Victoria: A historical case study of regulatory failure in the building control industry

This article is written by Stephen Kip and was originally published on LinkedIn on 11 June 2019.


Phase 1: Politicians and regulators introduce major reforms

1993

When the concepts of micro-economic reform and the ‘Model Building Act’ were introduced with bi-partisan support in Victoria in the early 1990’s (particularly the introduction of private buildings surveyors and registration of building practitioners), regulators and politicians assumed incorrectly that insurers would do the ‘heavy lifting’ and therefore they could take a ‘hands-off’ approach to overseeing this new era of private practitioners. For example, the relevant Victorian Planning Minister in 1993 stated;

“These formal powers (of the regulator) will be complemented by the peer group scrutiny of other builders and building surveyors, and the scrutiny of the insurer. Without good professional standards and acceptable standards of professional practice, insurers will not maintain the insurance cover required by building surveyors on an ongoing basis”.

Phase 2: The problems begin to emerge

Those “acceptable standards of professional practice” described by the Minister in Parliament and intended by government to be followed by building practitioners, were never established or articulated by the regulators, and therefore unacceptable standards evolved due to market and commercial pressures (and human nature).

1999

The Australian Building Codes Board funds research by the Fire Code Reform Centre (FCRC) and this is published in 2000. That research was freely available at that time and is still available on the ABCB website (see https://abcb.gov.au/Resources/Publications/Research/FCRC-Fire-Performance-of-Exterior-Claddings). The FCRC Report discusses the limits of the then Building Code of Australia (BCA) 1996 and the challenges of emerging combustible cladding materials, including composite panels and expanded polystyrene (EPS).

The FCRC document also included a review of major building fires world-wide as at 1999. One of those was a fire from 1996 at the Te Papa (Museum of New Zealand) where an aluminium composite panel (ACP) cladding system significantly contributed to fire spread during construction of the building.

The FCRC Report therefore confirmed the requirement for strictly enforcing non-combustibility of external walls in multi-storey buildings, unless a fire safety engineering approach and fire brigade consultation occurred.

2000

In early 2000, The Auditor–General of Victoria tabled before Parliament his report; Performance Audit Report No. 64, Building control in Victoria: Setting sound foundations. This report signalled some early audit and enforcement issues as follows:

“1.1.21 We concluded that the initial strategies used to implement performance audits in 1998 were not sufficiently targeted to offer a rigorous and cost-effective mechanism to identify unprofessional conduct. In addition, these strategies did not meet the legislative intent for performance audits which expected the examination to include scrutiny of practitioners’ work, not just their administrative record-keeping, in order to ensure that the work has been competently carried out and does not pose any risk of injury or damage to any person.

1.1.13 Based on the outcome of my Office’s examination, I have outlined various suggestions for improvement after examining the way in which some aspects of the building control framework have been established and administered in Victoria. The potential ramifications of the key findings mean that it is not clear as to whether the most suitable arrangements have been established with regard to some elements of the building control system. Examples relate to practitioner registration, complaint investigation and auditing processes. Many of the weaknesses disclosed in the key findings are systemic in nature but are either permitted by, or not covered by, the legislation.”

“1.1.28 As building surveyors can be dependent on the builder for future engagements, it is conceivable that such arrangements may adversely impact on their independence in terms of challenging building work that may not comply with building standards or building permits. Given this relationship and the small number of building orders referred to the Commission for enforcement by private building surveyors, the Commission should take a more pro-active monitoring role in this regard”.

2002

In 2002, after written submission to the Victorian Building Commissioner, a delegation from the Engineers Australia Society of Fire Safety met with the Building Commission to advise of non-qualified practitioners (including building surveyors) undertaking fire safety engineering designs and not applying fire safety matters in the Building Code of Australia (BCA) in a compliant way, and therefore creating the potential for unacceptable community outcomes. There was no response or follow-up action resulting from the regulator after this meeting.

2005

In 2005, after further written submission to the Victorian Building Commissioner, a delegation from the Engineers Australia Society of Fire Safety again met with the Building Commission to advise of non-qualified practitioners (including building surveyors) undertaking fire safety engineering designs and not applying fire safety matters in the BCA in a compliant way, and therefore creating the potential for unacceptable community outcomes. There was no response or follow-up action resulting from the regulator after this meeting.

