Geoff Fletcher on Compliance, Conformance, and Certification in Engineering
The presentation addressed the critical aspects of regulatory compliance and certification for professional engineers in Australia. It draws on recent legal cases and regulatory shifts, with a focus on the building and construction sector.
Here are some key points from the presentation:
Focus on Regulatory Compliance: Certification is about confirming compliance with regulations, not just client expectations or Australian Standards, unless those standards are specifically referenced in the regulations.
Australian Consumer Law (ACL): The presentation highlights the importance of the ACL, particularly Section 18 regarding misleading and deceptive conduct, which can apply to engineers even without a direct contract with the affected party.
Compliance vs. Conformance: Compliance means adhering to regulations, while conformance is about matching design to construction. Both are important, and they are distinct.
Regulatory Certification: Certification is about complying with building regulations and the National Construction Code (NCC), not just Australian Standards, unless specifically stated.
Legal Cases: The presentation discusses cases like Mistrina v. Australian Consulting Engineers (ACE) and Actron v. DEEQ Consulting, which illustrate the serious consequences of defective certification and the engineer's responsibility for regulatory compliance.
Personal Risk and PI Insurance: Engineers face significant personal and professional risks, and Professional Indemnity (PI) insurance may not cover intentional wrongdoing or criminal acts.
Importance of Being Informed: Engineers must actively seek out and understand relevant regulations, acts, and court judgments.
Key Takeaway: Regulatory certification is about demonstrating compliance with the law (regulations and the NCC), and when an engineer certifies, they claim to comply, and others have a right to rely on that certification.
In essence, the presentation emphasises the shift towards stricter enforcement and accountability for engineers, stressing the need for diligence in understanding and applying regulations.
Presentation by Geoff Fletcher on Compliance, Conformance, and Certification in engineering, drawing on the provided sources.
Understanding Compliance and Liability in Engineering: Insights from Recent Cases and Regulatory Shifts
This article explores the critical insights presented in a two-part presentation delivered by Geoff Fletcher at the Forensic Engineering Society of Australia (FESA). Drawing on recent legal judgments and the evolving regulatory landscape in Australia, the presentation delves into the fundamental concepts of compliance, conformance, and certification, particularly within the engineering disciplines, with a significant focus on the building and construction sector. The presentation emphasised the multidisciplinary relevance of the topic across all engineering fields and the importance of integrating engineering and legal perspectives. While FESA meetings often feature discussions of structural failures, this presentation shifted focus to the legal and regulatory framework governing engineering practice, prompted in part by recent developments and revelations regarding the Australian Consumer Law (ACL).
Presentation Subject
The core subject of the presentation is the paramount importance of regulatory compliance and accurate certification for professional engineers in Australia. It highlights that certification is fundamentally about confirming compliance with the applicable regulations, not merely satisfying client expectations or adhering to Australian Standards unless those standards are explicitly referenced within the regulations. The presentation argues that ignorance of this principle and the broader legal landscape is no longer tenable for engineers, as evidenced by recent court cases where engineers have faced significant liability stemming from defective certifications. The emerging professional engineering registration schemes, such as the one in Victoria, underscore the increasing regulatory expectations and the need for engineers to be well-informed and diligent in their practice.
Key Topics Discussed, Summaries, Insights, and Learnings
The presentation covered several interconnected key topics, building a comprehensive picture of the challenges and responsibilities faced by engineers in the current regulatory environment.
The Evolving Regulatory Landscape and the Role of the Australian Consumer Law (ACL)
The presentation buildercontextualised the discussion within the backdrop of significant reforms in the Australian building industry, stemming partly from the "Building Confidence Report". New South Wales, in particular, has been identified as leading the way in raising industry standards and implementing reforms. This includes the introduction of a practice standard for professional engineers, initially opposed by Engineers Australia but pushed through by figures like the former NSW Building Commissioner, David Chandler, who was reportedly disappointed with Engineers Australia's response to performance issues. These changes, including the move towards registration systems, were ultimately positive, enhancing the profile, value, and expertise expected of engineers.
A crucial element discussed was the Australian Consumer Law (ACL), formally the Competition and Consumer Act 2010, which replaced the Trade Practices Act 1974. The ACL includes consumer guarantees for services. These guarantees stipulate that service providers must exercise due care and skill, provide services that are fit for a particular purpose, and deliver services within a reasonable time.
