The New Mandatory ‘Domestic Building Dispute Resolution Victoria’ Scheme

In response to years of consumer complaints, the state government has implemented major reform in the domestic building area. Most notable is the introduction of a new mandatory dispute resolution process called DBDRV. This article will briefly explain the new procedure and identify some of its potential failings.

Introduction
Over the past year a number of significant and substantial reforms have been made in an attempt to reduce domestic building disputes and improve the protection of consumers of building works throughout Victoria[1].

This article will focus on the Domestic Building Dispute Resolution Victoria (DBDRV) process as, for most lawyers, this is the most notable change. Some other changes include the abolition of the Building Practitioners Board, introduction of new indictable offences under s 16 of the Building Act 1993 (Vic), introduction of a new guide and checklist to be given with all domestic building contracts, increased scrutiny of building surveyors and the establishment of the new Domestic Building Legal Advocacy Service.

Establishment of Domestic Building Dispute Resolution Victoria
DBDRV is established by a new Part 4 of the Domestic Building Contracts Act 1995 (Vic) (“the Act”). The scheme commenced on 26 April 2017. The first point to note is that from that date, proceedings involving a “domestic building work dispute” cannot be commenced in the Victorian Civil and Administrative Tribunal (VCAT) unless a “Certificate of Conciliation” has first been obtained from DBDRV (except in the case of an injunction).

DBDRV is made up of the Chief Dispute Resolution Officer (CDRO), Dispute Resolution Officers (DROs) and technical assessors (assessors). The CDRO is Gina Ralston, formerly the Director of the Dispute Settlement Centre of Victoria. The DROs are mostly trained conciliators and accredited mediators. The assessors are either full time or sessional and include architects and registered building practitioners.

Its Procedures and Powers
In summary (and leaving out many procedures and powers), the process gives rise to the following considerations:

1. All domestic building work disputes (as defined in the Act) are to be referred to DBDRV, via the online application process. Note that there must be an owner involved.
2. A DRO will conduct an initial assessment of the dispute and decide whether to accept or dismiss the referral. If they assess the dispute as not suitable for conciliation, then a Certificate of Conciliation will be issued and the parties may commence proceedings in VCAT.
3. If accepted, a DRO will conciliate the dispute.
4. If no agreement is reached following conciliation, the CDRO will issue a Certificate of Conciliation and the parties may commence proceedings in VCAT.
5. If an agreement is reached, this must be recorded in writing.
6. DBDRV may require a builder to stop work.
7. An assessor may be appointed to assess whether the work is defective or incomplete. An assessor has wide powers, including site access and destructive testing. Any breach by a builder of the Building Act, Regulations or Codes must be reported to the Victorian Building Authority (VBA) and the Victorian Managed Insurance Authority (VMIA).
8. DBDRV may issue a Dispute Resolution Order (Order) to a builder or owner if the parties do not resolve the dispute or if an agreement is reached but has been breached. The Order may require a party to pay money, put money in trust or carry out works. It may include findings by DBDRV which then may be used as evidence in any subsequent proceedings.
9. A person who is required to comply with an Order may apply to VCAT for review of the decision.
10. If an Order is not complied with, then DBDRV may issue a Breach of Order Notice. That may be used as evidence in any subsequent proceedings and also is grounds on which an owner or builder may end the contract.
11. VCAT still has jurisdiction in many areas, including where an owner is not involved, injunctions, works that are not “domestic building works”, insurance appeals, reviews of DBDRV decisions, proceedings once a Certificate has been issued and assessments of loss and damage.

Issues and Concerns
There are a number of gaps and inconsistencies in the legislation, as well as questions about how the process will work in practice. DBDRV’s sweeping powers do not always sit well with its conciliation model. A paper discussing these concerns can be found at https://svensonbarristers.com.au/learning. The issues include (in summary):

1. Delays and prescriptive online application process.
2. What roles will lawyers be allowed to have?
3. Lack of published rules or guidelines making the process uncertain.
4. How will multi-unit developments and Owners Corporations be treated?
5. How will multi-party disputes be treated?
6. Agreements are not enforceable.
7. Issues with releases and potential conflict with s 10 of the Act (which provides that a person cannot sign away a right to take advantage of a warranty in certain circumstances).
8. Orders cannot be made against parties other than the builder or owner, so how does DBDRV deal with a breach of an agreement involving other parties?
9. At present the online application does not allow for claims against a building surveyor. However VCAT cannot accept these without a Certificate.
10. This is likely to be the end of the handyman, as assessors must report anyone working without registration.
11. What sort of Orders will be made – e.g. for works to be completed even if one party has purported to terminate the building contract? An order to hand over the property on payment of money?
12. An Order that a builder must pay money is only to be made where the work is so defective that it is not appropriate for a builder to complete or fix. What about the situation where plumbing work is required to be rectified? A builder cannot legally carry this out. Nor would it (usually) have to pay its own subcontractor plumber to rectify. And an Order cannot be made against a plumber. What are the appropriate orders?
13. If an Order is appealed to VCAT, what role will DBDRV take in the appeal?
14. There are limited grounds on which to appeal an Order (s 63), yet VCAT has a much wider range of orders it may make (s 63(4) and (5)).
15. How will VCAT handle the discrepancy between it exercising its review jurisdiction in respect of an appeal and at the same time exercising its original jurisdiction to hear evidence and make orders, including against other parties?
16. The risk of contradictory findings between DBDRV and VCAT.
17. DBDRV is required to notify and consult with VMIA and the VBA. How will issues of privacy and confidentiality be addressed? What will VMIA and/or VBA do with the information received? Will VMIA notify its brokers?
18. A referral to DBDRV does not stop the clock on the ten year time limit for bringing a claim.

These questions (and others) will undoubtedly be answered in time – whether through VCAT rulings, appeals to the Supreme Court or the practice developed by DBDRV over time. There will undoubtedly be new avenues of work for lawyers, even as some of the traditional sources cease to exist. Teething issues are to be expected, but the government is committed to making the scheme a success. Lawyers can be a valuable part of the process in providing advice, in challenging decisions when they are inappropriate, and in representing parties if conciliation fails.

[1]Legislation includes the Building Legislation Amendment (Consumer Protection) Act 2016 (Vic) and the Building Amendments (Enforcement and Other Measures) Act 2016 (Vic).