2007

In 2007 a fire occurred at 26-28 Shuter Street, Moonee Ponds, Victoria and two people narrowly avoided death. The building was varied from the BCA Deemed-to-Satisfy Provisions (DtS) to allow significant fire safety reductions and was designed by a non-qualified fire safety practitioner (a building surveyor). The Municipal Building Surveyor subsequently served a notice to install fire sprinklers throughout the building (amongst other remedial matters). The subsequent Victorian Metropolitan Fire Brigade post incident analysis (PIA) Report No. 07 0252A recommended;

“That the Building Regulations be amended to— (a) Clearly define the functions of designers in relation to the design of an alternative solution that is intended to satisfy the fire performance requirements of the BCA; (b) Prohibit persons or practitioners, other than registered building practitioners in the category of fire safety engineer, from undertaking designs of building work that are not intended to meet the deemed-to-satisfy provisions, but rather satisfy the fire performance requirements, of the BCA”.

There was no legislative amendment or other government intervention that followed from the regulator after the publication of this PIA.

2009

In 2009, the Engineers Australia Society of Fire Safety wrote to the Victorian Building Practitioners Board, to advise of non-qualified practitioners (including building surveyors) undertaking fire safety engineering designs and not applying fire safety matters in the BCA in a compliant way, and therefore creating the potential for unacceptable community outcomes. There was no response or follow-up action resulting from the regulator after this written submission.

2010

In 2010 a two-storey apartment building was completed in Frankston. The building was almost entirely clad in expanded polystyrene (EPS) now banned by the Minister for Planning for a building of this type and was located in a bushfire prone area. The builder went into liquidation, and due to lack of enforcement by the private building surveyor, the Municipal Building Surveyor (MBS) was required to intervene. The Building Commissioner required the Municipal Building Surveyor (MBS) to withdraw the enforcement action by the MBS ( https://www.theage.com.au/national/victoria/evacuation-of-site-an-overreaction-20100824-13qcw.html and https://www.theage.com.au/national/victoria/residents-of-unsafe-building-ordered-out-by-5pm-20100817-127mn.html). The private building surveyor was subsequently de-registered.

2011

In October 2011 the Victorian State Regulator released a Fact Sheet, which highlighted the non-compliance of ACP’s and EPS as DtS external wall systems. This Fact Sheet remains current, see https://www.vba.vic.gov.au/__data/assets/pdf_file/0013/21271/Fact-sheet-Non-Deemed-to-Satisfy-External-Wall-Cladding-Systems.pdf.

In December 2011 the Victorian Auditor-general released the report; ‘Compliance with Building Permits’ which stated;

“Ninety-six per cent of permits examined did not comply with minimum statutory building and safety standards. Instead, our results have revealed a system marked by confusion and inadequate practice, including lack of transparency and accountability for decisions made. In consequence, there exists significant scope for collusion and conflicts of interest”, and

“In most cases where the fire safety provisions of the BCA applied, the documents lodged with permits examined did not demonstrate sufficient compliance and therefore did not support the building surveyor’s decision to issue a permit.”

2012

In early 2012, the Engineers Australia Society of Fire Safety again met with the Building Commissioner to advise of non-qualified practitioners undertaking fire safety engineering designs and not applying fire safety matters in the BCA in a compliant way, and therefore creating the potential for unacceptable community outcomes.

There was no response or follow-up action resulting from the regulator after this meeting.

In December 2012 the Victorian Ombudsman (George Brouwer) released his report on the Victorian Building Commission. It stated that there had been “maladministration, cronyism and misuse of public funds” including on the Green Building Council role by the Commissioner (see also https://www.theage.com.au/national/victoria/warning-on-thousands-of-buildings-20121212-2babe.html). In Mr Brouwer’s report, tabled in State Parliament, he concluded that ”it could not be stated with any confidence that only competent and suitably qualified and experienced practitioners have been registered to build”, and ”This represents a substantial risk to the public and the integrity of the licensing regime”. The press further reported on this; https://www.theage.com.au/national/victoria/q-and-a-with-building-commissioner-tony-arnel-20120518-1yw2u.html. The Building Commission was then disbanded and replaced by the Victorian Building Authority (VBA).

