CASE DOOMED TO FAIL? - CAREFUL NEGOTIATION REQUIRED IF SO

04/05/2016

Recently Richard Watson received a telephone call from Matthew the Owner of a residential home that he had purchased from an Owner Builder. 

Matthew was concerned that some of the building works at his home were defective.  Matthew had previously (before discussing the matter with Richard Watson) engaged a Building Consultant to consider the matter and a Lawyer to assist Matthew in making the claim agent the “Owner Builder” who sold him the home.  From a report of a well-known Building Consultant it was clear that there were some items which could have been better undertaken as part of the building process.  There were 30 items listed and some items were built not strictly in accordance with the Building Code of Australia and Council requirements.  The Building Consultant prepared a detailed report and Scott Schedule setting out the items he considered were “defective”.  The Building Consultant also considered the cost of removing and rebuilding the non-compliant items and the costs of rectifying some items which were clearly defective.  The Building Consultant estimated the cost of rectification was in order of $80,000.00.

Matthew had been informed that he had 7 years to commence proceedings.  Matthew was not sure as to when the 7 year period commenced or the basis of such, however his previous Solicitor told him he had “seven years” to commence the claim.

Matthew’s former Solicitors set about commencing proceedings in the NCAT and preparing the case. 

Matthew was given an estimate of fees of approximately $25,000.  It is always a very difficult question as the estimate of fees is only an estimate and will depend on the attitude and approach of each of the parties to the proceedings.  When Matthew had recovered accounts for more than 50% of the estimate and no hearing date had been allocated Matthew became concerned as to whether the case could be completed for the balance of the estimate given by his previous solicitor. 

As often happens the Respondent who in this case was an Owner Builder on receipt of the demand hired a “gun” in the form of a Lawyer and the matter escalated at great cost (financial and emotional) to each party.

When Matthew rang Richard Watson, Matthew was convinced (presumably based on the advice of the former Solicitor and the expert report for the Building Consultant) that it was only a matter of proceeding with the hearing for a significant outcome in his favour. 

Matthew approached Richard Watson a few days before a Directions Hearing at the NCAT at which time the matter was to be listed for hearing. 

At this stage the statements and evidence, including expert evidence from an appropriate building contractor should have been finalised.  Even after the matter is listed for hearing there is still significant preparation, briefing of Counsel and preparing for the Hearing, complying with NCAT pre-hearing requirements and attending the hearing before the NCAT.  Each is time consuming and expensive and could not be completed for $15,000.

On a review of the matter Richard Watson was concerned as to the cost/benefit of proceeding, these concerns included:

1. The Owner Builder had engaged a Building Consultant who had disputed almost every item of the documented 30 items identified by the Consultant for the Owner.  The Owner Builder’s Building Consultant submitted that the cost of rectification of defective items would be in the order of $3,000.  The Building Consultant for the Owner Builder also indicated that if the other claimed defects were allowed the total cost of rectification would be in the order of $10,000 - $15,000.  This is not large in contrast with the suggestion of the Consultant on behalf of the Owner that the costs of rectification was in excess of $80,000.
2. The second issue which was of concern to Richard Watson was whether the claim had been bought within the time limits now allowed in relation to works undertaken.  There have been numerous amendments to the Home Building Act over the past few years and as a consequence there are different time limits for bringing a claim based on the date of the Contract, and the type of defect.  For example whether the defect is of a structural nature, a major defect or other type of defect. 

3.   Further there is the issue of when is the starting date for determining the period and the final date by which a claim should be made.  The Home Building Act has provisions as to the time limits and when the time limit commences.  Many of these depend on factual matters. 

As with all factual matters there can be a dispute and there usually is a dispute,

There are many factual matters which are difficult to ascertain in particular by the subsequent purchaser of the property.  For example, how does the subsequent purchaser determine when the building works were completed?

Often we are told that the building works were never completed because there are still defects.  This is not a determining factor as to when the building works were completed. 

Before one embarks on proceedings there are simple commercial matters which need to be considered.  One needs to consider the costs/benefit of bringing a claim.  Even if you have been wronged it may be better to spend money rectifying the defect rather then embarking on a long and expensive case. 

In Matthew’s case the previous Owner/Builder had put evidence in the NCAT proceedings by way of a Statement as to numerous factual matters.  These statements appeared reasonably accurate as far as relevant to the issue as to the date the work was carried out and completed to be reasonably accurate.  If those dates were correct then based on the information as to what was the defective work (namely all minor or non-compliant).  Matthew did not have 7 years from the date of completion of the works to bring his claim. 

Under the present legislation which applied at the time to Matthew’s circumstances Matthew had 2 years to bring a claim for breach of statutory warranty in relation to those items the subject of the claim.  If the claims were significantly different for example a major defect then a claim could have been bought.

Before Matthew instructed Richard Watson the matter proceeded with two Lawyers who regularly practice in the area of Building litigation in relation to homes, the Home Building Act, Statutory and Warranties and NCAT hearings.  The Lawyer for the Owner Builder may have been aware of the limitation issue but had never mentioned it.   If the Lawyer for the Owner Builder had been aware of the limitation period one would expect that if the Lawyer for the Owner Builder had notified the Lawyer for the Claimant Owner of the real issue the matter would have resolved at an earlier stage before significant costs had been incurred by Matthew and the Owner Builder.   This may have saved each of the Owner Builder and the subsequent Owner Matthew thousands of dollars.

A difficulty arose as to how could Matthew dispose of the matter (which he could not win as the claim had been commenced outside the time allowed to bring the claim) without being subjected to a demand for significant costs from the Owner Builder.

Richard Watson who is experienced in these matters, discussed the matter with Matthew and found a way forward.  Offers were made and one of those offers was accepted by the Owner Builder and the matter resolved.  The matter resolved on a payment to Matthew; and Matthew was not obliged to reimburse the Owner Builder for the Owner Builder’s costs that had been incurred.

There is a secondary issue namely whether the Owner can now claim his losses from the Lawyer who previously acted on behalf of the Owner. 

Richard Watson and the team at Watson and Watson are very experienced and will assist in this regard to achieve what the client wishes to achieve (which is on the basis that it is reality).

In those circumstances if you have any issues, building issues, strata issues please contact Richard Watson our experienced Building and Construction Solicitor for an assessment of your matter or expert opinion.