A surprising revelation highlighted in the presentation, learned from Bronwyn Weir (co-author of the Building Confidence Report), was that engineers and architects are legally exempt from the consumer guarantee that services must be fit for a particular purpose. This exemption was described as a genuine surprise and a point of dissatisfaction for both Geoff and Ms Weir. Engineers Australia reportedly supports and lobbies to maintain this exemption.
However, the presentation pivots to highlight Section 18 of the ACL, which deals with misleading and deceptive conduct. This section was crucial in the legal cases discussed, providing a basis for action against engineers even without a direct contractual relationship with the injured party and despite the exemption from the "fit for purpose" guarantee. Conduct that is likely to mislead or deceive is also covered under this section.
Understanding Compliance vs. Conformance
A key distinction drawn from the regulatory landscape is between compliance and conformance.
Compliance strictly means complying with regulation. This applies to both design and construction; designs must comply with regulations (e.g., the National Construction Code (NCC)), and what is built must also comply with regulations. Regulations represent the minimum legal requirements.
Conformance is specifically a comparison between design and construction. It ensures that what was designed, particularly if it was an approved design, is accurately built. Checking conformance requires inspection and comparison.
The presentation notes that compliance and conformance are often used interchangeably in engineering speak, but the regulatory landscape defines them distinctly. It is possible to have compliance without conformance (e.g., design complies, construction complies, but they don't match each other exactly, though both are above the minimum bar) or conformance without compliance (e.g., construction perfectly matches a design, but the design itself did not comply with regulations). The latter scenario, where a conforming structure doesn't comply with regulations, can lead to significant commercial and legal issues.
The Primacy of Regulatory Certification
A central tenet of the presentation is that certification is about regulation. When an engineer issues a certificate of compliance (such as the Victorian Regulation 126 forms or Queensland Forms 15 and 16), they are certifying that the design or construction complies with specific building regulations or parts of the NCC.
This certification does not mean the design or construction complies with the client's expectations.
It does not mean it complies with an Australian Standard per se, unless that standard is specifically referred to by the regulation.
The presentation strongly emphasised that engineers must understand and apply what is in the regulations when certifying. This means knowing the specific regulations and the NCC, which is the nationwide building regulation adopted by states through their own legislation. Simply designing or building to an Australian Standard like AS3600 (for concrete structures) is insufficient if the NCC requires more, and the certification must reference the NCC/regulation, not just the standard. For instance, the NCC requires more from concrete structures than AS3600 provides in areas like robustness, fire resistance design, and weatherproofing. Certification must be to the NCC, not just AS3600.
Defective certifications, where the certification states compliance with regulations but this is not true, were identified as the hinge point in the legal cases discussed. Such defective certifications can be deemed misleading and deceptive conduct under the ACL, leading to significant legal consequences.
A fundamental principle highlighted is that "When you certify, you claim to comply, and others have a right to rely". This reliance principle is key because parties who may not have a direct contract with the certifying engineer (such as subsequent owners or affected neighbours) can suffer financial loss as a result of relying on a defective certification and may have a basis for legal claims.
NCC vs. Australian Standards (AS)
The relationship between the National Construction Code (NCC) and Australian Standards (AS) is crucial for understanding what regulatory compliance entails in the building sector.
Building regulation is state law.
Each state's legislation appends or adopts the National Construction Code (NCC), a nationally agreed set of technical standards.
The NCC may, in turn, refer to Australian Standards.
Therefore, the hierarchy is typically: State Building Regulation -> NCC -> Referenced Australian Standards. Compliance is primarily assessed against the regulations and the NCC. While AS provides technical details, simply complying with an AS is not sufficient if the NCC requires more, or if the certification form asks for compliance with the NCC/regulation, not the standard. This distinction is critical, and some engineers may mistakenly believe that complying with AS3600 is sufficient for structural concrete design in buildings, when the NCC imposes additional requirements.
Contractual Obligations and Professional Judgment
The presentation touched upon contracts, noting that a fundamental requirement of a contract is a lawful object. This means a contract cannot be structured to ignore or contract out of regulatory compliance obligations. Even if a construction contract specifies compliance with, for example, AS3600, this does not exempt the parties from complying with the NCC if the structure is a building governed by building regulations.