2014

In early 2014, the Engineers Australia Society of Fire Safety again wrote to the Victorian building regulator (now called the VBA) regarding a range of fire safety matters. No response was ever provided from the regulator after that written submission.

In November 2014 the Lacrosse apartment building at 673-683 Latrobe Street, Docklands caught fire. It was clad in aluminium composite panels (ACP‘s) which did not comply with the BCA.

2015

In February 2015 an apartment building in Hampton caught fire. The subsequent Metropolitan Fire Brigade post incident analysis (PIA) Report No. 1316192 concluded;

“2. The external wall cladding used on the upper residential levels of the building, as well as the façade overlooking Small Street at the rear of the property, was clad with aluminium composite panelling (ACP) and it is unclear how the building was permitted to be constructed using this material. The use of ACP needs to be considered as part of the overall solution in the FER and reviewed by the Building Surveyor.”

In April 2015 the VBA wrote to all registered building surveyors and requested;

“If you are aware that you have been involved in a project as the relevant building surveyor, of a Class 2 apartment building of 3 storeys or more, please review your files to determine the type of cladding used in those projects. If you are aware of a building permit you have issued where Alucobest or any other non-compliant product has been used as the external cladding, please notify the VBA as soon as possible with: the details of the building including the address, whether it was subject to an appropriate alternative solution, and whether you have taken enforcement action.”

In May 2015 the Victorian Auditor-General again reports to Parliament and states;

  • A 2011 analysis published in the Australian Consumer Survey report found that 28 per cent of building and renovating consumers in Victoria reported experiencing problems, with the most common problem reported across Australia being poor workmanship, accounting for 63 per cent of problems.
  • The current regulatory framework also entrenches a long-recognised conflict of interest for private building surveyors who are assessing the compliance of other building practitioners while often also relying on them for work. This undermines the building surveyors’ statutory role.
  • Despite the critical role that building surveyors play in monitoring and enforcing building standards, they are over-represented in disciplinary inquiries, registration suspensions and cancellations, and reoffending.
  • Our audit found deficiencies in the standards and process for assessing applications for registration. The registration system does not provide consumers assurance all registered builders are competent, qualified and of good character.
  •  Building surveyors are over-represented in misconduct inquiries and findings. Between January 2009 and December 2013 nearly 10 per cent of building surveyors appeared before the BPB with all found guilty of at least one offence. The effectiveness of current sanctions is questionable—over 27 per cent of offending surveyors appeared at disciplinary inquiries more than once within the same year. Consumers cannot have confidence that they are protected from misconduct, and that practitioners will be appropriately sanctioned when they offend.
  • Building surveyors play a crucial role in building regulation—they issue building permits and conduct stage inspections to ensure homes are built to minimum standards. However, this important role is undermined by a conflict of interest that arises because surveyors are typically engaged by builders, rather than owners, and they are therefore reliant on builders for ongoing work. This limits the surveyor’s independence to challenge noncompliant work.
  • The Victorian Building Authority has recently begun risk-based performance audit and field compliance programs, but it can’t yet tell if they are effective because it does not have an evaluation framework in place.

In December 2015 the Victorian Government introduced an amendment to the Building Act 1993 to address these now entrenched poor standards of professional practice (and compliance). The relevant Minister stated;

“Professional standards will be reinforced through new codes of conduct for building practitioners. it will be possible for the (Victorian Building) Authority to approve or endorse different codes of conduct for different categories and classes of building practitioner. It is expected that codes of conduct will cover matters such as acting in the public interest, complying with legislative requirements, avoiding conflicts of interest, acting independently, and not performing functions outside competence or areas of expertise. A failure to comply with a code of conduct will be grounds to discipline the building practitioner.”

Since the introduction of these provisions in 2015, no codes of conduct have been released.

