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July 2022

Client issues? You have options

27 Jun 2022, Learn, Legal, Prove Your Know How

While most projects will run smoothly, what can you do when things get bumpy? Duncan Cotterill Senior Associate Alysha Hinton discusses the various dispute resolution avenues below

Disputes can easily arise between a head contractor and sub-contractor, between a client and contractor, with the council or another construction professional. For a cost effective and timely resolution, it is important to consider informal steps before escalating to formal forums of recourse.

Resolve it yourself

In the first instance, parties involved in a dispute should always try to reach a resolution between themselves directly. Clear, frank and prompt communication can prevent a dispute from escalating and becoming far more expensive to resolve. Good communication can ensure that a functional working relationship is maintained and prevent future disputes from arising. The more adversarial a dispute becomes, the more likely it is to damage the relationship between the parties. 

To effectively address the dispute yourself, you should check the basis of your arrangement so that you are clear on your position. Review any written contracts for relevant terms which address the issue and your previous correspondence to establish what was expected of you and what your obligations are before you discuss a solution. 

If you can reach a resolution, the agreement should be recorded in writing. Ensure the key background details and issues are accurately recorded so they can be referred to later. 

If you can’t reach a resolution, the next step is to check your contract to see if a dispute resolution process is specified such as adjudication, arbitration, or mediation. You can then begin that process.

Consumer protection rights

You should also consider your position in relation to the consumer protection laws that apply to building work. 

For example, all residential building work is covered by the implied warranties in the Building Act 2004.  These warranties protect the work for up to 10 years regardless of whether there is a contract or not, or the cost of the building project. 

The Consumer Guarantees Act 1993 (CGA) and Fair Trading Act 1986 (FTA) may also apply. The CGA applies to building services but not to the buildings or materials. The CGA provides: 

  • Tradespeople need to work with reasonable skill and care; and 
  • Tradespeople need to fix work that isn’t competently done at no extra cost, or an owner may arrange another tradesperson to do that work and pass on the costs to the original tradesperson. 

The FTA ensures consumers cannot be misled about products or services. 

Formal complaints

Where a building practitioner is licensed or connected to a trade or professional body, they could be subject to a formal complaint. This would likely be in relation to their workmanship or conduct. 

Determinations

The Ministry of Business Innovation and Employment (MBIE) is able to issue determinations (legal binding decisions) in relation to certain disputes to do with building work, such as a disagreement with a notice to fix. MBIE is limited in its scope and will not consider disputes about workmanship or contractual disputes.

Mediation

Mediation is an alternative dispute resolution process where both parties try to come to an agreement that is facilitated by an independent third party, the mediator. The mediator does not make a final decision but helps the parties to resolve the issue through discussion. The parties must agree to participate and agree on a mediator. It is an informal and often comparatively inexpensive forum; however, it is not guaranteed that an agreement will be reached. 

Arbitration

Arbitration is similar to mediation. It requires the parties to agree to participate and on the selected arbitrator. It is less formal than court but resembles a private court process because an independent party, the arbitrator, decides the outcome. The arbitrator’s decision is binding and enforceable by the courts. It can be as costly as a lower court process but is likely to be more time-efficient.

Adjudication

Adjudication is similar to arbitration – a fast dispute resolution process for resolving building disputes. Adjudication is an option for all construction contracts (verbal or written) under the Construction Contracts Act 2002, even where no dispute resolution process is specified. The orders made are for an interim period but generally are accepted by the parties and usually further proceedings are not required to enforce the decision. The benefit of this option is the construction work is not unduly delayed.  

Disputes Tribunal

The Disputes Tribunal is a simplified, faster, and less expensive legal forum which hears a broad range of disputes. It is an informal setting where parties are self-represented, and a binding determination is made by a referee rather than a judge. It is the role of the referee to hear all the evidence and determine what is fair in the circumstances. Their determination can be enforced by the courts. You can claim up to $30,000 and, while you cannot be represented by a lawyer in the Disputes Tribunal, you may wish to seek legal advice to help you prepare. 

District Court

If you have exhausted all other informal measures, or if your claim exceeds the $30,000 limit of the Disputes Tribunal, you can consider making a claim in the District Court. This should be your last option and it is recommended that you seek legal advice before initiating a claim. Legal proceedings are often costly and far slower than other dispute resolution forums.  

 

If you have any questions about engaging independent contractors, or if you are someone who has been engaged as an independent contractor but you believe you are an employee, please contact Alysha Hinton on (04) 471 9452 or at alysha.hinton@duncancotterill.com, or your local Duncan Cotterill advisor (duncancotterill.com). Duncan Cotterill is a full-service law firm with offices in Auckland, Wellington, Nelson, Queenstown and Christchurch.

Disclaimer: the content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose


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