Wednesday, 29 November 2023

Building Legislation Amendment (Domestic Building Insurance New Offences) Bill 2023

Statement of compatibility

Sonya KILKENNY (Carrum – Minister for Planning, Minister for the Suburbs) (10:47): In accordance with the Charter of Human Rights and Responsibilities Act 2006 I table a statement of compatibility in relation to the Building Legislation Amendment (Domestic Building Insurance New Offences) Bill 2023.

In accordance with section 28 of the Charter of Human Rights and Responsibilities Act 2006 (the Charter), I make this statement of compatibility with respect to the Building Legislation Amendment (Domestic Building Insurance New Offences) Bill 2023 (the Bill).

In my opinion, the Bill, as introduced to the Legislative Assembly, is compatible with the human rights protected by the Charter. I have this opinion for the reasons outlined in this statement.

Overview of the Bill

The purpose of the Bill is to amend the Domestic Building Contracts Act 1995 (Domestic Building Contracts Act) and the Building Act 1993 (Building Act) to improve consumer protection by enhancing requirements for builders to obtain appropriate building insurance.

The Bill amends the Domestic Building Contracts Act to insert two new offences penalising a builder who demands or receives money from or on behalf of a building owner under a major domestic building contract if the builder has not ensured that the domestic building work to be carried out under that contract is covered by the required domestic building insurance.

The Bill amends the Building Act to empower the Victorian Building Authority, or a person authorised by the Victorian Building Authority, to investigate and bring proceedings for a contravention of the new offences. The Bill also provides that builders who are found guilty of contravening either of the new offences may be subject to disciplinary action by the Authority and have their registration suspended or be ineligible to apply for registration for a period of time.

Human rights issues

The human rights protected by the Charter that are relevant to the Bill are the right to privacy in section 13(a), the right to a fair hearing in section 24(1), the rights in criminal proceedings in section 25, the right not to be tried or punished more than once in section 26 and the protection against retrospective criminal laws in section 27.

Power to obtain information or documents

Clause 11 of the Bill inserts new paragraphs into section 227G(1) of the Building Act expanding the circumstances in which the production of information and documents can be compelled. These new subsections will provide that an authorised person may, by notice in writing, require a person to provide information or produce documents in the custody or control of the person if the authorised person has reasonable grounds to suspect that an offence has been committed under the new offence provisions inserted into the Domestic Building Contracts Act by this Bill. The new offence provisions apply to a builder and concern receiving money from or on behalf of a building owner for carrying out domestic building work under a major domestic building contract or for carrying out domestic building work, in either case, without holding the required insurance.

Clause 12 of the Bill inserts a new subsection into section 227I of the Building Act, which expands the circumstances in which a Victorian Building Authority inspector may apply for a court order requiring a person to provide information to include where the inspector believes that the person may have contravened the new offences inserted into the Domestic Building Contracts Act by this Bill.

These provisions engage the rights to privacy and protection against self-incrimination in the Charter.

Right to privacy (s 13)

Section 13(a) of the Charter provides that a person has the right not to have their privacy unlawfully or arbitrarily interfered with. An interference will be lawful if it is permitted by a law which is precise and appropriately circumscribed, and will be arbitrary only if it is capricious, unpredictable, unjust or unreasonable, in the sense of being disproportionate to the legitimate aim sought.

While not all information required under clauses 11 and 12 of the Bill will be of a private nature or be information concerning a natural person, as opposed to information concerning a corporation to which the Charter does not apply, the expansion of purposes for which a power to obtain information or documents may be exercised may constitute an increase in the level of interference with privacy permitted by the Act. However, to the extent that these provisions do require disclosure of personal information, this will occur in lawful and not arbitrary circumstances. The expansion serves a legitimate purpose, being to facilitate the effective administration of the Building Act and related legislation through investigating suspicions of non-compliance or breach of the regulatory scheme. The provisions are circumscribed in their scope, require the provision of written notice and can only operate to compel the provision of information in the specific circumstances outlined in the sections. These relate to important areas of consumer protection where significant gaps have been identified in relation to industry compliance, exposing consumers to risks of financial harm. The powers will principally apply to registered builders who have voluntarily undertaken to practice in a regulated industry where special duties and responsibilities attach.

Further, confidentiality requirements in section 229J of the Building Act apply to any information gained in the exercise of these powers, as well as the availability of complaint mechanisms under sections 231 to 234A of the Building Act relating to an exercise of power by an authorised person.

