Australia: Non-conforming building products – the risk for contractors in Queensland

Last Updated: 23 November 2017
Article by Stephen Burton and Sarah Shirley

Most Read Contributor in Australia, September 2018

In response to events such as the fires at Grenfell Tower in London earlier this year and Melbourne's Lacrosse Tower in 2014, the Queensland Government has introduced new legislation targeting non-conforming building products: Building and Construction Legislation (Non-conforming Building Products—Chain of Responsibility and Other Matters) Amendment Act 2017 (Qld) (the Act).

The Act came into effect on 1 November 2017 and is the first of its kind in Australia. It has been designed to prevent non-conforming building products from being used on building projects in Queensland by holding everyone in the chain of responsibility responsible for the safety and use of building products.

With the introduction of the Act comes substantial new risk for all players involved in the design, manufacture, importation, installation, or supply of a building product (i.e. the chain of responsibility).

What is a building product and when will it be considered 'non-conforming'?

A building product is any material or other thing associated with, or that could be associated with, a building, i.e. generally a structure with a roof and/or walls.

A building product is non-conforming if:

  • its intended use is not or will not be safe, or not comply with relevant regulations (such as the National Construction Code); or
  • it does not perform, or is not capable of performing, for the intended use to the standard it is represented to perform.

Hindsight being 20/20, this could have a very wide application. While many contractors may not be involved in the construction of the building, associated works such as installation of slabs and pilings will be caught by this definition. Additionally, a contractor engaged on a traditional construct-only basis will be caught by the definition, even though they were not responsible for the design.

Duties imposed by the Act

The Act now imposes important duties on each person in the chain of responsibility, which may involve significant reform of your company's current administrative processes and procedures.

Information about the suitability and use of a building product must be provided by each person in the chain of responsibility to the next person in the chain. It is vital that the information passed to each party in the chain of responsibility is correct and accurate (regardless of whether you have design obligations under the contract or if your contract specifically requires it).

All persons in the chain must notify the Queensland Building and Construction Commission (QBCC) within two days if they are aware or suspect that a product is non-conforming, or if there is a death, injury or illness or risk of serious injury or illness, which may have been caused by the use of a building product.

If the QBCC suspects that an offence has occurred, it has powers to stop work, seize property and require documents and information be given, including requiring relevant parties to attend interviews.

What does it mean for contractors and subcontractors?

It will be important to identify when you might come into contact with 'building products' and therefore when there is a risk of contravening the Act.

Senior executives of a company within the chain of responsibility must exercise due diligence to ensure that the company complies with the duties imposed on it. This includes gaining an understanding of the safety and non-compliance risks associated with the products that the company designs, sells or installs. Merely having processes however will not be enough. Active management of building product compliance is necessary.

The potential consequences of failure to comply are significant. The Act imposes significant penalties on duty-holders (both companies and individuals) for failing to comply with the Act, including:

  • monetary penalties, in some cases up to $126,150 (1,000 penalty units)
  • recall orders for the removal, repair or modification of non-conforming building products
  • stop work orders
  • cancellation or suspension of QBCC licences.

Managing the risk

Whilst you cannot contract out of your obligations under the Act, some ways that you may manage the risk of non-compliance, include:

  • checking your insurance policies to ensure you are appropriately covered for your liability as far as possible. Since the Grenfell Towers disaster earlier this year, insurers across the globe have sought to impose exclusions in relation to non-conforming building products. You should note that directors' and officers' insurance policies usually do not cover fines
  • knowing and auditing your suppliers
  • reviewing internal processes and building products used to ensure compliance
  • although you cannot transfer your duties under the Act onto a third party, you can ensure that appropriate indemnities are in place in your contracts so that you may recover losses as a result of a breach of the Act by another
  • making sure that the intended use and relevant information for the building product is clearly described in your contract (at least for high value / high risk components)
  • seeking legal advice on future contracts, and on managing risk under contracts that are already on foot.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.

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Sarah Shirley
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