BUILDING AMENDMENT 
(RESIDENTIAL BUILDING CONSUMER PROTECTION) BILL 2011
SERIAL NO. 188

LEGISLATIVE ASSEMBLY OF THE 
NORTHERN TERRITORY

MINISTER FOR LANDS AND PLANNING

EXPLANATORY STATEMENT

GENERAL OUTLINE

This Bill amends the Building Act. 

The purpose of this Bill is to establish a Home Warranty Insurance scheme, (now referred to as Residential Building Insurance (RBI)), and for the provision of approved fidelity fund schemes, which offer protection similar to RBI. 

The proposed scheme for insurance and approved fidelity funds will offer cover against financial loss to owners and subsequent owners against defective residential building work where they are unable to seek recovery from the builder responsible because the builder has died, disappeared, become insolvent or has lost registration. The type of registration loss this applies to, is proposed to be prescribed by regulation. That type of cover (where an event must occur first), is known as ‘last resort’. This means that the owner of residential building work will be required to seek rectification of the defective or incomplete building work from the builder, if an event has not occurred, through relevant dispute resolution processes. The dispute resolution process proposed in this Bill is designed to effectively ‘close the gap’ between first resort cover and last resort cover, as it will enable the speedy resolution of disputes where a builder is still operating. 

The insurance and fidelity fund cover is part of a package that also consists of implied consumer guarantees, and an effective dispute resolution process that consumers may access if the builder remains operational (i.e. has not become bankrupt, died, disappeared, or lost registration). 

The Bill proposes to establish a new Division 3C in existing Part 3, to manage disciplinary action for builders that contravene a decision to rectify defective building work.

The Bill also proposes to establish a new Part 5A; separated into six divisions that provide for different components of the consumer protection package. 

Proposed Division 1 deals with the general matters of the application of new Part 5A such as the definition of residential builder, prescribed building work and current owner.

Proposed Division 2 provides for the consumer guarantees implied into residential building work that is prescribed by regulation. It is noted that the consumer guarantees are implied into work carried out by building contractors that build for consumers, building contractors that build on land they own (referred to as ‘developers’), and owner-builders.

Proposed Division 3 provides for matters relating to RBI, such as approval by the Minister for a person to operate as an RBI provider, annual reporting requirements, and directions the Minister may give to approved insurers. 

Proposed Division 4 provides for matters relating to fidelity fund schemes, such as approval by the Minister for a person to offer fidelity certificates for residential building work, the prudential standards, and compliance with those standards, and powers of the Minister in relation to an approved fidelity fund scheme. 

Proposed Division 5 provides for matters relating to the auditors and actuaries of approved fidelity fund schemes, such as outlining the roles and establishing the obligations, notification requirements and other matters relating to those appointments. 

Proposed Division 6 establishes a new consumer guarantee dispute resolution process and creates the appointment of a person to be the Commissioner of Residential Building Disputes (‘the Commissioner’). Only owners of a residential building may apply to the Commissioner for the determination of a dispute with a builder, however, a builder may apply to the Commissioner for the appointment of a suitably qualified person for inspection of building work, to determine whether the building work complies with the new consumer guarantees. This will provide an avenue for builders accused of carrying out defective work to obtain an independent assessment of the building work. 

The Bill also amends certain provisions in the existing Act to give effect to the substantive changes attributable to this Bill, such as the deletion of existing section 61. Existing section 61 provides for the requirement to obtain a Home Building Certification Fund policy, which will be repealed by this Bill. 

The following should be noted in relation to the notes on clauses: 

