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RECENT CASES

DEFECTIVE BUILDING WORK

*Building dispute resolution without recourse to litigation within the Court / Tribunal.

1. Home owner client contracted with builder to carryout extensive renovations to existing home.  Cost plus building contract was used, estimating the cost of the works at approximately $800,000.00 (please note it is never our practice to advise home owners to sign cost plus building contracts).  The builder was abusive, demanded payment for work not performed, and left the building works sitting for approximately six months without performing any further building work. The builder requested a large progress payment of approximately $85,000.00.  The owner had already paid over $500,000.00, was living in the home, but the work had not attained Interim Occupation Certificate stage as promised, and felt that the building works were defective and overvalued at that stage.

Expert evidence was obtained from an independent building consultant, who provided an expert report on all defective and incomplete items of building work. A solicitor from our firm, who is an experienced lawyer and a qualified home builder, attended a series of site meetings with the builder and home owner in person. The expert report was used as a very useful negotiation tool when discussing the dispute. The solicitor, builder and owner walked through the home, and building site, and examined each and every item of defective work.

The builder was placed under pressure of being confronted with work that did not comply with the Building Code Of Australia, relevant Australian Standards and manufacturer’s specifications. Legal correspondence was sent to the builder asking for all items of defective work to be rectified. Defects to the work included; render cracking, incorrectly placed structural steel within reinforced structural concrete slabs and beams, incorrectly installed external windows and doors that were not properly flashed, existing parts of the home had been exposed to rain and were damaged, the works were incorrectly set out, the storm water drainage was defective, water was leaking through the roof structure and important certification documents were not obtained or provided.

The home owner wanted to contract with another builder, however was advised by us of the difficulty due to having signed a cost plus contract. The home owner was effectively in breach of the building contract at this time, not the builder.  The builder argued that the works were not defective, but simply incomplete. This is an argument that would carry weight before the court.  After a heated discussion that was intended to exhaust the issues in dispute, and the builder himself, an agreement was entered into between the parties to end the building contract and allow the home owner to contract with a remedial builder to complete the project. The agreement was recorded in a Deed of Settlement and Release, and on good financial terms to the home owner. During the informal discussions, it was essential to discuss the best case scenario/worst case scenario with the builder and the owner. Home building disputes are very expensive to resolve before the Court, and this should always be emphasised when conducting informal dispute resolution negotiations.

 

LATENT BUILDING DEFECTS

*Disadvantages of not being legally represented by a specialist solicitor.

2. An owner builder client in Sydney’s Inner West built three town houses as a property developer/investor. He kept ownership of two properties and sold the other. The subsequent purchaser (‘new home owner’) of the town house commenced legal proceedings in the Consumer, Trader and Tenancy Tribunal at Sydney for monetary damages due to alleged defects and incomplete works. The owner builder was personally responsible and accountable to the new home owner.  An Application was filed with the Tribunal and the case listed for a directions hearing. The owner builder retained a solicitor from our law firm who sought permission to appear before the Tribunal on his behalf.

The new home owner’s legal case became far too complex for him to properly understand the issues, and submissions made before the Tribunal.  It became difficult or impossible for him to make properly informed decisions. Orders were made by the Tribunal that expert evidence to support the new home owner’s case was inadmissible. Without understanding the consequences, the new home owner submitted to the Tribunal that his case was not worth more than a limited and relatively small sum of money. This is recorded in the Tribunal file where an undertaking was made by consent of the parties, that the new home owner will not seek financial damages in excess of that sum of money.

The new home owner’s mistake was to not be properly informed, as to what can be very complex litigation, by an experienced building lawyer. Attempting to save money by being self-represented can lead to disastrous results for any litigant.  The new home owner settled the case in the early stages of litigation by accepting a financial settlement offer that was recorded in a Terms Of Settlement document, and placed on the Tribunal’s file closing the case. What the new home owner didn’t realise was that the sum of money accepted, was not enough to carry out effective remedial works. Further, if the new home owner decides to sell the townhouse, then the legal dispute must be revealed to any future purchaser. This could cause a reduction to the value of the town house. If not revealed to any future purchaser, the situation could result in legal claims being directly made against the new home owner, for failing to disclose the dispute, and the defective work.

 

SUCCESSFUL INFORMAL DISPUTE RESOLUTION

*The importance of good negotiation and dispute resolution skills. Always maintain politeness and show consideration to all parties.

3. A home builder retained our firm to act in legal proceedings before the Consumer, Trader and Tenancy Tribunal. A home owner had a very genuine case for defective and incomplete works.  The home owner was not legally represented at the first directions hearing. Leave was granted by the Tribunal for the home builder to be legally represented.  The dispute was a long and very acrimonious one between the parties. In relation to building disputes, the Tribunal has a legislative responsibility to attempt resolution of each dispute by conciliation. Usually this means that the Tribunal Member hearing the case asks the parties to step outside the Tribunal Hearing Room, to discuss the matter informally and attempt informal settlement.