I therefore consider that any interference with the right to privacy resulting from these provisions will be neither unlawful nor arbitrary.

Protection against self-incrimination (s 25(2)(k))

Section 25(2)(k) of the Charter provides that a person who has been charged with a criminal offence has the right not to be compelled to testify against himself or herself or to confess guilt. It is also an aspect of the right to a fair trial protected by section 24 of the Charter. This right under the Charter is at least as broad as the privilege against self-incrimination protected by the common law. It applies to protect a charged person against the admission in subsequent criminal proceedings of incriminatory material obtained under compulsion, regardless of whether the information was obtained prior to or subsequent to the charge being laid.

Clause 11 of the Bill expands the circumstances in which an authorised person can compel the production of information and documents to include where the authorised person has reasonable grounds to suspect one of the new offences inserted by this Bill has been contravened or where the authorised person requires this information or documentation to determine whether one of these offences has occurred.

The above provisions are subject to the protection against self-incrimination by way of section 229G of the Building Act, which provides that it is a reasonable excuse for a natural person to refuse or fail to give information or do any other thing that the person is required to do if the giving of the information or the doing of the thing would tend to incriminate the person. The protection is limited to information only and does not extend to documents which an authorised person can require to be produced.

The privilege against self-incrimination generally covers the compelled production of documents or things which might incriminate a person. Section 229G of the Building Act limits this protection by not excusing a person from producing documents that would tend to incriminate that person. However, it is my view that this limit is reasonable under section 7 of the Charter.

At common law the protection accorded to the compelled production of pre-existing documents is considerably weaker than the protection accorded to oral testimony or to documents that are brought into existence to comply with a request for information. This is particularly so in the context of a regulated industry, where documents or records are required to be produced during the course of a practitioner’s participation in that industry and are brought into existence for the dominant purpose of demonstrating that practitioner’s compliance with relevant duties and obligations. The duty to provide documents in this context is consistent with the reasonable expectations of these individuals as persons who operate within a regulated scheme.

These expansions to existing powers enable authorised persons to monitor compliance with the Building Act in relation to the new offences to be inserted into the Domestic Building Contracts Act, investigate potential contraventions, and protect consumers from detriment resulting from non-compliance with the regulatory scheme. It is necessary for authorised persons to have access to documents to ensure the effective administration of the regulatory scheme, being the investigation and detection of money received by a builder pursuant to domestic building work where the required insurance has not been obtained.

There are no less restrictive means available to achieve the purpose of enabling authorised persons to have access to relevant documents, and access to such documents is necessary to ensure the safety of consumers and to protect the financial interests of consumers. To provide for a document-use immunity would unreasonably obstruct the role of authorised persons and the aims of the scheme, as well as give the holders of such documents an unfair forensic advantage in relation to criminal and disciplinary investigations.

Therefore, I consider that the limitation of the privilege against self-incrimination with respect to documents is compatible with the right not to be compelled to testify against oneself or confess guilt in section 25(2)(k) of the Charter.

Suspension of builder registration

Clause 10 of the Bill inserts a new subparagraph into section 180(b) of the Building Act adding a further ground on which a builder may have their registration immediately suspended, being a contravention of the new offences inserted by this Bill. The expansion of the grounds for suspension of registration is relevant to the right to a fair hearing.

Right to a fair hearing (s 24)

Section 24(1) of the Charter relevantly provides that a party to a civil proceeding has the right to have the charge or proceeding decided by a competent, independent and impartial court or tribunal after a fair and public hearing. The concept of a ‘civil proceeding’ is not limited to judicial decision makers but may encompass the decision-making procedures of many types of tribunals, boards and other administrative decision-makers with the power to determine private rights and interests. While recognising the broad scope of section 24(1), the term ‘proceeding’ and ‘party’ suggest that section 24(1) was intended to apply only to decision-makers who conduct proceedings with parties. As the administrative decisions at issue here do not involve the conduct of proceedings with parties, there is a question as to whether the right to a fair hearing is engaged.

In any event, if a broad reading of section 24(1) is adopted and it is understood that the fair hearing right is engaged by this Bill, this right would nonetheless not be limited. The right to a fair hearing is concerned with the procedural fairness of a decision and the right may be limited if a person faces a procedural barrier to bringing their case before a court, or where procedural fairness is not provided. The entire decision-making process, including reviews and appeals, must be examined in order to determine whether the right is limited.