·	A reference to a ‘person’ includes a reference to a body corporate (such as a company);
·	A reference to the Minister, is a reference to the Minister responsible for the administration of the Building Act;
·	Divisions 4 and 5 of proposed Part 5A, which are provisions concerning fidelity fund schemes and auditors and actuaries of fidelity fund schemes, have been directly modelled on the relevant provisions of the Building Act 2004 (ACT) as fidelity fund schemes for residential building cover is unique to the ACT. All legislative provisions from that Act in relation to fidelity fund schemes, including the provisions concerning the auditors and actuaries of those schemes, have been included in this Bill unless they were deemed suitable for inclusion in the Regulations (for instance, where the matters were more procedural rather than substantive in nature);
·	The ACT legislation sets out the matters relating to fidelity fund schemes in statutory instruments, separate from the Building Regulations 2006 (ACT). Those instruments are known as ‘disallowable instruments’ in the ACT and are required to be laid before the Legislative Assembly and can be disallowed. This is why the approach proposed in this Bill is to have those matters in the Building Regulations (NT), as regulations must be laid before the Northern Territory Legislative Assembly and may be disallowed because of the operation of section 63 of the Interpretation Act (NT);
·	Some provisions in relation to RBI in this Bill have also been modelled with regard to equivalent provisions in the Building Act 2004 (ACT) in relation to RBI;
·	Some of the new offences created by this Bill are specified to be ‘regulatory offences’. Regulatory offences are different to simple offences as, generally speaking, the part in the Criminal Code Act (NT) relating to criminal responsibility does not apply, which means that some mental elements are not required to establish the commission of an offence, and that conduct alone may be sufficient. The reason for the inclusion of the regulatory offences is on the basis that those provisions were directly based on the provisions in the Building Act 2004 (ACT) that provides for ‘strict liability’ offences, which are essentially equivalent to regulatory offences in the Northern Territory; 
·	The maximum amounts of the new offence provisions, in relation to the fidelity fund schemes, have been modelled on the ACT legislation; however, they have been adapted slightly to be consistent with the existing Building Act (NT). The ACT legislation prescribes some more serious penalties, such as imprisonment, which are not proposed to be incorporated in this Bill. 

NOTES ON CLAUSES

Clause 1. Short Title

This is a formal clause, which provides for the citation of the Bill. 

The Bill when passed will be cited as the Building Amendment (Residential Building Consumer Protection) Act 2011. 

Clause 2. Commencement

This clause provides for the commencement of the Act on a day fixed by the Administrator and notified by publication in the Gazette. 

Clause 3. Act amended

This clause specifies that this Bill amends the Building Act. 

Clause 4. Section 4 amended

Definitions have been included to reflect the amendments of this Bill and to provide further clarification of existing terms not previously defined in the Building Act. 

Clause 5. Part 3, Division 3C inserted 

This clause inserts proposed Division 3C in Part 3. Proposed Division 3C deals with the disciplinary action for a contravention of a decision by the Commissioner about the rectification of defective building work by a builder. 

Proposed section 34X provides that this new division applies where the following occurs: 

·	a decision has been made by the Commissioner of Residential Building Disputes (the Commissioner) about 	a consumer guarantee dispute that a residential builder must rectify defective prescribed residential 		building work; and
·	the builder has contravened that decision; and, 
·	the contravention is specified by regulation to be professional misconduct. 

It is intended that the Regulations will specify that a builder is taken to contravene a decision by the Commissioner only if they have not applied for a review of that decision, within the relevant time. An explanation of the functions of the Commissioner may be found below in the notes on proposed Division 6, in clause 7. 

This provision makes it clear that this Division does not apply to owner-builders, as they cannot be subject to professional disciplinary action. 

Proposed section 34Y provides that the Board must satisfy itself that all of the circumstances in 34X(1) apply and if they do, the Board must decide to take certain disciplinary action. This provision also makes it clear that the Board is not required to conduct an inquiry under existing Division 3A. The Board is only required to decide what disciplinary action is appropriate if all the circumstances in 34X(1) are present and must make an entry in the Register about what action is taken. 

The note to this subsection makes it clear that if the Board suspends or cancels a registration under proposed section 34Y, existing section 34VB applies, which means that the builder must deliver their registration certificate to the Board within 14 days. In addition, this note explains that where a builder has had their licence suspended, existing section 34W applies, which means that the effect of the suspension is the same as if the licence had been cancelled.  

Proposed section 34Z provides that after the Board has decided what disciplinary action should be taken, it must give written notice to the residential builder and the Director of Building Control setting out the reasons for the decision, and the procedure for commencing an appeal under Division 4. The Board must further give notice of the decision to the Commissioner and to the person who applied to the Commissioner for a decision about the consumer guarantee dispute. 

Clause 6. Section 35 amended

This clause amends existing section 35. The proposed amendment provides that a decision under proposed section 34Y(1) or (2) in proposed Division 3C of Part 3 is an appealable decision. 

