Disputes decisions set a precedent

A range of Disputes Tribunal decisions were reached at the end of last year that may have consequences for situations builders are likely to encounter in the future

Spanning from the end of August to November, the cases relate to renovation work, retaining walls, demolition, building work and the purchase of second-hand equipment.

In October 2022, ‘Client A’ engaged ‘Builder A’ to assist with demolition and building work at a rental property. The initial contract was an oral agreement for Builder A to demolish the lining on the bathroom/kitchen wall, replace the bottomplate to the wall, reline the wall to the point where it was able to be gib-stopped, prepare the kitchen floor for vinyl, carry out framing work in the bathroom to allow for the installation of a shower rather than the existing bath.

Upon commencement of work, it was also agreed that Builder A would create an opening from the kitchen to the dining room by demolishing and reframing a section of wall and completing it to the point where gib-stopping was possible and remove the laundry area to install a bigger window.

The verbal agreement stated that Builder A would carry out the labour and Client A would pay for and provide all materials. Additionally, it was agreed that Builder A would only work after-hours and at weekends.

However, problems arose when Builder A stopped working after the demolition work, bottomplate replacement and framing was done on the bathroom and living rooms walls. To complete the work, another contractor was brought in.

Further complicating things was the fact that there was no written agreement on an hourly rate (although at one meeting the two parties verbally agreed a rate of $30 per hour after the job started), nor was there an agreement on how long the job would take. In total, Client A paid Builder A $5,807 for a job that wasn’t finished.

While considering the evidence, the Disputes Tribunal found the hourly rate should be charged at $30 per hour, and the amount of time spent on the job was 84 hours. As a result, the Disputes Tribunal found that Client A paid Builder A $2,287 more than the fair price of the work done (84 hours x $30 per hour) and ordered Builder A to repay $2,287.

More renovation woes

In early 2021, ‘Client A Ltd’ contracted ‘Builder A Ltd’ to carry out extensive renovation work on its commercial property, part of which included replacing three upper-level aluminum windows but not exterior weatherproofing.

Since the work was carried out, Client A Ltd claimed the windows leaked and hired another company, ‘Builder B Ltd’, to complete weatherproofing, remediation work (including additional flashing and sealing around the windows) as well as internal work caused by internal water damage. As a result, Client A Ltd claimed $14,950 to cover remedial work as “the applicant concluded… [the] work was only required because the respondent failed to adequately weatherproof  the installed windows,” said the Tribunal.

Builder A Ltd denied liability because it advised Client A Ltd that further weatherproofing would be required and quoted $55,000 to make the building weathertight.

While the Tribunal rejected Client A Ltd’s claim for $14,950, it accepted the argument that Builder A Ltd’s flashing installation allowed some leak and ordered Builder A Ltd to pay Client A Ltd the amount to remove and reinstall flashing ($1,180 + GST). Builder A Ltd was also ordered to pay Client A Ltd the amount to remove existing sealant ($880 + GST) and an extra $860 + GST for resealing around the windows – a total amount of $3,358.

Second-hand headache

Another case brought in front of the Disputes Tribunal relates to the purchase of a small second-hand digger by Buyer A from Seller A. Buyer A argues that the purchase price of $6,500 was reached due to Seller A’s promise that the digger had been serviced regularly.

After an inspection carried out by a company (‘B Ltd’) that sells and services heavy machinery found that repair work totaling $6,354.30 was required on the digger, Buyer A contacted Seller A to request a contribution towards the repair costs.

Buyer A claimed that Seller A had misrepresented the condition of the digger, which was backed up by the opinion of B Ltd after having carried out the digger inspection.

Buyer A claimed $5,000 in reparations as the purchase price of the digger was $6,500 but it was his opinion, and the opinion of the company that carried out the repairs, it was only worth $1,500.

“Seller A said that he had bought the digger from a hire company that had had its own service department,” reported the Tribunal. “Seller A said that he had assumed, because the hire company had told him so, that the digger had been regularly serviced before he had bought it. He was of the impression, because he had been told so, that such a company would have maintained its hire equipment in good order.”

Even though the sale took place 12 months before the Tribunal claim, it was found that Seller A should pay $1,500 back to Buyer A.

Tribunal Referee C Hawes explained his decision: “I have examined the details of the work done by B Ltd, and I consider that some of the defects, such as leaks and worn parts, would have been identified during a service and, it would be reasonable to assume, have been fixed if the cost of doing so had been justified. Having regard to this, and the factors I have mentioned above, I consider that a reasonable sum for Seller A to pay should not exceed $1,500.00.”

Huge retaining wall fine

The final case in the round-up is that of ‘Builder C Ltd’, which was ordered to pay $19,600 to ‘Customer A’ for the cost of remedial work on a retaining wall.

Builder C Ltd was contracted by Customer A and B to build a two-tiered retaining wall on the boundary of their house. Just a few months after completion, it started to show signs of failure. To correct the failure, Customer A and B hired another builder to fix the wall, after first giving Builder C Ltd the opportunity to remediate the work, and then sought compensation from Builder C Ltd to cover the cost.

In response, Builder C Ltd filed a counterclaim for breaching their initial agreement and loss of income totaling $154,929.93 – which it reduced to $30,000 to stay within the jurisdiction of the Dispute Tribunal.

After consultation with the builders who carried out the remedial work, the Dispute Tribunal found that the retaining wall built by Builder C Ltd was not built with reasonable care and skill “because the posts were not deep enough and the boards were not staggered”.

In response, Builder C Ltd says it verbally informed Customer A and B that a specialised, larger company should be used to build the retaining wall and that an engineer or architect should be involved. Builder C Ltd also said it verbally limited the scope of its services in this case – which was disputed by Customer A and B.

“The only evidence on this issue is of a he said/she said nature and so there is not enough evidence to support a finding that that Builder C Ltd limited the scope of its services to Customer A and B,” wrote the Tribunal.

The Tribunal found that Customer A and B were entitled to rely on C Ltd’s expertise, and added that if Builder C Ltd had concerns, it could have refused to do the work. Under the Consumer Guarantees Act, a supplier is required to be given an opportunity to remedy any problem – which Customer A and B provided.

In judgement, the Tribunal found that Builder C Ltd failed to provide building services with reasonable care and skill and must pay $19,600, which was the cost to remedy the defects with the retaining wall.

In relation to the counterclaim totaling $154,929.23, which related to a verbal agreement to commit to two-years of renovation work with Builder C Ltd at Customer A and B’s house, the Tribunal found that the lack of a written contract meant there was not enough evidence to support a finding that there was such a contract and the claim was dismissed.