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Submission supporting document 5.1.4 - Building Compliance Reform

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Submission supporting document 5.1.4 - Building Compliance Reform Powered By Docstoc
					CONTRACT MANAGEMENT AND DISPUTE RESOLUTION

5.1.4 How can dispute resolution procedures be structured to provide incentives for faster, less
expensive and fairer dispute resolution? Should participation in initial dispute resolution be
mandatory ahead of the right to commence proceedings in VCAT?

Introduction: What is the meaning of dispute?

The very first problem regarding disputes is the terminology. Most building situations, particularly
with extremely serious and critically defective/incomplete buildings, are not ‘disputes’; this is simply
the term that has been given to them. When a negligent, incompetent or unscrupulous builder (or all
three) walks away with much of the owners’ money, and the owner is powerless to do anything about
it, this is not a dispute. That is a builder taking advantage of his favoured position in an exceptionally
unfair system. You need two parties to create a dispute. But when there is such imbalance in the
system and when one party is totally powerless, in this case the owner, this does not result in ‘a
dispute’; the owner is simply left abandoned and trapped. It is the system that has coined the term
‘dispute’ and it is incorrect. Sadly this concept of ‘dispute’ has generated the fallacy that consumers
are an equal party, and in such a position (with little/no power) could be in an equal position to cause a
‘dispute’ and tor resolve a ‘dispute’. Unhappily, the unfair system has created a ‘dispute scheme’, and
also a ‘dispute resolution’ sub-industry; it relies on disputes to ensure its ongoing existence and to
support the very high incomes of those who make their living in this industry. Legal charges for
solicitors can be $300-$500 per hour, much higher than in other civil matters.

On close examination of this unfair system, we can explain how it has evolved. First, many of the
practitioners have set out intentionally to take shortcuts on the quality of building materials, fittings,
safety issues and delivering poor workmanship. This means being paid dishonestly, for something they
have not provided – and sometimes this means making an extra $200,000, $500,000 or millions of
dollars. It all depends on the contract price and how many shortcuts, how many seconds’ products
have been used, how much concrete was not laid, how defective and unsafe overall, how many coats
of paint not applied, how much cheaper the tiles were, how much less they paid the sub-contractors (or
did pay contractors at all in some cases), etc. Thus, when the builders know that in all probability they
will get away with not delivering what was in the contract, and given that for many practitioners
money is a high priority, this becomes the standard behaviour. And the word spreads. Everyone hears
how you can make quick, easy money and others join for their share of the spoils! And experience
demonstrates that in a building conflict situation, the owners cannot win; the builders are so brazen
that they will arrogantly tell owners to their face that they, the builders, have all the cards. Thus, it is a
misnomer to call such a ‘building dispute’, as if there were two equal parties, each with an even
chance to get a fair deal, or to go into a ‘dispute’ and get a fair deal.

In reality, a dispute in the usual sense of the word does not apply to building disputes, and rarely does
an owner create a dispute. Rather owners often know when things are not right, but with unfair
contracts and the whole system favouring builders, owners are in an inferior position. A builder, being
in a far stronger position than an owner, can dismiss their rightful claims to rectify defects. As John
Royce, an experienced surveyor has found: “The writer through experience in domestic building
disputes has found that when consumers claim that the construction work appears wrong or below
standard, they are generally correct. It is usually very wrong and their complaints to the builder are
commonly ignored or placed on the back burner.” (John Royce ‘Warranty Insurance for Builders
Fails’)



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How can procedures be structured to achieve faster, fairer and less expensive dispute resolution
and what of initial mandatory dispute resolution ahead of the VCAT?

The complaints and dispute resolution procedures are extremely poor. The Commission and the BPB
are equally to blame and using either body to try to improve the system will not work. The Building
Commission argues that it has no enforcement powers, and if this is true, then it is pointless to pretend
that it can assist owners. CAV has enforcement powers but will not use them. The existing processes
do not include any checks and balances as regards a fair review of complaints to the Building
Commission, CAV or BACV. If a new system was introduced to genuinely help consumers, the
system and personnel would both need to change.