Clause 7. Part 5A inserted 

Part 5A - Prescribed residential building work – consumer protection

This clause inserts proposed Part 5A which provides for different components of the consumer protection package. The components include consumer guarantees, approved RBI and fidelity fund schemes, and a statutory dispute resolution process for prescribed residential building work.

Division 1 – Preliminary matters

Proposed section 54A provides that this Part applies in relation to prescribed residential building work carried out, or to be carried out by a residential builder, except in relation to building work carried out, or to be carried out, in relation to a building owned by a public authority. 

Proposed section 54AB defines ‘prescribed residential building work’ and ‘residential builder’ for the purpose of this Part. Proposed subsection 54AB(3) makes it clear that the definition extends to contracting builders, developers and owner-builders that are either no longer registered, or no longer have an owner-builder certificate in force. 

Proposed section 54AC provides that it is an offence for a builder to carry out prescribed residential building work unless there is a policy of RBI or a fidelity certificate in force and if a residential building contract is required, the builder has given the owner an RBI policy document or fidelity certificate (which is evidence of the cover). The section also provides that a builder must not demand or receive any payment under a residential building contract unless an RBI policy or fidelity certificate is in force and the builder has given the owner a RBI policy document or fidelity certificate (which is evidence of the cover).  

Proposed section 54AD defines ‘current owner’ for the purpose of this Part. The definition extends to an owner that has contracted with a building contractor, a person who is a successor in title to a contracting owner or a successor in title to a developer or owner builder. This definition does not extend to developers and owner-builders, only successors in title to such builders. The regulations may also specify another person to be a current owner for the purpose of this Part. 

Division 2	Consumer guarantees for prescribed residential building work	

Proposed section 54B provides for consumer guarantees taken to apply to all residential building work that is prescribed by regulation for this proposed Part, carried out by a residential builder. This proposed definition of residential builder extends to building contractors, owner-builders and building contractors that carry out work on land owned by them (‘developers’). The guarantees are implied into the work that has been carried out by the builder, as opposed to being implied into the building contract. This is on the basis that it is intended that the Regulations will prescribe certain work that does not require a residential building contract to be compliant with these consumer guarantees (such as Class 2 buildings – units). 

The guarantees include the following: 

·	the materials supplied by the residential builder will be new unless otherwise stated in the contract (this 		does not apply to owner-builders, developers, or contracting residential builders that are carrying out work 	under a contract that specifies that they do not have to be new);
·	the builder will build in accordance with the Building Act, the Regulations and other laws in force in the 		Territory and will carry out that work with reasonable care and skill and in a proper and workmanlike 		manner and in accordance with the plans and specifications; and, 
·	if applicable, will complete the work by the date or within the period of time specified in the residential 		building contract. If there is no residential building contract for the work, the work must be completed within 	a reasonable time. 

The period of time that the consumer guarantees have effect for will be prescribed by regulation. It is anticipated to be six years for structural components and two years for non-structural. 

Proposed section 54BA(1) provides that a contracting residential builder must include the consumer guarantees in each residential building contract the builder enters into. A contravention of this provision may result in a maximum penalty of 100 penalty units.  

Proposed section 54BA(2) provides that of a provision of a residential building contract that purports to ‘contract out’ of the provisions by restricting or removing the rights of a person in relation to a consumer guarantee or another matter relating to the contract required by regulation, is of no effect. Similarly, a residential building contract that purports to require a party to be referred to arbitration is of no effect. The parties are permitted to enter into an agreement to arbitrate certain matters but only where the following conditions exist:

·	after the dispute has arisen; and, 
·	the dispute is not a consumer guarantee dispute; and, 
·	only in an agreement separate to the residential building contract. 

Other jurisdictions also specifically prohibit the use of arbitration clauses in residential building contracts, as arbitration is not considered appropriate for the resolution of most consumer disputes. This provision does enable parties to enter into an arbitration agreement but only after the dispute has arisen, and outside of the residential building contract. This is to ensure the consumer is given the opportunity to be aware of the type of agreement they are entering. Similarly, there is a restriction on parties agreeing to arbitrate where the matter relates to a consumer guarantee dispute because those matters are to be considered by the Commissioner. 