2017

In March 2017 an apartment building in Brunswick caught fire. It was completely clad in combustible cladding (ACP and EPS) and the Municipal Building Surveyor served an emergency order for some of the cladding to be immediately removed, amongst other remedial measures.

In March 2017 another apartment building in Dandenong caught fire, and a tenant suffered burns. It was significantly clad in EPS and was designed by a fire safety practitioner (a building surveyor) who was not a registered fire safety engineer.

In July 2017 the Victorian government establishes the Victorian Cladding Taskforce to;

“investigate the extent of non-compliant external wall cladding on buildings State-wide and make recommendations for improvements to protect the public and restore confidence that building and fire safety issues are being addressed appropriately”.

2018

In March 2018, the State government issues the Building Product Safety Alert Use of ACP and EPS as external wall cladding(https://www.planning.vic.gov.au/__data/assets/pdf_file/0014/118400/Building-Product-Safety-Alert-Use-of-ACP-and-EPS.pdf) and Ministerial Guideline No. 14 (https://www.planning.vic.gov.au/__data/assets/pdf_file/0031/118399/Ministerial-Guideline-MG-14-Issue-of-building-permits-ACP-and-EPS.pdf).

2019

In February 2019 the VCAT decision of Justice Woodward on the Lacrosse apartment building is released and states (section numbers and underline added);

“In the course of my findings…, I have found that ACPs did not satisfy the “Deemed-to-Satisfy” (“DTS”) provisions of the BCA by operation of clause C1.12(f) (or on any other basis), and that the opinions of …, the building surveyor expert witnesses to the contrary were unreasonable.” (7)

“otherwise experienced and diligent practitioners were beguiled by a longstanding and widespread (but flawed) practice into giving insufficient scrutiny to the rationale for that practice.” (338)

“While in a sense it goes without saying for expert witness called to prove peer professional opinion, it is nevertheless appropriate to acknowledge that their endorsement of the Relevant Practice was informed and influenced by the fact that they each had each given approval to the use of ACPs in circumstances similar to those facing the relevant building surveyor in 2011. To that limited extent, their evidence might be fairly described as self-serving.” (369)

“Given their level of qualifications and the nature of their responsibilities, it would be fair to expect fire engineers, building surveyors and architects (in that order) to have a better grasp than building practitioners of fire risks and the application of the BCA to those risks.”(301)

“I have set out above how I consider C1.12(f) should be construed. I have also explained why, in my view, a building surveyor is in a good position to question the logic of the putative alternative construction and can generally be expected to take positive steps to clarify any uncertainty. I consider that the contrary position represented by the Relevant Practice is both irrational and unreasonable. There is no evidence of any of the experts, individually or collectively, subjecting the Relevant Practice to robust scrutiny of the kind discussed by Lord Browne-Wilkinson in Bolitho and, perhaps for this reason, it does not withstand logical analysis.” (391)

“The evidence of the knowledge of the combustibility of polyethylene among the building surveyors was in fact mixed. Regardless, any failure to ascertain this most basic information about a substantial element of the material under scrutiny, serves to highlight a fundamental deficiency in the process by which the Relevant Practice developed. Similarly, as senior counsel for the Owners submitted, the widespread use of a product over many years without reported serious incident, is hardly a scientific or rational basis for regarding it as safe (citing asbestos as an illustration of this point).” (396)

In February 2019 the NEO 200 apartment building at 200 Spencer Street, Melbourne caught fire. The non-compliant ACP cladding significantly contributed to the rapid fire spread.

Phase 3: Insurers walk away from building surveyors

2019

In June 2019 insurers are now faced with no auditing or enforcement of insured practitioners by regulators (particularly private building surveyors) and an increasing liability profile based on claims history. There is no real way of differentiating between good and bad practitioners, so insurers walk away from insuring private building surveyors. https://www.abc.net.au/radio/programs/pm/construction-industry-could-stall-due-to-flammable-cladding-risk/11191318, and https://aibs.com.au/Public/News/2019/MemberCommuniqueProfessionalIndemnityInsuranceUpdate.aspx

Phase 4: What next? (more to follow as events unfold)

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