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House Contracts Guarantee (HIH) Bill
Circulation Print
EXPLANATORY MEMORANDUM
PART 1--PRELIMINARY
Clause 1 provides that the purpose of the Bill is to amend four Acts,
namely the House Contracts Guarantee Act 1987 ("the
Principal Act"), the Building Act 1993 ("Building Act"), the
Domestic Building Contracts Act 1995 ("Contracts Act"), and
the Sale of Land Act 1962 ("SOL Act") to provide for--
· the establishment of an indemnity scheme in respect of
losses arising in respect of certain classes of domestic
building work affected by the collapse of companies in the
HIH insurance Group, and the making of claims under this
scheme;
· the Housing Guarantee Fund Limited ("HGFL"), a
company established under Corporations Law, to
administer the scheme;
· the establishment of the Domestic Building (HIH)
Indemnity Fund ("the Fund") to be administered by HGFL;
· the implementation of an additional levy on domestic
building permits to meet part of the claims and other costs
of the scheme;
· the rights of parties to take legal actions in respect of the
operations of the scheme;
· the provision of information to house purchasers about
required insurance;
· HGFL to be able to recommend disciplinary action against
domestic builders;
· the deferral of the mandatory suspension provisions in
relation to some uninsured builders.
541201 BILL LA CIRCULATION 1/6/2001
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Clause 2 provides that all sections, other than sections 14 and 15, of the
Act commence on the day after Royal Assent. Sections 14 and 15
provide for the repeal of the new sections to be inserted in the
Building Act implementing the additional levy on building
permits, and will come into effect on 30 June 2010 or on the date
they are proclaimed, whichever is the earlier.
The commencement of these sections removes the power to
impose the additional levy.
PART 2--AMENDMENT OF HOUSE CONTRACTS
GUARANTEE ACT 1987
Clause 3 amends section 1 of the Principal Act to provide an additional
purpose for that Act, namely the establishment of the indemnity
scheme.
Clause 4 amends section 4 of the Principal Act to make it clear that the
indemnity scheme applies to domestic building work and
contracts carried out on or after 1 May 1996. The rest of the Act
applies to the old house contracts guarantee scheme.
Clause 5 inserts a new section 22(1B) in the Principal Act providing for
two additional clauses to be deemed to be included in the
memorandum of association of HGFL. The deemed inclusion of
these clauses ensures that HGFL is properly empowered under
Corporations Law to carry out the functions given to it under this
Bill.
This clause also inserts a new section 22(7) in the Principal Act
to ensure that HGFL retains these additional powers regardless of
any other provisions of Corporations Law.
Clause 6 provides that the winding-up of HGFL, which is currently
proposed as soon as all claims under the existing guarantee
scheme managed by HGFL are completed, is delayed until after
all claims under the new indemnity scheme established under this
Bill are also completed. This provision would not preclude the
earlier winding-up of HGFL for other reasons that may apply
under Corporations Law.
This clause also inserts a new section 22A(9A) in the Principal
Act that provides explicitly that the Fund established under this
Bill is not part of HGFL's funds.
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Clause 7 repeals some spent provisions of the Principal Act. This Clause
does not relate to the operations of the indemnity scheme, but has
been included under the general procedures governing drafting of
legislation that seek as far as possible to have spent provisions of
Acts repealed when a Bill amending that Act is passed.
Clause 8 inserts a new Part 6 in the Principal Act. This new Part
establishes the indemnity scheme aimed at protecting house
owners affected by the collapse of HIH.