In this case, the home owners were very insistent about not talking to our solicitor. However, in keeping with our firm’s policy of always acting in a very courteous manner with all parties to a dispute or legal proceedings, our solicitor began speaking with the home owners in a very considerate way. Sometimes this is a one and only chance to resolve a dispute informally. This process is sometimes assisted by a Tribunal Facilitator.

By carefully listening to what the home owners wanted to say, they gradually began to discuss the dispute. Our solicitor encouraged them to enter into discussions with the builder. A Tribunal Facilitator also assisted in encouraging discussion that our solicitor began directing. It was very important to allow the home owners the chance to speak uninterrupted, and eventually the dispute was resolved with the builder making a payment of settlement moneys to the home owners. They parted company at the Tribunal on a friendly basis and on good financial terms to both parties.

 

INCOMPLETE BUILDING WORKS

*Builder abandon’s building site for no apparent reason.

4. A retiree home unit owner entered into a fixed price building contract to renovate her home unit. During the course of the building works, the builder abandoned the building site for no apparent reason. The home unit owner was left for months without any understanding as to why the builder had disappeared. The home unit owner could not live in the home unit because of the incomplete works, with building materials including cupboards, wardrobes, kitchen units etc. lying on the floor of the main living areas.

After being instructed to act for the home unit owner, our solicitor made a home building licence check on the NSW Office Of Fair Trading web site, to identify the home builder’s details. The home unit was examined by an independent building consultant, and an expert report prepared recording all defects and items to complete the building contract works. The expert report provided a cost estimate to complete the work. It was found that the builder abandoned the site due to mistakes in the set out of the bathroom, a failure to install proper waterproof membranes and difficulties with the electrical fit out.

During a site meeting with the builder, a solicitor of this firm showed the builder the expert report and made reference to non-compliance with the Building Code Of Australia, Australian Standards and the material supplier’s specifications and recommendations.  The builder and solicitor reviewed the building contract and expert report together. After informal ‘without prejudice’ discussions, the builder agreed to return to complete the works and rectify defects, rather than have the building contract terminated and legal proceedings commenced before the Tribunal.  The home unit owner was very relieved to have the building works completed over the next two months, and in accordance with the costs set out in the building contract.

 

MASSIVE WATER ENTRY INTO ROOF OF HOME

*Builder installs inadequate roofing leading to significant damage to internal ceilings, wall, floor coverings, and cupboards due to rain water entry.

5. A home owner contracted with a medium sized home building company to build a first floor extension, and renovate ground floor internal and external areas. The builder installed roofing in such a manner that caused massive water penetration into the roof void. Water destroyed the ceilings and sat approximately 50mm in depth on top of the ceiling, slowly leaking down walls and into floors, damaging new work, the existing home and contents.

Independent expert evidence was obtained as a permanent record of the damage caused by the builder. The expert evidence was prepared by an experienced building consultant / expert court witness, skilled in the preparation of admissible expert evidence for legal proceedings. A site meeting was held with the builder, building consultant, solicitor from our firm, and the home owner.

On a ‘without prejudice’ basis, the builder was reminded of; its legal responsibilities pursuant to the Home Building Act (1989) NSW, contractual responsibilities and a potential damages claim to be made against it if the situation was not rectified. Reference was made to a large damages claim ($275,000.00), and the consequences of the builder entering insolvency, should a judgment be obtained and enforcement proceedings pressed to recover damages. The builder was also reminded of the personal undertakings by its company directors to the Home Warranty Insurer by way of Deed Of Indemnity. This meant potential personal liability to the home builder company directors should an insurance claim be settled.

The builder agreed to return to rectify and complete the works, and pay reparation moneys for personal assets damaged due to failure to install a waterproof roof.  Remedial and completion works took four months longer than the original time contemplated by the building contract, however litigation was avoided and the home owner relieved the dispute was brought to conclusion.

 

UNLICENCED CONTRACTING

*Builder who is only licenced to perform maintenance work to a maximum value of $6,000.00 operates as a home builder on contracts exceeding $500,000.00.

6. An unqualified and unlicenced maintenance contractor, using a company name entered into a building contract to perform extensive renovations, and new building works to an existing home.  The building works were inspected by an independent building consultant who found that the works were so badly carried out; they were of no value to the home owner. Internal tiling to bathrooms had no waterproof membranes, plumbing works were non-compliant, electrical works were dangerous and defective, external works to pathways and stairs were set out at incorrect falls and needed to be demolished. Other works performed were illegal and of no value to the home owners. In fact, to bring the works into compliance cost the home owners many thousands of dollars.

The home owners had paid the unlicenced builder approximately $300,000.00. At the time our law firm was instructed to act for the home owners, the builder was pressing for payment of further progress payments. At a site meeting with the unlicenced builder, he  claimed to be licenced and promised to return to the site to rectify and complete all work, and provide a copy of his company’s building licence. The builder was never seen again. A false address was given, moneys were received illegally, and the home owners were left financially exhausted and unable to fund remedial works. There was no Home Owner’s Warranty Insurance Cover.