Proposed section 54BB provides that the current owner (which includes a successor in title) of a residential building, is entitled to the benefit of the consumer guarantees during the period that the consumer guarantees have effect for. This means that where a consumer sells the property, new owners (known as successors in title), are also entitled to the benefits of the consumer guarantees (during the period of time they will be prescribed to run). 

Proposed section 54BC makes it clear that the provisions in this Division do not affect other rights a current owner may have under any other law in force in the Territory that deals with the protection of the rights of consumers in relation to the provision of goods and services in connection with building work. 

Division 3	Residential building insurance provided by approved insurers	
 
Proposed section 54C defines residential building insurance generally. It is defined as insurance that indemnifies the beneficiary against financial loss incurred because a residential builder has either failed to complete the building work, or has contravened a consumer building guarantee and the builder has either died, disappeared, become bankrupt or insolvent or the builder’s registration has ceased for a reason that may be specified by regulation. 

Proposed section 54CA provides that the Minister may authorise specified insurers to issue authorised RBI policies. Therefore, Ministerial approval is needed before a person is authorised to issue policies of RBI for residential building work in the Northern Territory. 

Proposed section 54CB describes the criteria for an authorised RBI policy. This section also proposes that it is an offence for an approved insurer to make misrepresentations; for instance, that an insurance policy issued, or to be issued, is an authorised RBI policy if they are aware that it is not authorised. 

Proposed section 54CC provides that an authorised insurer may specify in a policy of RBI the provisions it considers appropriate for the policy, and the premium payable by a residential builder under the policy. The policy must provide for a minimum amount of cover as prescribed by regulation and any other provisions required by regulation. The provision also provides for the submission of the proposed policy to the Minister and how authorised RBI policies operate where a provision included in a policy is not approved or is inconsistent with the Act, Regulations, or a direction by the Minister. Such provisions are specified to be of no effect. 

Proposed section 54CD provides that when an RBI policy is issued for prescribed residential building work, the insurer must give the residential builder who will carry out the work, a policy document in the approved form. That document is evidence of the insurance contract between the parties and is referred to as an ‘RBI policy document’. 

Proposed section 54CE provides for a duty of an approved insurer to report information about claims for RBI policies to the Minister.  

Proposed section 54CF provides for a duty of an approved insurer to notify the Minister where they cease to be an insurer if the following occurs: 

·	The person ceases to be a body corporate authorised under the Insurance Act 1973 (Cth) to carry on 		insurance business; 
·	The person ceases to be entitled under a law in force in the Northern Territory to carry on business in 		connection with the provision of insurance.

The person referred to above must notify the Minister (in writing) within 7 days. Failure to comply with that notification duty is a regulatory offence. 

Proposed section 54CG enables the Minister to give general directions to approved insurers, such as, certain provisions that must be included in an RBI policy. This is to ensure that there is a satisfactory minimum level of cover provided in authorised RBI insurance policies. 

Proposed section 54CH provides that it is an offence for a builder to give misleading information (or a document containing information the builder knows is misleading), to an insurer. This offence is to provide deterrence to builders from providing misleading information that may affect an insurer’s decision to issue a policy. 

Proposed section 54CI provides that an insurer is not entitled to avoid liability under an authorised RBI policy only because the person gave the insurer misleading information, which may have contributed to the policy being issued. 

Proposed section 54CJ specifies certain matters relating to approved insurers and authorised RBI policies that may be provided for by the Regulations. The Regulations will contain detail, such as, the beneficiaries that may be covered by the policies, how notifications must be made to insurers, recovery by an approved insurer of an amount paid by the insurer and several other matters considered necessary for the legislative scheme to operate effectively.

Division 4 	Fidelity certificates and approved fidelity fund schemes

Proposed section 54D defines fidelity certificate and connects the operation of fidelity certificates with the general provisions in Division 1. The definition is almost identical to the general description of RBI. This is because both RBI policies and fidelity fund certificates are to provide cover with respect to the same matters (and the same level of cover), however, because of the structure of fidelity fund schemes, there are technical differences between the two types of products. The fidelity fund scheme provisions are derived from the Building Act 2004 (ACT) as stated earlier. 