Furthermore, the legal cases discussed underscored the engineer's non-delegable responsibility to ensure compliance with regulations, irrespective of client preferences or choices. In the Actron case, the engineer offered the client three design options with varying performance levels and costs, detailing the pros and cons of each and even predicting expected settlements. The builder chose the cheapest option, which subsequently failed to perform adequately. The court found that it was not for the client to decide what the appropriate design was. The professional engineer has a duty to exercise professional judgment to ensure the design complies with the requirements of the regulation, regardless of the client's expectations or desire for a cheaper solution. If a client insists on a design below the regulatory minimum, the engineer should refuse and potentially withdraw their services. Offering options where one is below the regulatory standard, even if the engineer points out its shortcomings, is considered abrogating design responsibility to the client, which is unacceptable.
Case Study: Mistrina v. Australian Consulting Engineers (ACE)
This case, which reached the New South Wales Court of Appeal and application for leave to the High Court was refused, illustrates the severe consequences of defective certification under the ACL, particularly for commercial losses.
Context: The case involved a 10-storey mixed-use building designed with a raft slab in Brighton Le Sands, Sydney.
Parties: Mistrina (developer/appellant) had a contract with the design-and-construct builder (Jabbcorp). Australian Consulting Engineers (ACE) was contracted to the builder but had no contract with Mistrina. The lack of a contractual relationship between the engineer and the developer was deemed irrelevant by the court.
The Issue: With eight stories completed, a structural engineer neighbour complained of damage to their adjoining property. It emerged that the design by ACE was defective.
The Legal Finding: The certification issued by ACE stated that the design complied with the NCC. However, uncontested evidence showed it did not. Causing damage to adjoining property is contrary to NCC requirements. The defective certification was found to constitute misleading and deceptive conduct by ACE. This finding was not disputed even at the initial trial level; the trial focused on the extent of liability for losses.
Consequences: Due to the dispute and required rectification works (necessitating a year or more delay), the project lender called in the loan facility. Mistrina was forced to sell the incomplete building and the developer's family home, which was used as security. The builder also suffered significant losses. The court of appeal awarded $3.44 million against ACE for all commercial losses, not just the cost of rectification. This is highlighted as a significant outcome, as engineers are not often sued for such large amounts, particularly for commercial losses suffered by parties they have no direct contract with.
Further Insights: The presentation mentioned that ACE and its principal, Dr Anthony Hasham, reportedly had previous issues and connections to other problematic projects like Top Place Builders and Mascot Towers. ACE entities were liquidated, but Dr Hasham reportedly remained registered with Engineers Australia as of December 2022. The presentation contrasted this with the potential consequences under the current Victorian registration system, suggesting a greater likelihood of being prevented from practising.
Case Study: Actron v. DEEQ Consulting
This Queensland Court of Appeal case further underscores the engineer's responsibility for regulatory compliance, even when providing options to a client.
Context: The case involved an industrial warehouse built on a slab on ground (SOG), similar to the Mistrina case in the type of structure's footing system. The site had highly reactive marine clays.
Parties: Actron (purchaser) bought the completed warehouse. DEEQ Consulting was contracted to the design-and-construct builder, DDS Project Management, and had no contract with Actron. Again, the lack of a direct contractual relationship was irrelevant.
The Issue: After Actron purchased the warehouse and installed pallet racking, it experienced massive differential settlements, making it unusable for forklift operations and causing pallet racking to lean. This failure was attributed to both the reactive soil conditions and the loads applied.
Engineer's Actions: DEEQ provided DDS with three slab design options, detailing varying levels of performance, construction cost, pros, cons, and predicted settlements for each. DDS chose the cheapest option. Forensic investigation after the failure found the actual settlements were within the range predicted by the engineer for the chosen option.