For consumers who have approached the Building Commission, the response is go to BACV, where if
decided upon, the Commission can arrange for an Inspector to come and inspect the building.
However, the Inspector will only inspect the defects/incomplete work pointed out by the owners, and
then on the bottom of the inspection report it states that the Commission cannot force the builder to
rectify or complete the work. Hence most builders simply walk away and having the inspection report
is a waste of time and effort. So without powers to enforce compliance, it is another waste of
consumers’ money to pay Commission wages/or contractors’ wages to do so. Except that owners are
told that the inspection report can be used at the VCAT. That is the one message that is constant: “Get
a Lawyer and go to the VCAT.” All roads lead to VCAT.

In a rare case where owners complained to the Commission and actually discussed their serious
building problems (normally it is BACV or off to VCAT), they were informed by a senior Building
Commission Official to pay the builder a further $100,000 - with the aim of getting this builder back
to work, even though he had left nearly 2 years earlier! He clearly had no intention of returning to do
any work. He had not honoured his contract and not built according to even vaguely minimum
standards. But the Building Commission’s suggested solution was to further reward the builder for his
wrongdoing. It is simply astonishing! Even worse, this would have caused further financial harm to
the owners, already so badly damaged.

It seems that BACV, with CAV in charge here, conciliates few ‘disputes’ (see Appendix 1 ‘Statistics’)
and the experience of those few consumers who have been to conciliation is that it produces no
solution, or is ‘resolved unsatisfactorily, finding it was a waste of time, causing more damage through
the lost time - one year or even 3 years being wasted at BACV - and for no result. Most owners we
have ever come in contact with have never had ‘conciliation’ because after lodging their written
complaint, sometimes more than one, it has been deemed: “not to meet the criteria”. So this idea that
‘conciliation’ exists is, it seems for most a myth. Then to learn in this ‘Consultation Paper that in
2010-2011, consumers paid BACV $7.7 Million is astounding, given that once again consumers’
experience demonstrates clearly that spending money on the BACV is useless.

A full discussion regarding the Government agencies’ statistics, including the BACV’s statistics, is
covered in Appendix 1 (See Appendix 1) Here we will take one year, 2006-2007 and examine the
BACV statistics, which demonstrate the outcomes for consumers’ complaints. We see that of the
2,113 owners who put in written complaints to the BACV, only 21 managed to go to conciliation
(ASBC News Spring 2007), which means 2,092 owners did not manage to access the conciliation
service in response to their calls for help. All these consumers were so desperate that they were willing
to spend hours writing their detailed complaint, photocopying contracts, diary entries, emails and other
documents in an effort to get some justice from CAV. Let us take an example to see the actual number
of consumers who went on to BACV conciliation in 2006-2007 and the overall outcome. There were


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21 cases that went to conciliation. Of those, CAV in its Annual Report for 2006-2007 informs us that:
“83% of conciliated complaints being successfully resolved” – 83% of 21 consumers, which is just 17
consumers! Furthermore, we are told that CAV “is highly successful”. (CAV Annual Report 2006-
2007, Page 7) Thus, 17 consumers out of 2,113 managed to obtain successful conciliation, (whatever
success means) and that is just .8%! Yes, less than 1%, which normally one would not call “highly
successful”.

As regards Consumer Affairs Victoria, most consumers contracted to registered practitioners have
received no assistance, which is bad enough, but large numbers have been given incorrect advice and
many consumers have been harmed. To give an example; a consumer was told by BACV staff to pay
$550 to the builder for a blunder he had made during the framing stage of building and to claim it back
later at the VCAT – as if it was automatically going to be refunded. There was no mention of years
and years, and hundreds of thousands of dollars being expended to recover that money and the rest for
major defects in the building at the end of the project. In practice, the builder could make excessive
charges, for what was his fault, and aided by the BACV, force the owner to pay. The money, of
course, was never recovered – and large sums of money were spent at the VCAT for no gain.