The NSW Office Of Fair Trading was informed of the situation. No investigation was carried out by the Department. The home owners gave up attempting to locate the unlicenced builder due to mounting legal costs. The home owners eventually sold the home and purchased a less expensive one at a significant financial loss. These home owner clients provide a tragic example of not having had their building contract reviewed by a specialist solicitor before signing it. Unlicenced building contractor provides an example of how easily unlicenced contracting can be carried out involving large sums of money, and how they are rarely investigated by the licencing authority.  

 

DAMAGE CAUSED BY BUILDING WORKS TO HOME LOCATED NEXT DOOR

*Property developer engages builder who damages home located next door.

7. Excavation works to a 90 year old town house cause significant wall cracking to property next door. The property developer and builder are asked to inspect the damage where it is obvious that earth moving equipment caused vibration to masonry walls and cracked them. The walls were very old and brittle.  The property developer engaged a solicitor who adopted a defence that the owner of the damaged home had to prove that the builder was responsible and was negligent.

Though the damage to the walls was; extensive and easily seen upon visual inspection, occurred at the precise time the earth moving equipment operated next door, and caused a significant risk of wall and roof collapse, the builder and developer continued to deny liability. Their solicitor refused all requests by our solicitors to informally negotiate a settlement based on simple underpinning of the damaged walls, bracing and re-rendering of the affected areas.  After having the damage inspected by a structural engineer and building consultant, our client was forced to sue the property developer and builder in the Local Court.

The jurisdiction of the Consumer, Trader and Tenancy Tribunal was not applicable, as this was not a home building dispute. It was a dispute based on the legal principle of one property damaging another.  Over 18 months, litigation was undertaken and the matter resolved on good terms to the home owner.  Though the dispute was very traumatic for the home owner, the eventual outcome was facilitated by instructing legal counsel (a barrister) who was a specialist in home building litigation.  Expert evidence was adduced at the hearing, and an extensive number of witnesses subpoenaed to appear gave evidence. The case was resolved with damages and costs ordered in favour of the home owner client.

 

SUBCONTRACTOR STOPS BUILDING WORKS PROGRESSING ON SITE

*Excavation company demands payment of money and when objected to by head contractor, excavator leaves bull dozer in middle of building site so work cannot continue.

8. Our client was a building contractor who was building a large residential home in the Eastern Suburbs of Sydney. Clauses in the building contract involving time for completion were critical. During initial building works an excavation contractor made menacing threats for payment to the builder that were unjustified.  It left a bulldozer in the middle of the building site so that works to complete the ground works could not continue. The builder was very intimidated by the subcontractor who attended the site each day demanding moneys it was not entitled to.

A solicitor from our firm was retained to resolve the matter. He attended the site office at the construction site and waited for the subcontractor to arrive and intimidate our client. When the subcontractor arrived, he had two large men with him to intimidate the builder. Our solicitor threatened to call the police and asked the workmen to remove themselves and the bulldozer from the building site. After some negotiations, an agreement was written up on paper and signed by the parties resolving the dispute. The bulldozer was removed the next day.

 

DEFECTIVE BUILDING WORK – INFORMAL RESOLUTION

*Home owner has home damaged by building works to common wall.

9. A home owner client was a retiree who was very upset over damage to her home by water penetration, and building works encroaching on her property, caused by a builder working next door. An independent expert building report was obtained from a building consultant, and all items of damage recorded as evidence in the event of legal proceedings. Some of our client’s personal possessions were damaged or ruined. Water running through the roof and internal kitchen cupboards, caused an electrical danger, cracking to walls and other damage.

The builder was asked to meet our solicitor at a site meeting, and the case was discussed sitting down at our client’s kitchen table. All defects and damage recorded in the expert report were discussed and examined during the site meeting. Best case scenario / worst case scenario were discussed with the builder, along with legal correspondence being provided, placing the builder on notice that legal and professional costs would be claimed if the dispute was left unresolved. Argument was put to the builder that much of the profit on the building works next door, would be lost fighting a legal dispute, and that this outcome could be set aside by simply rectifying the damage and removing the encroachment.

The builder was sensible and responded by quickly addressing the problem. Access was given to the damaged home and remedial works were carried out under the direction of the owners building consultant. The builder paid money to our client on a ‘without prejudice and without admissions basis’ to pay for legal and professional costs. Our client, was much relieved to have the damage rectified without cost, and without taking the matter to court.

 

*For privacy reasons, the names of the clients involved in these disputes are not shown. These cases do not constitute a guarantee, warranty or prediction regarding the outcome of your legal matter.

Call us now on (02) 9460 6202 or 0421 695 571 anytime Monday to Saturday.

 

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