The Legal Finding: The case hinged on DEEQ's certification that the design and construction complied with the standard building regulation (which referenced the NCC and AS3600). A key provision from AS3600 2001 required performance "without undue differential or uniform settlement". The court focused on the meaning of "undue" in the context of a typical industrial warehouse. Crucially, the court found that even though the engineer provided options and the client chose the cheaper one, it was the engineer's professional responsibility to ensure the chosen design complied with regulatory requirements, including providing performance without undue settlement for the intended use of a warehouse. They should have exercised professional judgment to ensure the design met the regulatory standard, regardless of client pressure for a cheaper option. The defective certification was deemed misleading and deceptive conduct under the ACL.
Consequences: The warehouse was deemed totally unusable, impacting its utility. The DEEQ director was struck off from being a registered professional engineer in Queensland and retired.
Further Insights: The presentation noted the judge's detailed discussion of "undue settlement" and typical warehouse use. The wording about "undue settlement" was reportedly dropped from later versions of AS3600 but is planned to be re-inserted following this judgment.
Personal Risk, PI Insurance, and Registration
The legal cases highlight the significant personal and professional risks faced by engineers. A particularly stark learning point is that criminal acts and intentional wrongdoing are likely uninsurable by Professional Indemnity (PI) insurance. This is based on the public policy principle that one cannot profit from such conduct. Misleading and deceptive conduct under the ACL can have serious consequences, and if deemed intentional or involving criminal aspects (some ACL offenses can be criminal), PI cover may be void. Additionally, in Victoria, there is a legal prohibition against insuring or indemnifying for Occupational Health and Safety (OHS) penalties, and offering such insurance is also prohibited and subject to prosecution.
PI cover is often a prerequisite for professional registration. However, engineers cannot rely on PI to shield them from all consequences, particularly those arising from deliberate non-compliance or misleading conduct.
The introduction and rollout of professional engineering registration systems, such as the one in Victoria (since 2019), are changing the landscape. Registration often requires demonstrating competence and adherence to a mandatory code of conduct. Engineers must be aware of these requirements and understand that compliance with regulations, like the NCC, is a fundamental expectation. The certification process even applies to obtaining registration itself; false or defective certifications during registration are unacceptable. Being registered implies a responsibility to understand and operate within the legal and regulatory framework.
The Importance of Being Informed
The presentation repeatedly stressed the critical need for engineers to be informed. Relying on limited knowledge or assuming past practices are sufficient is dangerous. Engineers must actively seek out and understand the relevant regulations, acts, and potentially significant court judgments. Court judgments, being public records, are available for review, either through detailed judgments or legal firm summaries, providing valuable insights into how the law is being applied to engineering practice. Ignorance of what is required by regulation is no longer an excuse and can lead to significant commercial exposure, even if a defence is successful. Engineers need to navigate the legal landscape they operate in and seek appropriate legal advice when necessary.
Conclusion
The presentation provided a sobering yet crucial examination of the engineer's responsibilities regarding compliance and certification in Australia, drawing sharp lessons from significant legal cases. The key takeaway is unambiguous: regulatory certification is fundamentally about demonstrating compliance with the law – the regulations and the National Construction Code – not client desires or Australian Standards unless specifically mandated by those regulations.
The Australian Consumer Law, particularly the prohibition against misleading and deceptive conduct, provides a potent avenue for legal action against engineers, even by parties with whom they have no direct contract, overcoming the exemption from the "fit for purpose" Consumer Guarantee. Defective certification, where an engineer claims compliance that does not exist, constitutes such conduct and has been the basis for significant liability, including substantial commercial losses.
The Actron case vividly illustrates that engineers cannot abrogate their professional judgment to a client; the responsibility to ensure regulatory compliance rests squarely on the engineer, regardless of the client's preference for cheaper, non-compliant options.
Furthermore, the presentation highlighted the personal exposure engineers face, as intentional wrongdoing or criminal acts may not be covered by professional indemnity insurance. The evolving regulatory environment, including professional registration and mandatory codes of conduct, reinforces the increasing accountability and the expectation that engineers possess a working knowledge of the relevant laws and regulations.
In summary, engineers must recognise the shift towards stricter enforcement and accountability. They must be diligent in understanding and applying regulations, ensuring their designs and certified works comply with the law. They must resist pressure from clients or others to deviate from regulatory requirements. The principle is clear and consequential: When you certify, you claim to comply, and others have a right to rely. Understanding and adhering to this principle is essential for navigating the modern engineering landscape safely and professionally.
