Towards accountability
Fewer defective buildings? There are valuable lessons to be found on the side of the road, writes Samuel J Woff.
Speed cameras: an effective instrument of justice
Near our old neighbourhood there is a well-known (read, notorious) speed camera which patrols, in silent vigil, over a stretch of Warrigal Road. This particular stretch of road has a speed limit of 40 km/h (down from a cruisy 70 km/h) owing to the proximity of a set of shops, a train station and a vocational college.
It is almost a right of passage for new people to the area to be “done” by this speed camera at least once. It transfers you from, as Nick Carraway said in the Great Gatsby, newcomer to “original settler”, and gives you something in common with your neighbours to talk about at the shops. You’re a not a true member of the tribe until you can grumble amiably with strangers about revenue raising and heavy-handed enforcement.
Tough as it is though, the camera is very effective at regulating behaviour. It is a classic case of once bit, twice shy, and except for the occasional newcomer, blithely unaware that an unwelcome letter will be arriving in a few days courtesy of their inattention, the stretch of road is one of the safest, and most law abiding in Melbourne. We all, gazing up in supplication to the sentinel on the side of the road, crawl past meekly at well under the required speed limit, as if serfs passing cantankerous and capricious city gate guards, ready with the whip to dispense a bout of oppression at their pleasure. It’s a strange feeling. Everyone, on passing the camera, releases a breath they didn’t know they were holding, and the conversation — temporarily frozen as the driver enters a state of extreme concentration on the speedometer — resumes with a new sense of levity. The dreaded camera has been successfully passed.
The reason, of course, that compliance with the law is so fastidious in the vicinity of this camera is that there is no escape from the consequences of law-breaking.
If you do, foolishly, creep over the mandated 40 km/h the following inexorable instrument of justice will kick in:
Your car will be photographed by the camera, conclusively proving the speed you were travelling and hence the gravity of your offence.
Your licence plate will be automatically read, identifying, with inarguable precision, the owner of the car, and therefore the likely driver of the car.
An automated fine will be sent to the owner of the car, with a ratchetting series of reminders and pressures which ramp up until the fine is ultimately paid.
If you remain obstinately recalcitrant, you will be jailed as a means of paying your debt to society in lieu of a contrite donation to the state coffers.
This is all well known in the community, that there is no escape from the consequences of speeding in this stretch of road, and hence — as if all cars were propelled collectively by magnets — almost everyone slows as they pass this camera.
The key word here of course is accountability. As drivers, we are very accountable. The well-functioning infrastructure of justice surrounding the speed camera ensures compliance with the law is very good, because deviant actions always have consequences.
We can, as well and usefully for the construction industry, transfer these lessons to a related field where compliance with the law is very poor (the vexed issue of defects in buildings), with the aim of improving industry compliance with the law.
Because there are already laws against leaving a defect in a building, just as there are laws against speeding. The answer is not to pass more laws. The laws are fine. What we need to improve is how we enforce the law when it is broken.
Many easy ways out
Currently, there are a multitude of ways in which builders can escape from the consequences of their defective work.
Take a crack in the ceiling which appears after 6 months. First, the builder can claim (for instance) the crack has arisen because of settling of the underlying soil, and not because of a structural problem in the building. This is hard to easily disprove. Second, the builder can say, even if is a structural problem, I wasn’t responsible for the design of the framework, it was the architect. It is the architect’s fault. Again, this is hard to easily disprove. Finally, even if you can pin the builder down, and prove the crack is a defect and it was the builder’s responsibility, often the builder is nowhere to be found. The company is in liquidation, or the builder themselves is bankrupt. They therefore do not have to pay for the consequences of their breach of the law.
To revert it back to our speed camera example, think about how ineffective the speed camera would be if:
when it took a photo, it didn’t record how fast the car was travelling, so the driver could argue it wasn’t speeding.
cars had no licence plates, so a driver could always point the finger at someone else with the same make and model as them, and say — “it wasn’t me, it was them”.
the owner of the car was actually a corporation, and so — when faced with a fine it couldn’t otherwise deflect — it was liquidate and transfer the car to a new corporation, and hence avoid paying the fine.
I hazard a guess that in those circumstances, compliance with the 40 km/h speed limit would be far more haphazard. Yet this is exactly the situation which exists in the construction industry. Defects are hard to prove as defects, finger pointing is easy, and worst comes to worst, the builder can simply liquidate to avoid responsibility. This is not an environment conducive to a high degree of compliance with the laws around defects.
Closing the escape hatches
From the discussion above, a couple of concrete recommendations can be made.
Presumption that a defect is a defect
Firstly, there should be a legislative presumption that any visible blemish that spontaneously appears on a building is a defect, unless the builder proves otherwise.