Some CAV officials have shown bias, a lack of objectivity and disregard for owners’ welfare. For
example, one owner who sought assistance from BACV after her builder had walked away, leaving
her with a very defective and incomplete building, wasted months of time in ‘conciliation’. This owner
incurred much additional stress at the BACV. Both conciliators allowed the builder to bring in a
solicitor, when the owner did not have legal representation. Both were unwilling to pressure the
builder to do anything, even after a site visit, which made it obvious just how bad the building work
was in this case (later to be declared one of the worst cases of building disasters ever seen by
insurance assessors sent regarding a Warranty Insurance claim). The conciliators kept repeating that it
was a ‘contractual issue’, as if that meant that the owner had no rights to expect the builder to rectify.
And after some months, not surprisingly the BACV staff pushed VCAT as the best option. Despite
CAV having powers, as always with registered practitioners, it refused to use them. In the end, the
owner was advised by the BACV officials to pay the builder another $150,000 “so he might come
back!” This builder had no intention of coming back, declared insolvency some months later, so had
this owner taken BACV’s counsel, a further loss $150,000 would have been incurred! When this
builder went broke, there were evidently 60+ consumers, victims of this one crook. This BACV
experience was months of wasted time for nought.

In another case, owners had many problems and contacted BACV to try to get the builder to return to
rectify. However nothing happened. Then concerned about an electrical problem, the owners pleaded
with the builder, electrician and BACV to get the electrician to come back. No action from anyone and
six months passed. Then one night after being out for a meal, the owners returned home, horrified to
find the house ablaze. They were told that if the fire had happened a few hours later, and they were in
bed upstairs, they would have been seriously burned or dead! Despite all their pleas, BACV had done
nothing – and this was a serious electrical problem. It turned out that ESV informed them that
everything was non-compliant, and later it came out that the electrician had not done the wiring, but
simply signed the certificate. The owners were told that this electrician would lose his licence, but not
so – he was given a small fine. If the BACV are so powerless or uninterested that it would not do
anything in 6 months in such a serious case, then it is pointless to pay millions of dollars for no
benefit.

Both the Commission and the BPB have demonstrated no commitment to assisting consumers. The
Commission says it has no powers and CAV will only prosecute those who are unregistered. Thus, if

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there were to be ‘mandatory dispute resolution’, it would only be successful and have value if the
practitioners are forced to rectify work and complete work. Otherwise, as is the case now, it would
employ many Government officials but be a waste of time – and more waste of owners’ money. For
such a proposal to work, there would need to be a change of attitude and change of personnel involved
and a new body – at present, the practitioners do what they want, which is to refuse to do anything and
walk away. Under the same system, they would continue to do the same as they do now, unless there
is massive reform. We need people involved, who do not have any links with the industry and related
industries, and those who will honestly fulfill their obligations and duty of care to consumers. Building
laws and regulations must be enforced; it is clear that under self-regulation, the self-interested will do
just as they please as they have done, unless they are forced to do otherwise by the regulators.

In relation to the VCAT, it is not the place initially, or at any future time for consumers if wanting
objectivity and to obtain a fair outcome. VCAT is the ultimate unfair experience.

In terms of any conciliation, nothing can work under the present regime. If there is serious reform, it
could be trialed, but it would be as useless as the present system, if the ‘natural justice’ continues only
to apply to builders as is the case now.

Should compliance orders be introduced? If so, what should be the scope of their mandate and
what should be the consequences of a party failing to either comply with the order or seek
review of the order at VCAT?

It is rare that it will be owners not complying, as they cannot but make the payments and have no
powers to do anything else. If an owner does withhold payment, it is our understanding that it would
be the final payment, and in most cases they would have good grounds for final stage defects and
possibly defective work at earlier stages, but they cannot withhold payment, or the builders will run to
the VCAT. However, they should be able to withhold payment, as they have no other weapon (if this
were to be in the contracts). At present they are locked out of their property, have no rights to visit,
have to make payments within 7 days of receiving an Invoice – regardless of defects, they can be
constantly bullied and forced to pay for seconds’ materials and shocking substandard work. And this is
called a ‘fair contract’. No one will assist them, even though we have all so many bureaucrats
employed to supposedly ‘help’. There is no point in having such officials when they say they can do
nothing and they do absolutely nothing. Even solicitors will tell owners during the building process
that it is not even worth paying for a solicitor’s letter to the builder about defective work or being
locked out– as the builder will ignore it – and no one will intervene and compel him to right his
shoddy work. If you go to BACV and complain about anything serious, an owner cannot get any help.
For example, if not allowed to visit and inspect work, BACV will not even ring the builder. It is a truly
hopeless situation for owners. Such is the ‘consumer protection framework’ in Victoria.