Any decision made by the Victorian Building Authority to immediately suspend a builder’s registration is made pursuant to a show cause process (section 182 of the Building Act) and is subject to internal review (Part 11, Division 4, subdivision 2 of the Building Act). The builder is provided with the opportunity to provide oral or written representations during the show cause period (section 182A(1) of the Building Act) and on internal review (section 185B(2)) of the Building Act).

Finally, any decision made to suspend a builder’s registration by the Victorian Building Authority is subject to external review by VCAT (section 186 and section 186(3) of the Building Act). This affords builders a hearing before an independent and impartial tribunal and satisfies the requirements in section 24(1) of the Charter.

As such, I conclude that the fair hearing rights in section 24(1) of the Charter are not limited by this Bill.

Strict liability offences

Clause 5 of the Bill inserts a strict liability offence into the Domestic Building Contracts Act. New section 43B(2) relates to a builder demanding or receiving money from or on behalf of a building owner under a major domestic building contract without holding the required insurance. This offence does not require proof of fault (being that the builder did so ‘knowingly or recklessly’).

The inclusion of the strict liability offence in clause 5 of the Bill is relevant to the right to be presumed innocent under section 25(1) of the Charter.

Right to be presumed innocent (s 25(1))

Section 25(1) of the Charter provides that a person charged with a criminal offence has the right to be presumed innocent until proven guilty according to law. The right is relevant where a statutory provision allows for the imposition of criminal liability without the need for the prosecution to prove fault.

To the extent that this imposition limits the presumption of innocence, I consider that this limitation can be reasonably justified pursuant to the factors in section 7(2) of the Charter. Strict liability offences will generally be compatible with the presumption of innocence where they are reasonable, necessary and proportionate in pursuit of a legitimate objective.

A strict liability offence is considered legitimate where it is directed at preventing loss in particular contexts, such as consumer protection. This offence will deter existing practices within the building industry that have exposed consumers to significant risks of financial harm. This assists to enhance compliance with regulatory requirements and ultimately to protect consumers who may find it difficult to independently verify if the builder holds the proper insurance and who are otherwise vulnerable to losing large amounts of money where proper insurance was not held. It is reasonable that the offence does not require proof of fault given significant consequences and loss that can arise regardless of whether a builder acts knowingly or recklessly.

The offence is reasonable in that it does not exclude the common law defence of honest and reasonable mistake of fact, and it does not attract a penalty of imprisonment. While the offence attracts a fine of up to 240 penalty units for a natural person, which is at the high end of the liability spectrum for what a strict liability offence would generally attract, this is reasonable and proportionate noting the very large values of contractual commitments by builders and their customers under major domestic building contracts, and the significant costs to the community where builders fail to hold the required insurance. Accordingly, this maximum penalty provides a significant deterrent to prevent builders from operating without holding the required insurance in response to identified practices of non-compliance in the industry.

For these reasons, the limitation to section 25(1) of the Charter is reasonable and justifiable within the meaning of section 7(2) of the Charter.

Right not to be tried or punished more than once

Section 26 of the Charter provides that a person must not be tried or punished more than once for an offence in respect of which they have already been finally convicted or acquitted in accordance with law. This right reflects the principle of double jeopardy. However, the principle only applies in respect of criminal offences – it will not prevent civil proceedings being brought in respect of a person’s conduct which has previously been the subject of criminal proceedings, or vice versa.

Penalties and sanctions imposed by professional disciplinary bodies do not usually constitute a form of ‘punishment’ for the purposes of this right as they are not considered to be punitive.

The ability of the Victorian Building Authority to immediately suspend the registration of a registered building practitioner (clause 10 of the Bill), for a court to grant an injunction against a person in circumstances where the Court is satisfied that the person has engaged in, or is proposing to engage in conduct that would constitute a contravention of one of the new offences (clause 13 of the Bill) and for a court to impose an order making a person ineligible for registration (clause 15 of the Bill) do not engage this right. This is because the purpose of each of these sanctions, for example an injunction against a registered builder from receiving further money under a contract without holding the required insurance, or suspending the registration of a builder, is imposed to protect consumers from future harm. As these sanctions are for protective rather than punitive purposes, they do not engage the right against double punishment set out in section 26 of the Charter.