In particular the Part--
· defines the terms used in the Part, and in particular
determines the insurance companies to whose policies the
scheme applies;
· restricts the application of the scheme to houses located in
Victoria;
· provides for the State to indemnify a house owner against
loss arising from an event that would otherwise have been
covered by a builders' warranty insurance policy issued by
HIH, that is, by an insurance company to which the scheme
applies;
· provides that claims that have previously been completed,
either by being paid or by being rejected through due
process, cannot be revived as new claims under the scheme;
· provides that the scheme does not apply if another contract
of insurance exists under which a successful claim may be
made;
· provides that HGFL will administer the scheme and the
Fund on behalf of the State;
· provides that HGFL is acting as an agent of the State in
implementing this indemnity scheme, and that no claims
can be made on or payments made from HGFL's own
assets;
· provides for persons to make claims to HGFL under
procedures approved by the Minister for Consumer Affairs;
· provides that HGFL must pay a claim once HGFL accepts
the claim;
· requires a successful claimant to assign to the State their
rights to recover from other persons in respect of that claim
and requires the liquidator of HIH to disregard the amount
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paid on a claim under the new Part 6 in assessing a claim
under an HIH policy;
· enables HGFL to require builders to undertake rectification
or completion of building work, or to make payments into
the Fund, and to recover from builders amounts paid to
home owners under the indemnity;
· ensures that other rights and obligations of parties are not
affected;
· establishes the Fund and specifies the receipts and
payments that must be made into and out of the Fund;
· allows for the balances of the Fund to be invested as
authorised by the Treasurer;
· provides for the balance of the Fund to be paid to the
Consolidated Fund on the winding up of HGFL;
· requires the financial statements of the Fund, and the
general operations of the scheme by HGFL, to be reported
to the Minister for Consumer Affairs, and to be included in
HGFL's annual report;
· requires the Fund to be audited by the Auditor-General;
· provides for HGFL, as agent of the State and with the
approval of the Minister for Consumer Affairs, to enter into
settlement arrangements with the liquidator or other
persons;
· provides that the provisions have effect despite the
Corporations Law;
· provides for penalties for the making of false statements in
relation to claims;
· provides for Regulations to be made in respect of the
operation of the scheme.
PART 3--AMENDMENT OF BUILDING ACT 1993
Clause 9 amends section 137A of the Building Act to make it clear that a
builder is covered by required insurance for the purposes of
sections 136(2) and 137 of that Act in relation to building work
to which the indemnity scheme in Part 6 of the House Contracts
Guarantee Act 1987 applies.
amends 137B of the Building Act to provide that the sale of a
house by an owner builder complies and is to be taken always to
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have complied with the requirements for builders' warranty
insurance if evidence is or was provided that the house is covered
by a HIH policy within the meaning of Part 6 of the House
Contracts Guarantee Act 1987.
Clause 10 inserts new sub-sections into sections 172 and 174 of the
Building Act that act to defer the automatic suspension by the
Building Practitioners Board of a builder's registration that
occurs if, at the time the builder's registration expires, the builder
does not have builders' warranty insurance or a certificate of
eligibility for builders' warranty insurance.
The new sub-sections apply if--
· the builder has applied for the required insurance; and
· the only reason that the builder does not have such
insurance is that the insurer to whom he or she has applied
has not made a decision on the application.
The Board's discretion to defer suspension in these circumstances
expires on 31 July 2001.
Clause 11 amends sections 174A and 179 of the Building Act to empower
HGFL to recommend the taking of action regarding the
registration of builders who fail to carry out a direction of HGFL
with respect to completion or rectification work or a payment
into the Fund under Part 6 of the Principal Act.
Clause 12 requires the additional levy imposed under Clause 13 to be paid
into a separate account on collection by the Building Control
Commission, with the balances to be paid into the Fund within
seven days after the end of each month.
Clause 13 inserts new sections 201(1A) and 201(1B) in the Building Act,
providing for an additional building permit levy of ·032 cents in
the dollar ($32 in each $100 000) to be imposed in respect of
domestic building work costing more than $10 000. It also
inserts a new section 201(1) to make it clear that the additional
levy only applies to new applications for building permits.
Clause 14 repeals the provisions that will be inserted in section 201 of the
Building Act by Clause 13 providing for the additional building
permit levy. This clause will become operational on the day it is
proclaimed or on 30 June 2010, whichever first occurs.
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Clause 15 contains savings provisions that ensure that any additional levy
amounts that had already been charged before Clause 14 comes
into effect remain collectable and will be handled in the same
way as amounts collected before the levy was abolished.
This clause will come into operation on the same day as
Clause 14.
PART 4--AMENDMENT OF DOMESTIC BUILDING ACT
1995
Clause 16 inserts additional provisions in the Contracts Act that ensure that
disputes in relation to claims against HGFL under the indemnity
are handled in the same way as disputes in relation to claims
against insurance companies in respect of the rights and
obligations on all parties to the dispute and the role of VCAT and
the Courts.
PART 5--AMENDMENT OF SALE OF LAND ACT 1962
Clause 17 amends section 32 of the SOL Act to provide that it is sufficient
and is to be taken always to have been sufficient for the purposes
of that section for details of a HIH policy covering the house to
be provided.
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