Can you believe it! It has been roughly a year since the majority of construction industry’s most talked about Act in NSW progressively came into effect.

The Design and Building Practitioners Act 2020 (NSW) (“Act”) and the Design & Building Practitioners Regulations 2021 (NSW) (“Regulations”) brought design, engineering and building practitioners working on Class 2 buildings a raft of new legislative obligations and since its enactment, design and engineering practitioners have been informing themselves of all the obligations under the Act and Regulations in order to properly and wholly comply with them as well as any subsequent updates.

For many of those in the industry, this has been a reluctant and at times frustrating journey for design practitioners with complex and costly administration, registration and documentation required to get on top of the obligations and duties under the Act.

Although the Act and Regulations are still only in their infancy, with a steep learning curve for those relevant design practitioners, there have been a number of changes made as the Government works through some of the teething issues and practical complications relating to the Act.

One of the most recent changes has been to the evidence obligations relating to easements and ground anchors. Initially, design practitioners were required to provide evidence of a registered easement over a neighbouring property (other than a public road) for installation of an encroaching ground anchor to be included in the “design practitioners regulated design” for the building work. However, following the Design and Building Practitioners Amendment (Miscellaneous) Regulation 2022 (NSW) (“Amended Regulation”) from 2 March 2022, this evidence requirement has been substantially softened and is now an obligation of the building practitioner to provide. A small but helpful win for design practitioners.

Furthermore, two additional and welcome changes have been made through the Design and Building Practitioners Amendment (Miscellaneous) Regulation (No 2) 2021. Firstly, the Act no longer applies to non-structural fit-out work for commercial and residential spaces within residential mixed-use developments (as this work is now excluded from the definition of “building work” as long as there is a separate development consent).

Secondly, the staged lodgement of “declared designs’” and “design compliance declarations” under the Act have been extended from 30 June 2022 until 30 Jun 2023 – a result of the seemingly unanticipated and presumably unintended time and cost implications of dealing with the complex registration and training for practitioners as well as the documentation and lodgement requirements under the Act. Again, two changes that are assisting design practitioners.

Another recent change, although perhaps not so celebrated by design practitioners, which will come into effect on 1 July 2022, also through the Amended Regulation will be the extension of the expiry date of the current insurance exemption for building practitioners to 30 June 2023 (which would have otherwise expired on 30 June 2022). This makes professional indemnity insurance for design practitioners the continued main sources of insurance in the event of a claim until June 2023 for these projects and therefore brings with it the continued likelihood of design consultants being dragged into proceedings relating to the Act.

It is not only the introduction of the Act itself, and the delay in the requirement for builders to obtain insurance which is concerning design consultants and potentially imposing additional risk, but also the important development in the understanding of the legislative retrospective duty of care under the Act, being to exercise reasonable care to avoid economic loss caused by defects under section 37 of the Act. Initially, there was a widespread view within the construction industry (supported by the Government’s Department of Fair Trading) that the Act and Regulations including the statutory duty of care, are only currently applicable to class 2 buildings or buildings with a class 2 part. However, the scope of the statutory duty of care is separately defined elsewhere in the DBP Act. Section 36 of the Act suggests that the statutory duty of care may also potentially apply to any residential building or portion of a building intended for residential use (i.e. possibly class 1 and class 3 buildings also). This would see design practitioners owing the retrospective duty of care for more far broader range of buildings than just those under class 2 .

The commencement of the Act and Regulations as well as this expansion of the retrospective duty of care obligation, means that we are seeing more contractual obligations relating to the Act not only for class 2 buildings, but also other sorts of commercial and domestic projects, where design consultants are being asked to “warrant” and “indemnify” clients (and others in some cases) for obligations and liabilities under the Act. We are also anecdotally seeing more and more claims being made against design consultants under the Act, usually through amended pleadings that appear to be tacked on as an additional cause of action.

Ultimately, it is good news to see that the Government is reviewing and considering the practical implications of the Act and making changes that do appear to (at least in part) assist design practitioners in their requirements under the Act. However, there is still a need for good risk management and education as the Act and Regulations (and claims under them) evolve. As with all your obligations under the Act and Regulations, as well as the evolving changes (including the extended timeframe for builder’s insurance), it is important to remember that the design or engineering practitioner’s Professional Indemnity (“PI”) insurance is an important resource and risk management tool. Although our colleagues at Planned Cover have started to see policies which contain exclusions stating that all or some obligations under the Act are not covered, this is rare. Most PI insurance policies do not specifically refer to or exclude the Act. PI insurance policies cover you for the provision of professional services noted in the policy schedule (e.g. Architecture/ Engineering). If your experience and professional expertise extended to the provision of services under the Act, and if your policy does not contain any specific exclusions for work under the Act , your PI insurance policy would be expected to cover you for your obligations under it, subject to the other terms and conditions of your PI insurance policy.

Good risk management is not only about insurance, but also making sure that you are carefully reviewing your consultancy agreements for these projects to limit any additional liability and remove any clauses that waive your rights to recover against others. Furthmore, consideration needs to be given to preparing and providing a fully formed brief relating to your services as well as continuing to practice good communication with your clients and detailed and accurate document management for each project.

For more on the Act and developments on the legislation and its interaction with court pleadings, caselaw and consultancy agreements, the activity of the NSW Building Commissioner, and how the obligations under the Act could be expanded in the future, please join us for our next webinar with Paul Bannon and Julian Mellick of Colin Biggers & Paisley Lawyers who will discuss their experience over the last 12 months. Planned Cover State Manager (NSW), Simon Gray will also discuss some of the insurance concerns arising from these obligations.

D&BP ACT (NSW): ONE YEAR ON – TUES 28 JUNE
INFORMATION AND BOOKINGS

Felicity Dixon
Risk Manager
informed by Planned Cover

This article is only general advice in respect of risk management. It is not tailored to your individual needs or those of your business, nor is it intended to be relied upon as legal or insurance advice. For such assistance you should approach your legal and/or insurance advisors.