Why Builders Need to Resolve Disputes Promptly

If you’re a builder in New South Wales you have probably noticed that the Department of Fair Trading have significantly increased their capacity of investigating and disciplining builders who they deem have done work not to a standard that corresponds with the relevant legislation and codes. Today I’m joined by David Sachs of Sachs Gerace Lawyers. David, are you seeing this trend in your practice?

Yes, over the last two years I’ve found in New South Wales that the Department of Fair Trading is really trying to crack down in their own way on the way builders operate doing residential building work and pretty much all other types of building work. It seems to me that it’s connected to the change in legislation to the Strata Schemes Management Act and the amendments to the Home Building Act. On my perception of it, it’s the outcome of some balance between what are perceived to be the rights of developers and builders in order to enable them to continue to build in New South Wales, and to protect the consumers, the people who are ultimately living in these buildings, particularly in strata schemes.

I think that what we found is that the legislation has become much more clear so as to identify what the responsibilities of builders and developers are and to shorten the periods within claims are made. Correspondingly, the department seems to have been funded, and at least given some riding instructions that they are to crack down on rogue or rotten apples within the building industry.

That’s all very well and good as a statement, but my experience is that a lot of builders, whether they would be rogues or rotten apples, are being caught up I this new regime and are being the subject of rectification orders, or license inquiries, or refusals of renewals of licenses, refusal of applications for contractor licenses, the whole range of disciplinary action that the department can take against builders. In fact, even in the last twelve months I’ve seen a ten to twenty fold increase in disciplinary action brought by the department against builders.

David, how do builders normally deal with these matters? Prior to these new changes was it the case that these types of complaints brought by the department were significantly less, so builders didn’t really give them due consideration? Now that they’re quite prolific, how are they dealing with them?

In the past builders were often given warnings, or cautions, or notices to do some rectification work, and those sorts of things were easily accommodated by builders. It wasn’t worth the trouble of fighting it. Often, I suppose, drawing an analogy, builders treated it something like that they’d gotten a speeding fine, that it wasn’t really worth taking on the police. It’s not worth taking on the department because they thought that they could never win.

The actions that the department are taking now go way beyond just warnings and cautions. They’re suspending licenses, they’re putting restrictions on them, they’re refusing people the opportunity of being able to operate through corporate vehicles to run their business, they’re imposing very substantial fines, thousands and thousands of dollars on builders. The consequences are not simply being told to do some remedial work or being given a warning to improve your practices, but have a real potential to substantially affect a builder’s ability to conduct their business or to be able to do it in a financially viable way. It’s got to the point now where many builders just cannot afford, either financially or practically, to allow the department to keep doing what it’s doing.

How does this play out at a practical level? If a builder has allegedly done something wrong on s site, or not in accordance with the building code, is there some notification that is sent by the department advising them of a complaint? What’s the mechanism that plays out?

Generally the process is started from a complaint, so from a consumer point of view, of I’m advising consumers, that’s something that I also do, you’ll find particularly in this new environment that you get the best result by lodging a complaint with the Department of Fair Trading. It has got a whole raft of bureaucrats out there in their office, and they’re supported by a number of builders, or former builders, or people who are inspectors within the department. Often the inspector will come out to the site and examine what the dispute is about, and we’ll come to a decision about it. We can do a number of things including issuing a rectification order, which is a directive to the builder to carry out a certain type of work, or report it to his or her superiors in the department who will conduct and inquiry into whether it has any impact on the builder’s license, the old show cause notice why they shouldn’t take disciplinary action.

There’s some strict time limits as well, I suppose, that builders need to respond to.

Indeed. The department will impose very strict time limits. It’s certainly not worthwhile ignoring those letters because otherwise the decision will be made in the absence of the builder. If a builder disagrees with a rectification order but decides to do nothing about it, then that also would be a trigger for disciplinary action. We’ve had some experiences there where builders either have refused or for perhaps legitimate reasons not been able to comply with a rectification order, and it’s been taken up to the next level and the department has imposed significant fines on builders for failing to do that.

What happens with court costs and what have you? If a matter does get elevated to that level, what’s the worry of costs being found against the builder on top of that?

Where the lawyer comes in is that the legislation surrounding this is actually quite, A, difficult to find, and B, quite complex when you get to it. In fact, we’re currently in the middle of a matter that’s being taken by the department to the appeal panel of the Civil and Administrative Tribunal over the extent to which the department can take disciplinary action against a builder. We’ve been through the process of a show cause hearing and internal review, then we had a successful hearing before the Civil and Administrative Tribunal. In that case we won one hundred percent, the disciplinary action was thrown out, the department was ordered to refund the fines to the builder, and the department was ordered to pay the whole of the builder’s costs.

The department, in its wisdom, has decided to challenge that decision and take it up to the Appeal Panel. We expect to be successful before the appeal panel again, and we expect to get another cost order against the builder. When it gets to that level, it’s obviously something that builders want to succeed and want to be able to prove, to vindicate their original position.

The real lesson for it is not that you can win cases before the tribunal, or you can win cases before the appeal panel, but if problems are properly dealt with at the early stages when you’ve got a show cause hearing, or even when you’re dealing with an internal review to a higher bureaucrat within the department, that you can effectively kibosh this action. That’s really where builders need to come and get some legal advice and not let things just drift along or decisions be made without them contributing to it, because they’ll find that they could be much more disastrous than they anticipated. Their opportunity to be able to do something is limited, and the cost of doing it will be much, much higher.

Builders should try always to stay out of court as much as they can, and that’s something that we certainly do here at Sachs Gerace Lawyers, is to try and keep builders out of court. Sometimes doing that means that you’ve got to get some legal advice to deal with these rectification orders, these show cause hearings, and the internal reviews at an early stage because they can be dealt with economically and properly, and you can negotiate a much better result.