As regards the builders, if work is non-compliant, defective in materials or workmanship, then they
should be ordered to rectify. If it is during construction, they should receive orders to fix. If they have
walked away, leaving an incomplete and defective building, they should be ordered to complete and
make work compliant. If they refuse, enforcement measures, overseen to meet at least minimum
standards must be put in place. If builders still refuse, owners must be compensated and the builder
must lose his licence. Perhaps a fund, paid into by builders should be set up to keep funds in trust for
such recalcitrant builders and good builders pay less. Whatever is decided, owners cannot continue to
pay for rubbish and the builders walk away and on to their next victim. It is theft - pure and simple. As
for warranties, they do not exist for so many owners and for this system to have pretended to
consumers that they are protected and actually have warranties and a real means of redress for


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shockingly defective/incomplete work so long, is disgraceful. It is ludicrous to have regulations,
without enforcement. The regulations will be ignored - as they have been for 17 years!

Consider our driving regulations. If police did not fine people caught ignoring our road laws, how
many more would be dead or maimed? This is the current building industry, no enforcement and no
penalties. And the outcomes for consumers are horrific; among other damage, injuries, suicides and
death. Until all practitioners are made accountable for their conduct, and seriously accountable,
nothing will change. Also we must remove all the helpers: those who support the delinquent builders.
They include: inspector who does not see the defects; the surveyor who approves their defective work;
the ‘consultants’ in their employ who write reports for the VCAT, stating their work is not really
defective; the lawyers who advise them on how to ‘get out of trouble’ at the BPB and at the VCAT;
those who advise them on how to divest their assets and go broke; the solicitors, barristers and senior
counsels who will try to blame the manufacturer or owner for the building defects at the BPB or at the
VCAT; those Members at the VCAT who allow them to delay and adjourn hearings when they know
that they have no reasonable grounds; those in the Commission, BPB and CAV who ‘turn a blind eye’
to the reality. Then there are all those in ‘the system’, who and which have buttressed the cowboys and
maintained this unjust system. The bureaucrats and particularly those at the senior levels, who have
had full knowledge, but have not called for change, even though they have seen first-hand the
inequality and the inequitable consumer outcomes.

Should VCAT cost rules be changed to provide an incentive for early resolution of disputes,
participation in conciliation and settlement based upon compliance orders?

The cost rules and the costs at the VCAT are prohibitive for any consumers. VCAT was designed to
be cheap, quick, and effective and to provide just outcomes. Given its objectives it has evolved to be
an abysmal failure The VCAT rewards those in the legal/consultant occupations. The VCAT is not the
place for any ‘dispute resolution’, especially for consumers. If they stay the distance at the VCAT
Domestic Building List, spend hundreds of thousands of dollars, sacrifice years of their lives and
‘win’, they will ‘lose’. Thus, to suggest that the VCAT should be a place for anything, be it early
‘dispute resolution’, or later ‘dispute resolution’, consumers with experience of the VCAT - and their
family, friends and acquaintances - would overwhelmingly state that this is definitely not the medium
for any consumers to be forced to use as a fair intermediary.

The fact is that no intermediary should be required if laws and regulations are properly enforced and
the industry cleaned up. For the few ‘disputes’, most of which are not ‘disputes’, owners should not
have to spend more money, even if it less than at present which is so expensive, just to seek what they
have paid for. At the VCAT, owners will never get what they have paid for because it is all about
compromise. They will be told to accept that structural items be addressed, but generally everything is
about accepting a ‘patch up’ job. Owners will be told that aesthetics, such as brickwork, plaster, paint,
floorboards, tiles, doors, windows, showers, toilets, sinks, toilets, ovens, carpentry items,
marble/granite, etc. are not important. In short, most of the house is not important! It is irrelevant that
this was the reason for building – to get a new house, one’s own design and aesthetically pleasing; this
should not be too much to expect, but in the building industry, it is not achievable.