Fidelity fund schemes are comprised of a discretionary trust managed by trustees. Accordingly, the cover they provide is not ‘insurance’. Insurance in Australia is regulated by the Insurance Act 1973 (Cth) and administered by the Australian Prudential Regulation Authority (APRA). As the legal structure of the fund does not come within the ambit of insurance regulation, it was considered necessary by the ACT legislators to provide for certain safeguards so that the fidelity fund schemes would operate in a very similar way to residential building insurance cover. This is the purpose for the provisions in this proposed Division, and Division 5, and associated Regulations. 

Proposed section 54DA entitles the trustees of a fidelity fund scheme to apply to the Minister for approval of the fidelity fund scheme. It also provides for how the application must be made, which must include all information required by the approval criteria. The approval criteria are determined by the Minister by regulation. This provision also specifies the matters that must be dealt with by the approval criteria (in the Regulations). The Regulations are able to adopt all or part of a law in force in the Territory (which includes Commonwealth legislation as it may also be in force in the Territory i.e. the Insurance Act 1973 (Cth)) or all or part of a document. The document may be as in force or existing at a particular time or time to time, with or without changes for the purposes of the approval criteria. The reference to document means that other instruments and documents that may not necessarily be part of a law in force in the Territory may be adopted. An example of a document that may come within the scope of this provision is an Australian Standard. 

Proposed section 54DB provides that the Minister is entitled to require (in writing) the trustees of a fidelity fund scheme to give further information or documents necessary for the Minister to make a decision about approval. It further provides that the Minister may require the trustees make a statutory declaration about the information in the application. This provision also provides that the Minister may give the approval subject to conditions. This provision also provides that the Minister may refuse to approve the scheme or require the scheme to be amended to comply with this Act before it is approved. It is noted that a reference to ‘this Act’ in this provision, includes a reference to statutory instruments in force under the law, such as the Regulations or other adopted instruments because of the operation of section 17 of the Interpretation Act (NT) and the definition of statutory instrument (also found in section 17 of that Act). In addition, the provision makes it clear that a condition placed on the scheme’s operation may be expressed to take precedence over something specified in the prudential standards. 

Proposed section 54DC provides that the Regulations may prescribe prudential standards for this Bill relating to prudential matters. Prudential matters are matters that relate to the trustees conducting the scheme’s affairs in a way that keeps the scheme’s financial position sound and with integrity, prudence, and professional skill. This provision also lists the matters the prudential standards may provide for, such as, the continuing eligibility of a person to be a trustee, matters in relation to the capital adequacy of the scheme, valuation of liabilities, effectiveness of risk management strategies and techniques and requirements for giving information about the payment (or refusal) of claims. A regulation prescribing prudential standards may also provide for the exercise of discretions under the prudential standards (such as approving, adjusting, excluding or imposing requirements on an approved scheme) and may also adopt a law in force in the Territory, or all or part of a document as in force at a particular time or from time to time.  

Proposed section 54DD provides that it is a regulatory offence if a trustee does not ensure the scheme complies with the conditions for the scheme’s approval and the prudential standards. 

Proposed section 54DE provides that the Minister may require the trustees of the scheme to comply with a provision of the prudential standards, give the Minister information about the liabilities and potential liabilities of the scheme, and may suspend or cancel the approved scheme. The provision also makes it clear that regulations may be made about the procedures for those matters and the consequences of a failure by the trustees to comply with a matter required by the Minister. 

Proposed section 54DF provides that if the Minister suspends or cancels the approval of a fidelity fund scheme under proposed section 54DE, the Minister is entitled to apply to the Supreme Court. The Supreme Court may make any orders it considers just (including winding up the scheme and orders about what should happen with the assets and liabilities of the scheme). 

Division 5		Auditors and actuaries of approved scheme

Proposed section 54E provides for the appointment of auditors and actuaries of a fidelity fund scheme. Trustees of an approved scheme must apply in writing to the Minister to seek endorsement of a person to act as the auditor and a person to act as the actuary of the scheme. It entitles the Minister to approve or refuse the proposed appointment. The Minister may only approve the appointment if satisfied the person meets the eligibility criteria for appointment (which will be specified in the Regulations). The appointment of the auditor and actuary can only take effect after the appointment has been approved and no person is currently appointed to the position. This provision also provides that to comply, the trustees must appoint another person within six weeks to the position of auditor or actuary if the auditor or actuary ceases to act. Regulations may be made about matters to do with the application, approval, revocation of approval, notices and ceasing to act in an appointment. 

