Claim Commenced by Builder Results in Significant Orders against the Builder

28/10/2019

Watson & Watson received instructions from the Owner of a property:

Briefly:

The Owner and Builder entered into the Building Contract for a Contract Sum of approximately $1,500,000 for a renovation and construction of a significant residence.

The building works were completed in 2017.

The Contract provided for liquidated damages to the Owner by the Builder at $3,000 per week for any delay in the Builder bringing the works to practical completion as required under the terms of the Contract.

At the conclusion of the building works:

  1. The Builder claimed an outstanding amount of approximately $80,000.
  2. The Owner indicated that the sum claimed by the Builder should not be paid as there were liquidated damages of approximately $100,000 to offset the Builder’s claim.

The Owner was prepared by walk away at that stage subject to the Builder providing Certificates for the work undertaken by the Builder which would have enabled the Owner to obtain an Occupation Certificate.

The Builder chose to commence proceedings at NSW Civil and Administrative Tribunal (NCAT) initially for the outstanding sum of approximately $80,000.

The Owner thereafter defended his position essentially on the basis there were liquidated damages due to the Owner to offset the claim by the Builder.

The Owner claimed for relatively minor defects valued at approximately $50,000 most of which were disputed by the Builder.

The Builder thereafter amended his claim having obtained expert opinion from a programmer from a major firm providing advice as to programming of building works and associated matters.  The Builder sought to claim additional costs due to delays in the project and the Builder increased his claim to approximately $300,000.

The Owner reviewed his position and it was ascertained:

  1. That the Builder had constructed the rear garage and studio over the boundary of the neighbouring land.  The expert engaged by Watson & Watson on behalf of the Owner gave evidence in support of the claim and estimated the cost of rectification at $250,000.  The Expert on behalf of the Builder did not respond to this claim.
  2. The Owner suggested to the Builder and agreed that if the Builder could obtain an easement from the neighbour covering the encroachment and the easement was registered prior to the hearing the Owner would not pursue that part of the claim. 
  3. As it happened the adjacent owner requested $10,000 compensation for the easement and the neighbours asked that his reasonable costs relating to the preparation and registration of the easement be paid.  The Owner’s position was that the Builder would have to bear all his costs as he had built the garage over the neighbour’s property. The Builder less than hastily, negotiated and eventually an agreement was reached with the adjacent Owner, the Builder and our client, the Homeowner.
  4. The matter was complicated in that the adjacent Owner put the property up for sale before the Hearing and before the easement had been registered.

In addition the expert engaged by Watson & Watson on behalf of the Homeowner estimated the cost of obtaining the Certificates to enable the Occupation Certificate to be issued was in excess of $100,000.  These included the Certificates that the Builder could have produced but held back in the belief that it would assist him to negotiate an outcome for the Builder.

The Homeowner’s claim at the time of the hearing was approximately $570,000 being approximately $420,000 plus costs made up as follows:

1. Liquidated damages being $100,000 less balance due   
    to Builder of a maximum of $80,000 $   20,000
2. Cost of rectification building works relating to the easement $ 250,000
3. Costs relating to the Certificate.   $ 100,000 approx
4. Defective work $   50,000 approx

In addition the Owner claimed costs.

At the time of the Hearing the Builder:

  1. Apparently had some of the Certificates required but had not handed them over them over the Owner.
  2. Had not achieved registration of the easement pursuant to the agreement with the neighbour and the Home Owner.

On the first day of the Hearing after cross examination of the experts briefed by Watson & Watson on behalf of the Homeowner and the experts briefed on behalf of the Builder, the Builder agreed to settle the matter on the following basis:

  1. The Builder pay to the Home Owner $250,000 (approximately) (which related to the encroachment of the adjacent neighbour).
  2. The Builder pay to the Home Owner $50,000 (relating to the defective work).
  3. The Builder provided all the Certificates other than those to be provided by person directly engaged by the Home Owner within 14 days.
  4. The Builder pay the Owner’s costs of each of Builder’s proceedings and the Homeowners proceedings.

The Home Owner agreed not to enforce the claim for $250,000 (approximately) relating to the encroachment which would allow the Builder 6 months to sort out the issue relating to the registration of the easement.

Further in the event that the Builder did not carry out the work (namely provided all Certificates as referred to above) within the time as specified in the order, the Home Owner was entitled to make a “Renewal Application”.  In that Renewal Application the Home Owner could claim the costs which would be incurred by the Homeowner in engaging appropriate persons to obtain those Certificates which were not provided by the Builder.  This had been assessed at $100,000 (approximately) by the Expert briefed by us on behalf of the Owner.

As it happened:

  1. The Owner allowed some extension of time for the Builder to provide the Certificates and they were provided;
  2. The Builder paid $50,000 relating to defects as referred to above;
  3. The Builder was able to obtain the registration of the easement with the adjacent neighbour and accordingly did not have to pay approximately $250,000;
  4. The Builder was obliged to pay the Owner’s costs which exceed $150,000; and
  5. The Builder also had to pay his own costs including legal costs and the costs of various experts engaged on behalf of the Builder.

The above case is one of many that we see and are involved in where a claim is made without proper consideration of the effect of making the claim.

In our view one needs to carefully consider making a claim and the consequences of making such a claim.  The same applies in defending a claim.  The client should make a commercial decision based on the information available as to the costs and benefits of pursuing or defending a claim.  There are not only financial costs but there are costs associated with the time involved and the stress associated with any litigation.

We suggest that the earlier that a dispute can be resolved the better it is as there is considerable savings to each of the parties.

One never knows what the driving force of the other party might be however at Watson & Watson we have many years of experience dealing with an array of personalities involved in litigation. 

If you find yourself in a position where you believe that you have been wronged please contact Richard Watson Senior Building & Construction Solicitor or his Personal Assistant Shereen Da Gloria to arrange a conference to consider the matter and provide you with the appropriate advice.

This is only a preliminary view and is not to be taken as legal advice without first contacting Watson & Watson Solicitors on 9221 6011.

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