 4 demerit points. HIA also understands the Regulation would not allow 4 demerit points (for the first offence) and then an additional 10 demerit points due to the nature of the defective work. This approach would be contrary to the BIF Act which imposes a cap on 10 demerit points for a failure to rectify. 3. OTHER AMENDMENTS TO REGULATIONS REQUIRED While not part of the Proposed BIF Amendment Regulation discussion paper, HIA submits the work being undertaken provides an opportunity to fix important parts of the Queensland Building and Construction Commission Regulation 2018 (QBCC Regulation). Please find these issues outlined below. 3.1 DIRECTIONS TO RECTIFY FEE PRESCRIBED BY REGULATION The Queensland Building and Construction Commission Act (QBCC Act) provides for the imposition of an application fee for consumers seeking to have a direction issued for defective or incomplete work (s71j(3)(c)). Currently there is no fee prescribed by regulation for a consumer to make a complaint to the QBCC. In light of member feedback to HIA indicating a noticeable increase in frivolous or spurious complaints lodged by consumers whilst in the middle of a dispute with their builder, HIA submits that the introduction of an application fee into the QBCC Regulations is both necessary and appropriate. For example, it is now quite common that a consumer will make a defective works complaint to the QBCC after they have been served notice that a contractor/builder is taking QCAT action against them (generally for unpaid money). It is very common for fees to be introduced for complaints to statutory authorities. For example, an application fee for a building dispute in QCAT can cost $ and the Fair Work Commission requires a fee of $71.90 to be lodged by an employee seeking to lodge an unfair dismissal application against their employer. 4 HIA would consider that a financial hardship exemption may be appropriate through which the QBCC could have the discretion to waive an application fee. 3.2 QBCC HOME WARRANTY INSURANCE SCHEME QBCC ACT In March 2016 changes were made to the QBCC Act to require the payment of the QBCC warranty insurance premium within 10 days of the signing of a home building contract, previously the payment had to be made within a reasonable time. HIA understands that the objective of the change was to protect the QBCC insurance fund from claims for return of deposit where the building contractor had not paid the insurance premium Page 6 of 7 Proposed BIF Amendment Regulation

7 However, this change has caused considerable administrative and cash flow issues for home builders due to the typically six to nine month delays experienced between signing a contract, title being issued and building work commencing on the consumer s land and the unwillingness of financiers/lenders to fund the consumer s building contract deposit during this period. Moreover there is considerable administrative process and extensive delays in receiving a refund on the premium from the QBCC should the building contract not proceed. HIA understands the requirements have created a significant additional administrative burden for the QBCC with several hundred refund requests lodged every month. As the QBCC insurance is not exposed to any risk until the deposit is paid HIA strongly submit that payment of the premium should be required within 10 days of the deposit on the building contract is paid. In HIA s view this retains the objective of the new requirements while removing the majority of the unnecessary administrative difficulties experienced by all parties that the change has created. 3.3 THRESHOLD FOR BUILDING WORK HIA would like to draw attention to the fact that the $3,300 threshold for what constitutes building work (including all materials, whether supplied by owner or contractor) is the lowest of any Australian jurisdiction. This $3,300 amount is set under the QBCC Regulations. HIA submit that a review of this threshold is long overdue and it should be increased. Page 7 of 7 Proposed BIF Amendment Regulation