Proposed section 54EA describes the auditor’s role, in relation to an approved scheme. The things the auditor is required to do include the following:

·	To exercise the functions of an auditor (as will be specified in the prudential standards in the Regulations);
·	To find out and report on whether the trustees of the scheme are complying with the prudential standards;
·	To prepare and give to the trustees of the scheme, the reports that are required by the prudential 			standards (which will be specified in the Regulations);
·	To give the trustees the certificates required by the prudential standards (as specified in the Regulations), 	relating to the scheme’s accounts.

This provision clarifies that a certificate given by the auditor (as required by the Regulations relating to prudential standards), must contain statements of the auditor’s opinion on matters the prudential standards require the certificate to contain. 

Proposed section 54EB describes the actuary’s role. The things that the actuary is required to do include the following: 

·	To exercise the functions of an actuary (as will be specified in the prudential standards in the Regulations);
·	Prepare and give to the trustees of the scheme the reports required by the prudential standards. 

Proposed section 54EC creates an offence for an auditor or actuary of an approved scheme where they do not comply with the prudential standards to the extent that it relates to the performance of the functions of the position. 

Proposed section 54ED creates an offence where either the auditor or the actuary forms the belief that the scheme is insolvent, or there is a significant risk that it will become insolvent and they do not notify the Minister within 7 days of forming that belief. In addition, where the auditor or actuary of the scheme form the belief that the trustees have contravened the Building Act or another law in force in the Territory in relation to the scheme, they must notify the Minister within 7 days of forming that opinion to avoid liability under this section.

Proposed section 54EE creates an offence where an auditor or actuary (either presently appointed or a past appointee), does not give required information to the Minister, if the Minister has given written notice to that person. 

Proposed section 54EF entitles the Minister to give notice to the trustees (in writing) that they appoint a person to be a special actuary. The purpose of a special actuary is to investigate the scheme’s liabilities at a certain period and to give the Minister a written report within a specified time. This provision also makes it clear that the appointment of the special actuary is to be at the scheme’s expense and the person proposed to hold the appointment must meet the eligibility criteria, which will be specified by the Regulations. 

Proposed section 54EG creates a regulatory offence for a trustee to not give the Minister a special actuary’s report within 30 days after the trustees have been given notice under proposed section 53EF, unless the Minister permits further time in writing. 

Proposed section 54EH creates a regulatory offence for the trustees to not make necessary arrangements so that the auditor, actuary or special actuary can do the things they are required to do for the scheme. 

Proposed section 54EI provides that an auditor, actuary or special actuary for an approved scheme does not incur civil liability under the Defamation Act  for an omission done honestly and without negligence for this Act (the reference to this Act includes the Regulations and other incorporated instruments as discussed earlier). 

Division 6 Commissioner and consumer guarantee disputes

Proposed section 54F provides that the Minister may appoint a person to be the Commissioner of Residential Building Disputes. Proposed subsection (3) provides that if the Minister does not appoint someone to be the Commissioner, the person that holds or occupies the office of Commissioner of Consumer Affairs is the Commissioner. 

Proposed section 54FA describes the functions and powers of the Commissioner. The primary function of the Commissioner is to hear and decide applications relating to consumer guarantee disputes. Another important function is the Commissioner’s role in facilitating mediation and conciliation between the parties, which may assist parties to resolve a dispute by agreement, without the need for the Commissioner to use his or her powers to decide matters. 

Proposed section 54FB allows both a consumer and a residential builder, to apply to the Commissioner for a report about the residential building work, where an allegation has been made that the building work is defective. The Commissioner has the power to appoint a person with appropriate qualifications and expertise to conduct a technical inspection of the building work. Regulations about the matters in connection with the technical report may be made, which provide for certain matters, including any fees payable. 

Proposed section 54FC enables a current owner (includes a successor in title to a contracting owner, developer or owner-builder) to apply to the Commissioner for a decision concerning a consumer guarantee dispute, if it is made within the prescribed period that the consumer guarantees apply for.

