The interplay of Victoria's proportionate liability scheme with Victoria’s building legislation amendments

With a push for more housing to be built in reaction to the housing crisis in Victoria, there is also a need for more confidence in the building industry. Issues like the collapse of Porter Davis Homes have been compounded by media attention bringing confidence in the industry to an all-time low.

With that background in mind, the Victorian Building Authority (“VBA”) commissions a report titled ‘Victorian Building Authority – The Case for Transformation’. The report has case studies and makes recommendations focused on homeowners which are adopted, in part, by the Allan Government in their various amendments to building legislation in Victoria.

The amendments are proposed to protect consumers by making the dispute resolution process clearer, but do they really? This article explores the amendment’s interplay with the proportionate liability regime which may bring complications for both homeowners and builders.

Proportionate liability

The proportionate liability regime was introduced across all states and territories after the 2001 – 2002 ‘insurance crisis’ and is often used by builders to shift their liability to parties (usually, sub-contractors they themselves have engaged). The effect being that the risk of an insolvency is shifted from a defendant builder to a plaintiff consumer. In Victoria, the scheme was introduced in 2003 by way of addition of Part IVAA to the Wrongs Act.

The regime works as a defence for defendants to raise. The effect of a successful apportionment defence is that the defendant who raised it is only responsible for a proportion of the damages equal to their liability. If a defendant joins a party to the proceedings for apportionment, the onus is on the plaintiff to bring its own claim directly against the joined party. If the Plaintiff doesn’t, the Court or VCAT can apportion some liability to that party but the plaintiff can’t recover that loss.

The proportionate liability regime seems to run contrary to the purpose of the building legislation amendments in two ways.

Firstly, the regime is complicated and allows for defendants (often builders) to make proceedings complex and costly rather than consumer friendly.

Secondly, the ultimate outcome is that the risk of insolvency of a third party is shifted from the defendant to the plaintiff.

Amendments to the building dispute resolution regime

Some of the amendments to the building legislation are contained in the Building Legislation Amendment (Buyer Protections) Act 2025 (Vic) (“Buyer Protections Act”) and the Domestic Building Contracts Amendment Act 2025 (Vic) (“DBCA Amendment Act”). Of particular interest are the new powers for the Building and Plumbing Commission (previously the VBA) to issue binding rectification orders and the modifications to section 8 of the Domestic Building Contracts Act 1995 (Vic).

Section 8 of the DBCA

Section 8 of the DBCA is a list of warranties from builder to homeowner which include a warranty that work will be carried out in a proper and workmanlike manner and that work will be carried out with reasonable care and skill. These two warranties are, on current case law, claims which can be apportioned by defendants under the Wrongs Act.

Under the DBCA Amendment Act, section 8 (a) and (d) will instead use the language of “due care and skill” as opposed to “proper and workmanlike” or “reasonable care and skill”. While it’s not immediately clear why this change is made, the removal of “reasonable” from section 8 of the DBCA may open the argument that sections 8(a) and (d) are no longer apportionable warranties.

Rectification orders

Currently, homeowners with a domestic building dispute must apply to Domestic Building Dispute Resolution Victoria (“DBDRV”) and are encouraged to conciliate to reach a non-binding agreement. Under the Buyer Protections Act, after 1 July 2026 the BPC will have the power to make a binding rectification order to rectify or complete incomplete, defective or non-compliant work within 10 years from the occupancy permit. The order can be issued to any one or more persons who carried out the work or are a developer. It’s not immediately clear for builders how they might seek to join other parties who they say are responsible to this process.

Jurisdictional challenges

A further potential challenge for the building legislation amendments arises from the now limited jurisdiction of Tribunals, which may well extend to the BPC. The case law in Burns v Corbett, Meringnage v Interstate Enterprises Pty Ltd and Thurin v Krongold effectively mean that only a court has authority to determine federal matters or hear matters involving interstate parties.

If a party is an interstate resident at the time of filing a dispute it appears from Burns v Corbett that any decision made by the BPC in those circumstances would be “invalid” and seemingly the only alternative forum is a court.

Outcomes

The amendments, while well-intended, do not appear to provide a clear path forward for multi-party disputes and in the circumstances, may not properly provide better outcomes for any parties involved in complex proportionate liability claims.

[Note: An earlier version of this article was submitted for completion of the LLM subject ‘Residential Construction Law’ at Melbourne University]