Owner Successfully Resolves Dispute and Claim Denied by Builder


In 2016 Watson & Watson received instructions from an Owner of a property in a new subdivision in western Sydney.  The property had been constructed in 2010 and 2011 and a Final Occupation Certificate was issued in February 2012.

During 2012 the Owner discovered that the property was cracking.  The Owner complained to the Builder.  The Builder originally blamed the Engineer who had been engaged to undertake engineering drawings for the home.

Over the next few years until 2015 the Builder and the Engineer attempted to resolve the issue.  The cracking in the building worsened.

The Builder and the Engineer engaged approximately 5 or 6 Engineers and Geotechnical Engineers to ascertain what was the cause of the cracking?  Each had a differing view as to the cause of the cracking.

It is fundamental that one discovers the cause of the cracking or any other defect before one can rectify the defect.  It is critical to identify, isolate and rectify the cause so that the continual deterioration of the building does not occur.

The Owner complained to the Department of Fair Trading who provided a Rectification Order to the Builder which was not complied with.

The Owner commenced proceedings issued out of the New South Wales Civil and Administrative Tribunal (NCAT) claiming against the Builder. At that time the only defence available to the Builder to a claim for breach of Statutory Warranties was to claim on a factual basis that there was no beach of the Statutory Warranties or that the Builder (if he had) had advised the owner of the possible non-compliance with the Statutory Warranties in carrying work out in a certain manner and despite the advice the Builder had received instructions to proceed.

One would have thought this namely, the Owner commencing proceedings against the Builder was the appropriate course to adopt.  If the Builder believed that the defect was as a result of conduct or negligence of another for example an Engineer, then the Builder should consider whether the Builder may have a right to claim against the Engineer.

The Builder instructed Solicitors who took an aggressive approach and denied responsibility.  The Builder’s Solicitors made an application to strike out the Owner’s claim on the basis that the Builder was not liable and it was the Engineer (if any person) who was liable to compensate the Owner.  The difficulty with that course of action was that under the provisions of the Home Building Act that applied at that stage, the Builder was obliged to comply with the Statutory Warranties.

Since 2012 the law has changed and there is a further defence to any such claim namely, the Builder carried out the work in accordance with advice of a relevant professional namely, a professional engaged by the Owner.

In 2015 the Owner approached Watson & Watson having regard to the seriousness of the possibility of the matter being struck out.

A review of the “expert evidence” from the numerous Building Consultants, Engineers, Geotechnical Engineers that had previously been engaged suggested that one would need to demolish the existing house and commence construction again.  The costs associated with such a process would be in excess of $1,500,000.

The Builder through its Solicitor was determined to have the matter struck out.  There was a fundamental misunderstanding of the law and/or the facts by the Solicitor for the Builder.

Watson & Watson received instructions to consider the matter and to provide a second opinion to the Owner. We attended the site with appropriate experts.  It was clear that there were some serious difficulties having regard to the extent and nature of the cracking.

Following instructions, it became clear to us that the only course to adopt was for the Owner to join the Engineer in the proceedings and to transfer the proceedings from NCAT to the District Court which had jurisdiction to hear the matter.

The Builder did not succeed in having the Owner’s claim against the Builder struck out.

There were further ongoing investigations to ascertain the cause of the problem and the cost of rectification.

On further investigation Richard Watson and the Hydraulic Consultant engaged (as distinct from all the Engineers who had been involved previously) ascertained the cause of cracking was that water ingress to the subsurface which caused heave and distortion to the slab.

The rectification of the building works required firstly to determine the cause of the problem which was water ingress through a defective stormwater system, rectification of the stormwater system, rectification and redesign of other drainage issues to stop water ingress to the foundations of the house, then patching and painting to rectify the defective work.

Still there were issues as to proof and other related matters. 

As it happened the parties agreed to Mediation in an attempt to resolve the matter.  The costs (legal and other expenses) of each of the Owner, the Builder and the Engineer were each about the same as the cost of rectification of the building works. 

At Mediation agreement was reached for a satisfactory sum to be paid to the Owner shared between the Builder and the Engineer.

In this particular case the resolution required:

1.        The Owner to accept less than full compensation.

2.        The Builder to pay its own costs and make a significant contribution to the settlement.

3.        The Engineer to pay its own costs and to pay a significant contribution to the settlement sum.

At Watson & Watson we start with the proposition of solving the building problem rather than engaging in endless litigation.

Clearly the issue would have been more easily resolved if Watson & Watson had been instructed initially and if the process, namely ascertaining the cause of the problem was ascertained at an early stage before the parties had incurred great costs with Lawyers, Engineers and Geotechnical Engineers.

If you have concerns as to the conduct of your case please contact Richard Watson or his Personal Assistant, Shereen DaGloria to discuss the matter and seek an opinion as to the various courses of action or options or alternatives available when you find yourself in the very difficult position of suffering loss with the parties involved denying responsibility.

This is only a preliminary view and is not to be taken as legal advice without first contacting Watson & Watson Solicitors on 02 9221 6011.

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