This is a reversal of the usual onus of proof, and hence must have a solid justification. But in this instance there is. Philosopher Bertrand Russell said that if someone says “that between the Earth and Mars there is a china teapot revolving about the sun in an elliptical orbit”, the onus is on them to prove it. And why is this? Because the person making that assertion is more likely to have precise knowledge about where this teapot is, and can point to it (if it exists). The person trying to disprove the existence of the teapot is left with an impossible task.
Hence the justification for the reversal of proof. It is builders (not owners) who have an intimate knowledge with how the building came together, and are in a far stronger position than the owner, if an issue arises, to identify the location of any exonerating evidence. If there’s an exculpating teapot somewhere in the house, the builder should be obliged to point it out. This is only fair. And doing so releases the home owner, who has no idea how the building was constructed, from the burden of expensive and time-consuming investigations, assisted by an expert, to prove a superficial blemish like a crack is actually the symptom of a defect.
Single point of accountability
The second principled recommendation is to make the builder the single point of accountability to the owner.
Compliance with the law is undermined if the builder can easily lump ostensible responsibility on someone else in a way that is hard to disprove. We must act to prevent statements to the effect that “it wasn’t me, speak to the architect”, just as we must avoid the ability of a driver to say “it wasn’t me, it was the other red Mazda”, or else the efficiency of law enforcement declines. The contract, correctly drafted, can achieve this, or it can be mandated by legislation.
Of course, if it really was the architect, the builder should be entitled to recover costs in the second instance from the architect, but as between the owner and the builder, the builder must remain solely on the hook.
Corporate builders
Thirdly, the ability of a builder to escape liability by simply “killing off” the company engaged to construct the building must be prevented.
The first way to achieve this is by the owner insisting on contracting with the individual personally, though this of course also carries a risk that the builder will declare bankruptcy to avoid their obligations. The second, and more commonly adopted, approach is to contract with a corporate builder, but to obtain a personal guarantee from the individual, backed up by a bank, to ensure that if the corporate builder does not or is unable to pay to fix the defects, there is another pot of money available for the owner to have recourse too.
What of regulation?
The building industry, particularly the domestic building industry, is a highly-regulated environment. The stated purpose of this, as with all regulation, is consumer protection, and in particular, protection of dangerous defects making their way into buildings. The regulations, the oversight, the licencing, the certifying, the checking, are all designed to catch potential defects before they make their way into a building.
This is all valid and good. Yet the side effect of this system, when it is the only accountability system, is that it turns construction into a game, where some builders (in the name of saving costs) construct a defective building and then try and game the system and “slip” the defect through the certification process. The incentive is not to avoid the defect, the incentive is to hide it so the building can get certified. And then when the defect emerges as a crack two years later, the builder spin out the normal defensive trifecta of “it’s not a defect, it was the architect anyway, and in either event, the company doesn’t exist anymore”. Of course, not all builders act in this way, and the intention is not to suggest so. But we must not, in the name of politeness, fail to point out that some builders do engage in this behaviour, because the incentives of the system encourage them to do so.
The answer, to my mind, therefore is not more regulation. The regulators cannot possibly provide a level of quality assurance that catches every single defect before it goes into a building. The better approach, or at least a strongly complementary approach, is to improve the ability of owners to sue if a defect emerges. This will improve the accountability of the industry, and incentivise builders to do a proper job in the first place. For if builders know that, with certainty, they will be on the hook for any crack that emerges in the building (unless they can prove it is not in fact a defect), they will be properly incentivised to avoid the defect at all.
Some builders may complain that this additional level of accountability will increase their costs. And for some it probably will. But it is simply a cost increase driven by a new sense of accountability to do the job properly, and it is hard to accept as valid a complaint that costs are now higher because builders are no longer able to cut corners. If you can’t afford to do it right, you can’t afford to do it.
In any event, the vast majority of builders, who are professionals and already doing the job properly, will have no reason for their costs to increase. Only those who are no longer able to cut corners stand to lose.
Conclusion
The Warrigal Road speed camera is a paradigm of effective law enforcement. No one dares mess with it. It’s time the construction industry borrowed some of the principles from this instrument of justice, decreasing the ability to get away with defective work, and hence restoring professionalism and accountability to the recalcitrant pockets of the industry. The vast majority of builders do the right thing. It’s time to increase acountability and bring the remainder into line through improving the power of disappointed owners to sue. This is immensely preferable to the current game of defect hide-and-seek these few builders play with the the regulators.
About the author
Samuel is a leading commercial construction law and construction litigation specialist, advising on complex and high-stakes project and major infrastructure disputes.
Prior to launching his solo (but national) consulting practice, Samuel had more than ten years experience working in private practice at some of Australia’s largest law firms.