It does not matter how expensive the house, if the owners paid top dollars for a high-end building, at
the VCAT they will not be awarded an amount of money to reflect minimum quality, not top quality.
Consumers are meant to pay a fortune at the VCAT, lose years of their life, suffer much stress and
then accept a super inferior building and be happy. And this is after having paid the builder all the
money - $500,000 or $2,000,000. There is something very wrong here! To give an analogy: if buying


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a new Mercedes, and after paying for it, a consumer was handed over a second-hand, seconds’ quality
Holden Barina in its place, with a dented body, lawn mower engine and 3 tyres, would we say
consumers should accept that and be satisfied? We think most reasonable people would not agree that
they should do so. And consumers would not pay in advance for a car; they would put down a deposit
and not pay for or accept the dented ‘lawn trike’, in place of a luxury brand spanking new luxury
Mercedes as ordered. And rightfully so! When a house is 5, 10 or 100 times more expensive than a
car, why should consumers be forced to accept what is not vaguely acceptable when expending vast
sums of money and more again at the VCAT? It certainly is illogical. And there is no compelling,
rational explanation for this ‘legalized robbery’ by builders, followed by more injustice at the VCAT.
It is no surprise that domestic building is on the decline; this trend is likely to continue until consumers
are protected and believe that they can make a decision to build, without great risk. Otherwise, why
would owners embark on a journey to wreck their life?

A more appropriate solution could be to have arbitration with a totally independent, newly formed
organization, with no personnel connected in any way with the Commission or CAV, without costly
reports, lawyers, or consultants – and including genuine consumers. A panel could consider each case
and if builders are at fault, they should be made to satisfy their responsibilities regarding materials and
workmanship, in line with building laws, regulations, Standards and contractual obligations. As we all
know, unless we are considering the structural integrity of foundations (taking account of soil type and
concrete reinforcement and strength) or framing (that it meets Engineering requirements and
Standards), plumbing and electrical work, most owners are in a good position to assess other defects.
Most can even see construction errors – leaking basement walls, woeful brickwork, walls out of line or
the wrong place, plaster defects, etc. Many, if not all are obvious to the eye, especially if one can take
time to inspect and more so once living in the house for some time. As John Royce has stated, from his
long experience as a surveyor, “when consumers claim that the construction appears wrong, or below
standard they are generally correct.” After some years of involvement with dodgy builders, the eye
improves. One learns that building is not ‘rocket science’, it does not require a team of lawyers or
consultants to make a case. Of importance when tests are required, is to be able to obtain independent
testing – at present that is another problem, as pressure can be applied for such organizations to return
tests that will not be damaging to the builder/surveyor, and this is another result of the cosy relations
across the industries involved in building.

VCAT for all ‘disputes’ is not the appropriate place, even if costs were lowered. If the aim is a clean
industry, with most of the cowboys having departed, the surveyors no longer privatized and back at
Councils, when the few ‘disputes’ arise, a new organization, truly independent should be able to
manage – with genuine consumer representatives. If any such serious ‘disputes’ exist, they should be
in the courts, where there should be a chance of a fair hearing, but costs must be examined; those not
at fault should not have to pay again. Also, when any practitioners commit serious crimes in the course
of building, be it fraud, assault, theft, theft by deception, lying in an Inquiry, even ‘misleading and
deceptive conduct’, (which CAV refers to as ‘puffery’ as if it is simply overzealous marketing) all
should be offences heard in court, especially when it is written down and given to the consumer in a
letter or brochure prior to building. And all misconduct, especially serious misconduct should lead to
action being taken against the offenders. No one is allowed to behave so badly and repeatedly in other
industries and not be called to account, and if guilty, receive no penalty.

Conciliation is not the answer and consumers’ experience with mediation, conciliation and
conferences has been very negative; certainly at the VCAT this is the consensus of consumer opinion.
This may be because this system has evolved to be ‘lawyer’ focused. This needs to cease. With
lawyers, cases drag on and on, costs go up and up – and such is not conducive to speedy, sensible

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solutions. Owners need to be able to get a decent building, through an independent body if there is a
‘dispute’, not staffed by people from the building and related industries, and without lawyers and
consultants seizing control.