As such these provisions are compatible with the Charter.

Conclusion

I am therefore of the view that the Bill is compatible with the Charter.

The Hon Sonya Kilkenny MP

Minister for Planning

Second reading

Sonya KILKENNY (Carrum – Minister for Planning, Minister for the Suburbs) (10:48): I move:

That this bill be now read a second time.

I ask that my second-reading speech be incorporated into Hansard.

Incorporated speech as follows:

The Victorian Government is committed to ensuring that consumers are provided with strong and meaningful protections when building or renovating their home and that builders face appropriate and commensurate consequences when they do not meet insurance requirements that provide consumer protection or seek to avoid these protection measures.

Following the collapse of Porter Davis Homes Group on 31 March 2023, it was revealed that more than 500 homeowners, or prospective homeowners, were at risk of losing their entire deposit due to the failure of Porter Davis Homes to obtain builders insurance on their behalf when required. Subsequently, we learned that several other builders that had previously collapsed – including Snowden and Hallbury Homes, among others – also had not obtained insurance to protect their customer’s deposits.

In April 2023 the Government stepped in to help Porter Davis customers get back on their feet by compensating those customers who were left without insurance cover for their lost deposits through no fault of their own. Since then, the Government has also set up the Liquidated Builders Customer Support Payment Scheme for customers of other builders whose businesses collapsed between 1 July 2022 and 30 June 2023, where those customers were at risk of losing deposits because the builder had not obtained domestic building insurance.

This Bill will introduce the first initiative to reform the regulatory framework to ensure that consumers and the money they pay builders for domestic building work are protected, and to ensure builders are incentivised to obtain insurance when required. The Bill will amend the Domestic Building Contracts Act and the Building Act to:

• Insert a set of two new offences, with tough penalties, to ensure domestic builders will comply with the insurance requirements; and

• provide strong powers for the Victorian Building Authority to enforce compliance with the insurance requirements.

The set of new offences this Bill will apply where a builder enters into a major domestic building contract and demands or receives money from or on behalf of the building owner to carry out work under that agreement without ensuring the builder holds domestic building insurance when it is required.

The Bill will provide for significant penalties for any contravention of these new offences. It sets the maximum penalty level for where the offence is committed knowingly or recklessly at 500 penalty units, or approximately $96,000, for a natural person and 2500 penalty units, or approximately $480,000, for a body corporate.

Where the offence has been committed under a standard of strict liability, the maximum penalties are set at 240 penalty units, or approximately $46,000, for a natural person and 1200 penalty units, or approximately $230,000, for a body corporate.

Following their commencement, the operation of the proposed new offence provisions will be monitored to ensure that the consumer protections are upheld and appropriately balanced with industry interests.

The Bill will also enable the Victorian Building Authority to be the lead regulator to take strong action against a builder for non-compliance with any of the new offences.

The Bill will provide broad powers for the Victorian Building Authority to:

• take proceedings against a builder who contravenes any of the new offences; and

• take disciplinary action against a registered builder for non-compliance with any of the new offences, including immediate suspension of their registration if warranted.

This approach will allow the Victorian Building Authority to take the necessary actions to ensure commensurate penalties are meted out to non-complying builders and minimise ongoing community harm from non-complying builders that continue to operate.

As the general market regulator, the Director of Consumer Affairs Victoria will continue to exercise other regulatory powers and functions under the Domestic Building Contracts Act and the Australian Consumer Law (Victoria).

With the Victorian Building Authority taking the lead regulatory role, and empowered to take strong action where necessary, this will send a strong message to industry on the importance of builders adhering to insurance requirements and will, in turn, give building customers greater confidence in the building industry, which will be beneficial for builders, their customers and the wider building industry over the long term.

The collapse of Porter Davis Homes Group revealed an additional issue of multiple agreements being used by builders, often avoiding the threshold for the requirement to obtain a DBI policy. This issue – and further legislative options to address it – will be considered as part of a review of the Domestic Building Contracts Act. This review will also consider related issues including whether there should be any changes to monetary thresholds for deposits, the definition of domestic building work and progress payments at various stages of a construction contract.

I commend the Bill to the House.

James NEWBURY (Brighton) (10:48): I move:

That the debate be adjourned.

Motion agreed to and debate adjourned.

Ordered that debate be adjourned for two weeks. Debate adjourned until Wednesday 13 December.