Proposed subsection (2) makes it clear that a consumer guarantee dispute is a dispute between the current owner and a residential builder where there has been an alleged contravention of a consumer guarantee and is in circumstances prescribed by regulation. It is intended that initially, the Regulations will prescribe that applications to the Commissioner may only be made when the contractual relationship of the parties has irretrievably broken down, or where the contract has been completed and the defect has been discovered during the consumer guarantee period (the ‘prescribed effective period’). It is further intended that the consumer guarantee period will be consistent with the period of RBI indemnity and fidelity certificate cover. It is envisaged that the period of time for non-structural defects will be 2 years, and for structural defects, 6 years. It should be noted that the Commissioner’s function to facilitate mediation or conciliation is not limited to only consumer guarantee disputes. The Commissioner will be able to facilitate that type of dispute resolution process for all disputes in relation to prescribed residential building work (such as where the contract is still in existence). 

The implementation of this dispute resolution process is designed to ‘close the gap’ between first resort and last resort RBI. This is because the ‘triggers’ for RBI indemnity and fidelity certificate cover are death, disappearance, insolvency and cessation of a builder’s registration in a manner to be prescribed by regulation. Without the dispute resolution mechanism as proposed by these amendments, consumers would have difficulty in obtaining recourse against builders that carry out defective building work. This is because insurance and fidelity fund cover does not indemnify consumers unless an event such as death, disappearance or insolvency has occurred. If an event has not occurred, consumers (if they cannot reach agreement with the builder) were required to apply to court for redress. The statutory dispute resolution process provided for in this Bill provides an avenue for resolution of such disputes that will be less formal, much less expensive and quicker than applying to court. This is particularly important, as these amendments will close down the Home Building Certification Fund, which indemnified owners in the Northern Territory against non-compliance with the Building Regulations, after an occupancy certificate had been issued for the work. Any policies issued prior to the HBCF close will continue to run for the period of indemnity on the cover and will not be affected by the fund closing down, this is known as the ‘run off’ period.   

Proposed section 54FD provides that a dispute with the Commissioner must be conducted by the Commissioner with as little formality and technicality, and with as much expedition as is possible and appropriate in the circumstances. It further provides that the rules of evidence do not apply, however the rules of natural justice do. The rules of natural justice mean that the Commissioner must conduct the determination applications fairly and impartially. This means that the Commissioner is an independent decision-maker and not an advocate for either party to a dispute. 

Proposed section 54FE makes it clear that disputes concerning aspects of the contract other than the consumer guarantees, may be dealt with in the same way they are dealt with presently. For example, disputes about payments may still be dealt with under the Construction Contracts (Security of Payments) Act and applications may be made to a competent court for the resolution of a contractual dispute (that is not a consumer guarantee dispute). 

As the builder may not apply to the Commissioner for resolution of a dispute that he or she wishes to initiate, other alternatives in addition to court litigation remain available to the builder, such as adjudication under the Construction Contracts (Security of Payment) Act (NT). That legislation provides for rapid resolution of payment disputes that may arise under a construction contract (which includes residential building work), by qualified adjudicators. The Construction Contracts (Security of Payment) Act (NT) legislation was enacted to protect the money supply chain during the construction process by providing for speedy resolution of payment disputes. As an example, a builder could initiate adjudication under that Act as an alternative to court, or in parallel with court proceedings, to seek adjudication in the circumstances where an owner refuses to make a payment under a residential building contract.  

Proposed subsection (3) provides that the Commissioner may deal with a matter that is the subject of proceedings in a court or tribunal, (for the aspect of the dispute relating to the consumer guarantees), unless a particular prescribed circumstance applies, or a court or tribunal orders that the Commissioner may not, or both parties to the consumer guarantee dispute agree in writing that the Commissioner adjourn the consideration of the dispute until the proceeding has been decided, or another event specified in the agreement has occurred. Proposed subsection (4) makes it explicit that the Commissioner must take into account any decision that has been made by a court, tribunal or person.

Proposed section 54FF provides that regulations may provide for matters relevant to the Commissioner’s functions or powers or in relation to consumer guarantee disputes. 

Clause 8. Section 59 amended

This clause amends existing section 59 to provide for the new residential building insurance and fidelity certificate requirements for prescribed residential building work. Amended section 59(1B) will provide that an approved form that evidences the policy of residential building insurance or fidelity certificate cover is in force, must be provided to the certifier prior to the certifier granting a building permit. This is so that the certifier is able to confirm that the Act and Regulations have been complied with in relation to the insurance or fidelity fund requirements, prior to issuing the building permit. 