Some builders may be under-capitalized, especially now they do not have to have any capital to be
insured and registered and they will use the owners money to fund the building – and hence ask for
payments in cash ahead of time, send out Invoices before stage completion and approval, make up
their own contracts with larger payments in the early stages, etc. Consumers are not in a position to
solve ‘disputes’ under the current contracts and legislation because they are absolutely powerless. New
contracts, fair to owners are a must. The home building market is not like any other market. “You've
got so many customers doing something they've never done before (and never will again) and
spending such huge sums of money, they are utterly outgunned. On the other side you have some big-
name project-home companies. ………...also small builders you don't know from Adam.” (Sydney
Morning Herald ‘Wolf Hovers over Housing Industry’, 14 August 2002) The building industry is like
no other, it gives so much power to builders and places consumers in an inferior and utterly
defenceless position.

From consumers’ experience, ‘disputes’ are not about owners being intractable. Owners cannot insist
on anything. In fact, cowboy builders use their position of strength to intimidate and bully, all through
the process, greatly aided by the unfair contracts, and the fact that the Government agencies do not
assist. There is the shocking VCAT process and costs - and the builders know they can do as they like.
For example, a builder will make a Variation, not advise the owner and add it the cost; he will decide
the night before the tiles are to go down that he will charge $3,000 more, and if the owner disagrees,
he will stop work. He will make blunders, whereby owners lose space from several rooms and say,
“just too bad”! Owners will find out about other short-cuts later, such as a smaller heating/air con unit
than required and the builder will say ‘take it or leave it - I’m not going to alter it.”

Compliance orders should be introduced. It is rare that it will be owners not complying, as they cannot
but make the payments and have no powers. If an owner does withhold payment, it would be the final
payment, and they would have good grounds for final stage defects and defective work at earlier
stages, but cannot do anything. In the case of builders, they should be forced to comply, but if
compliance orders are issued, they must, must be enforced. That means following up with staff, who
authority to begin court action if the orders have been ignored. If one considers VCAT, it can issue
orders, but there is no follow up. Thus, the builders generally ignore them. We know consumers 3
years and 5 years later, still waiting for the builder to rectify the work! We know one builder who was
ordered by the VCAT to fix work, years went by – and he did nought. Then he turned up at a BPB
Inquiry. He was working while suspended, had caused havoc for another lot of owners and came up
with stories of “special circumstances”, having the “owner from hell”, being disorganized and he had a
serious memory problem. The BPB response: “We understand.” The builder told many lies about the
owners’ houses being fixed, saying that he had a perfect past record. It seemed that he had sold his
licence, taken stage payments prematurely and said that he had never done anything wrong before.
The VCAT case could have been checked, but there is no referral from the VCAT to the BPB and no
cross checking of anything by any of these ‘consumer protection’ agencies. The builder’s case was put
forward sympathetically by a BPB Commission staff member. The builder walked away, informed by
the BPB that he was ‘naïve’ when in fact he was very clever; unbelievably he was “unsuspended”, free
to register, even though as an insolvent, he did not qualify for registration (against Building
Regulations) and was issued with a $500 fine! It is all farcical.



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Should reforms along the lines of those in WA be introduced, where a person can make quick
and cost effective decisions on a case? If yes, what is the appropriate organization?

Certainly quick and cost effective decisions sound good. It would be necessary to examine the detail
on the WA model. Also it would be essential to look at its history and cases involved, measure the
levels of consumer satisfaction, how much compromise is involved, who is involved on the body, etc.
The important point here is that if there is to be worthwhile reform, this time consumers need to get a
fair deal. It cannot continue to be about compromise – accept the horrific brickwork, which makes up
the entire exterior of the house, or accept the pathetic substandard everything if it is not structural and
falling down, etc. In addition, where the buildings are so atrocious that they need to be demolished, an
increasing trend, owners must be reimbursed, and for all the other damage – loss of years, stress,
money, etc. In fact, this should apply to all owners; so many cases cause problems for years and others
are detrimental for owners indefinitely – all impact negatively on all aspects of consumers’ lives. As
someone recently said, “The building disaster is the next worst thing to losing a loved one!” Certainly
consumers, who have lived the nightmare instead of the dream they were promised, would share this
evaluation.

If this were to be adopted, definitely the Building Commission and CAV would be totally
inappropriate. Any newly formed organization must be absolutely independent, without any links to
the building and related industries and without links with, or staff from the Government agencies. This
is the only way consumers could begin to restore any sense of hope and trust and contemplate building
in the future.

There seems to be an underlying presupposition that with more information, consumers will be better
off. Whilst information is always useful and it may assist consumers, in this case no amount of
information could ever place consumers anywhere near on an equal footing with builders. The
legislation, contracts, regulation, etc. must change and we need revolutionary reform. Most of all, it is
time for a clean-up like never before, and honesty central to success, including giving real statistics on
everything, starting to make information available on the processes, such as the structure and workings
of the BPB, the Commission and CAV, how many work there and what it is they are supposedly
employed to do. The secrecy at all levels must stop, public servants paid by us need to be servants of
us – and no longer dismiss us, refuse to telephone us back, stop hanging up on us because we are
seeking information, which is our right. Those who do not wish to work diligently and be responsible
should leave now. It is imperative that all are honest, pleasant in manner and importantly, made
accountable. Given the total failure with the agencies, especially considering the money spent and the
lack of achievement by officials in managing any positive outcomes for consumers, it would seem that
there will be many areas where redundancies would be appropriate.

Should an Ombudsman operate in advance of the VCAT process? Is there another
judicial/quasi-judicial structure that is more appropriate to the domestic building industry?

Certainly, regardless of the new structure, an Ombudsman should be appointed for the building
industry. Thus far, building is excluded everywhere, for example at the FOS. The industry generates
so many jobs and wealth for so many people, but it is also marred by conflict of interest, collusion and
has become seriously corrupted.

The Ombudsman’s office desperately needs the right staff, but once again critical to its success is
independence. There should be no staffing from those in any way connected with the building
industries, building law, current DPCD, Building Commission, BPB, CAV, Property, HIA, MBA,
Insurance companies, including the VMIA, consultants, developers, etc. Secondly, the Ombudsman

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needs to have powers and a right of appeal for complainants. Consumer input would be crucial in this
context, especially from those who have had experience putting complaints into the Victorian
Ombudsman and been unsuccessful; that office has tended to support the Government agencies on FOI
requests and complaints about the agencies’ inability to carry out their duties and obligations to
consumers in very many areas.

In the future we need to have decisions based around the genuine protection of building consumers,
totally ignored up until now. Also, the public interest has been so poorly served – and this is well
overdue to be remedied. There are so many cases of public interest; most of our community buy, build
and/or renovate, but the reality of building, all the pitfalls has been hidden from the public by the
Government agencies. It is only now, with increasing media coverage, that the public is more aware of
the disastrous outcomes that beset owners.

If there is another area of reform to consider, it is that of where to place ‘dispute resolution’. The
VCAT is not the place to hear any disputes, especially considering the amount of money involved in
legal and other costs; these are often never awarded even if an owner ‘wins’. Given these ‘disputes’
are not real disputes, but rather they result from the imbalance of the present relationship of inferior-
owner compared to superior-builder, this must change. We need an equitable relationship through new
legislation, changed contracts and the removal from the system of those in whose interest it is to
promote the dispute industry.

Where there are serious cases, hopefully very few, they should go to a court, or a judicial body which
will act like a court, in terms of fairness and it should have the power to refer criminal conduct to the
courts or higher courts. The costs need to be minimal and through a consumer advocacy/consumer law
group, consumers could obtain assistance, and the jurisdiction should not allow lawyers for owners or
practitioners. This is essential if we are to get rid of consumers paying once for the building, then
again to lawyers/consultants and then thirdly to rectify defective work. At present, owners can spend
more on legal and other costs than the amount to rectify/complete their building. Not to mention the
loss of years because the builders, together with their lawyers use the ‘adjourn and delay’ tactics –
these lengthen cases and increase costs. It does not have to be this way. So many owners ‘win’ and
then ‘lose’ – this is the Domestic Building List, not designed to deliver justice for owners.