Clause 9. Section 60A amended

This clause has been amended to reflect the RBI policies and fidelity certificate requirements. The existing provision referred to 48J, which was a provision in the Building Amendment Act 2004 that never commenced. 

Clause 10. Sections 61, 177 and 178 repealed 

This clause repeals existing sections 61, 177 and 178. 

Existing section 61 was the enabling provision for the approved policy of insurance against non-compliance with the Regulations, known as the Home Building Certification Fund (‘HBCF’). The repeal of this section repeals the requirement for and the approval of the HBCF.  

Existing sections 177 and 178 relate to transitional arrangements for the Building Amendment Act 2004 and require repealing as Part 4C of the Building Amendment Act 2004 was never commenced.

Clause 11. Part 19  inserted 

This proposed part provides for the transitional matters that apply in relation to the commencement of this Act.

Proposed section 190 defines certain terms that are relevant to this part of the amendment Bill. 

Proposed section 191 provides that where a building permit is in force before commencement day, the building permit and HBCF policy (and residential building contract if one had been entered into) continue in force as the former laws continue to apply (this means the work will not be subject to the consumer guarantees or the dispute resolution process).  

Proposed section 192 provides that for prescribed residential building work that requires a residential building contract, if before commencement day a residential building contract and insurance policy were in force, but no building permit had been granted, a certifier may issue a building permit in accordance with the former laws. If the certifier issues a building permit on this basis, the certifier must make a note on the building permit stating that the permit has been granted under the transitional provisions and the former laws continue to apply to the building work (this means the work will not be subject to the consumer guarantees or the dispute resolution process). This section also makes it clear that if there is only a residential building contract in force before commencement day, and no HBCF policy is in force, the new laws will apply in relation to the building work. 

Proposed section 193 provides that where a residential building contract is not required in relation to the building work (for instance the work relates to a class 2 building), if before commencement day an HBCF policy is in force and no building permit has been granted, a certifier may issue a building permit in accordance with the former laws. If the certifier issues a building permit on this basis, the certifier must make a note on the building permit stating that the permit has been granted under the transitional provisions and the former laws continue to apply to the building work (this means the work will not be subject to the consumer guarantees or the dispute resolution process). 

Proposed section 194 provides that matters of a transitional nature may be included in the Regulations. The Regulations can have retrospective operation to a day not earlier than the commencement day. Where the regulation has retrospective application, it is taken to not operate to the disadvantage of a person by decreasing the persons’ rights or imposing liabilities on the person. Subsection (5) provides that this section, and any regulations made under it will expire one year after commencement day.

Clause 12. Schedule 1 amended 

This clause proposes to amend Schedule 1 of the Building Act by inserting two clauses. Proposed item 55 provides that regulations may be made for matters relating to consumer protection in relation to prescribed residential building work carried out, or to be carried out in relation to a building owned by a public authority. Proposed item 56 provides that regulations may be made regarding information sharing between persons that exercise powers or perform functions under the Building Act (for instance the Director, the Building Practitioner’s Board, and the Commissioner of Residential Building Disputes). 

Clause 13. Act further amended

This is a formal clause that provides for further amendments to the Building Act in the Schedule to this Bill. The further amendments correct inconsistencies as a result of legislation that was introduced in 2004 and was not commenced. Any references to provisions in that legislation are removed by the amendments contained in this Schedule. In addition to correcting inconsistencies, references to other provisions in the Act as a result of the amendments proposed in this Bill are provided for.  	

Clause 14. Act amended 

This clause amends the Building Amendment Act 2004. 

Clause 15. Sections 17 and 21 repealed
 
This clause repeals sections 17 and 21 of the Building Amendment Act 2004. Section 17 of that Act inserted Parts 4A, 4B and 4C, but only Parts 4A and 4B were commenced. Part 4C, which relates to Home Warranty Insurance, is being replaced by Part 5A, Divisions 3 and 4, which are inserted into the Act by clause 7 of this Bill. This clause therefore repeals section 17 to the extent that it remains in force in relation to Part 4C, which has been superseded. Section 21 of the 2004 Amendment Act, which was also not commenced, relates to the repeal of s 61 of the Building Act. That section has also been superseded by clause 10 of this Bill.