Owners can go to the VCAT, ‘win’ and then the find that the builder decides to go broke. When
owners then put in an insurance claim, they cannot claim their prior costs for taking the builder to the
VCAT. Absurd! The first decision making this a precedent meant the owners lost an additional
$150,000. The builder was in the wrong, three years later their house is still not fixed, as they do not
have the money – but the builder continues to be a builder. The VCAT cannot enforce its own Orders.
So an owner gets awarded let us say $100,000. Then the builder refuses to pay and the owner has to go
and spend about $5,000 to try to send the builder broke to try to claim insurance. Some owners cannot
succeed because they do not have the $5,000 to liquidate the builder, or because the builder has put the
insurance in one company name, different to the other company involved in building! The cowboys
know all the tricks – and the system, including VCAT sure helps them. It truly is a minefield! All
these absurdities need to tackled in the reform process.

Are there any other issues or policy reforms which could be considered to improve the dispute
resolution process?

Yes, there are numerous problems, most relating to independence. It would seem that there are
numerous groups, to which the lawyers, consultants and VCAT members belong and they meet
regularly and socialize. There is also much cross-over between these groups and many inter-

9
relationships, of a business and social kind, as well as personal friendships. This potential conflict of
interest in this relatively small industry is of further concern because those who work at the VCAT
know the consultants and ‘experts’ and have regular contact with some of the builders and most of the
lawyers. The owners, who come along generally only once, are not connected, do not know anyone,
they are on the ‘outer’, and do not have a clue how the system works - until it is too late. As the VCAT
operates now, consumers would not take a case there, if at the beginning they knew what they have
come to know by the end. The VCAT favours many interests, but definitely not consumers – for
owners, it is nigh impossible to get a fair outcome.

Lawyers are involved in representing builders at the VCAT and they are also on the statutory agencies.
Lawyers can work in their practice and be a mediator at the VCAT. Developers/Building Consultants
can be mediators at the VCAT and then go out working in the industry. Building consultants can work
for certain solicitors and go to the VCAT and also work for the Building Commission. It seems that it
could open to potential conflict of interest. The fee structures for those in the legal and consulting
areas are extremely high and when consumers commit to go to the VCAT, they assume that it will
provide a just outcome. It is not designed to deliver a ‘what you paid for’ outcome. And many
consumers have found that, even though they had ample evidence to prove their case, the outcomes
did not reflect their strong position – and they lost another huge sum of money.

John Royce in his article ‘Warranty for Builders Fails’, states: “Builders can claim it’s poor drawings,
contracts cut too fine, ineffective or incomplete specifications, winging or greedy prospective home
owners, the supervisors fault, and much more. Unfortunately poor drawings, favourable industry
contracts and incomplete or poor specification documentation, are the foundation of disputes not
related to construction faults.” As Mr Royce says, there is no shortage of excuses to defend the
indefensible. He also believes that a ‘Notice to Fix’ is long overdue; other states have it and without it,
owners have no way to force compliance, as commented on above.

Under the present arrangements, all roads lead to the VCAT. This is the ‘advice’ from all the agencies,
and hence their lack of will to do anything. This is not the place to send owners of the future.

There are other problems too. Those owners engaged as consultants may be ‘favoured’ at the VCAT –
or not. Owners do not know who has a history of working for builders. For example, some consultants
list their qualifications, but before they walk into the house, make a judgement: “It is not the fault of
the builder!” Very strange without inspecting the house! Often this is because they are a friend of the
builder - and in the end, it turns out that it is the fault of the builder and the consultant was supporting
his friend. Owners need much time to navigate such a system, and of course, lose much money in
gaining this knowledge.

Another problem is with those who have P I Insurance, such as surveyors. When a house has to be
demolished, but a few years old, one would think it easy to lodge a claim and win. Not so, as the
insurance company will try to avoid paying out, even when there is irrefutable evidence, the building
is falling down and the major defects are there for all to see. However, for an owner to eventually
‘win’, he might have to spend $200,000 or much more as the surveyor, builder and insurance company
will all contest the claim strongly. This is so wrong. No VCAT or court should be involved, and it
should not go on for years. This is but another super-duper obstacle because of this crazy system!

Thus it goes on. The system is well and truly broken. It is beyond repair and a new system, without the
VCAT needs to be designed and implemented, with no perceived conflict of interest, collusion or
dishonesty. Most importantly, we have to make ‘disputes’ disappear from the system - or near enough
- and ensure fairness and justice for owners.

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