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What Can I Do If I Have a Dispute With Builders?

Blog & Articles, Building Disputes WA, Civil Litigation, Defamation and dispute, Litigation, Tang Legal, Western Australia Builders

BUILDING DISPUTES IN WESTERN AUSTRALIA

Since 2011 the adjudication of complaints relating to home building contracts and ‘regulated building services’ has been simplified for consumers and service providers. The Building Commission, and the State Administrative Tribunal in certain cases, has jurisdiction to hear complaints arising under the Home Building Contracts Act 1991 (“HBCA”) and the Building (Complaint Resolution and Administration) Act 2011 (“BCRA”).Builders also have recourse to the rapid adjudication processes provided by the Construction Contracts Act 2004in relation to payment disputes.


Home Building Contract disputes

 

Contracts for building work between $7,500 and $500,000 are classified as a ‘home building contract’ by the HBCA. The HBCA regulates home building contracts, including by prescribing terms to be included in the contract and requiring notices, home indemnity insurance and other procedures to be carried out or obtained prior to entry into a contract. Certain terms are also prohibited from inclusion in a home building contract.
As the HBCA relates specifically to matters relating to the contract, complaints arising under this act are primarily contractual in nature.   
Many building service providers incorrectly assume the HBCA only applies to builders undertaking substantial work on a home, such as the construction or renovation of a new home. In fact the HBCA extends to owner-builders and all associated building work, such as landscaping and cabinetry.
The HBCA contains civil penalty provisions for certain breaches of the act by a builder, for example requiring payment of a deposit that exceeds 6.5% of the contract price or undertaking home building work without obtaining the requisite insurance. This can result in the Building Commission commencing a prosecution and significant infringements subsequently being imposed on a builder. It is therefore essential that all providers of home building work, including associated work where the provider directly contracts with the owner, carefully review the provisions of the HBCA and ensure their written contracts comply with the HBCA before they are entered into.
The Building Commission has jurisdiction to hear complaints commenced within 3 years from the date the dispute arose. Remedies for an owner and a builder in relation to non-fulfilment of conditions imposed by the HBCA are set out in Schedule 1 of the Act, and include termination of the contract by the party not in breach.
The Commissioner has a number of remedial orders which can be made under the BCRA in respect of home building contracts, including orders restraining or requiring certain action by the builder, an order that a party pay an amount due under the contract or declaring that an amount is not payable, and an order requiring a party to pay specific compensation arising from a breach of the contract or the HBCA. Orders declaring a provision or a contract void can also be made in respect of specific breaches of the HBCA.
 

Workmanship disputes

A person adversely affected by the carrying out of a ‘regulated building service’ can make a complaint to the Building Commission on the basis that the building work was not carried out in a proper and proficient manner, or was faulty or unsatisfactory. Complaints made under the BCRA are therefore known as ‘workmanship complaints’.
The class of persons ‘adversely affected’ by a regulated building service extends beyond the owner who contracted with the builder, to a subsequent owner of the property or a neighbour for example. The complaint must however be made within 6 years from the date of practical completion where work was not carried out under a permit, or within 6 years from a notice of cessation or a notice of completion where work was carried out under a permit.
The term ‘regulated building service’ is defined in the BCRA as a building service carried out by a registered builder or approved owner-builder, and home building work under the HBCA. ‘Building service’ includes building work, demolition work (within the meaning of those terms in the Building Act 2011*), plumbing work and other prescribed works.
An aggrieved party must give 14 days’ notice to the other party before commencing a complaint, designed to encourage the parties to reach an informal resolution of the dispute with the need to resort to the formal complaint process.
Once the complaint is commenced, the Commissioner has the power to dismiss the claim, or require further details of the claim to be provided in deciding whether to accept or dismiss the claim. Once the claim is accepted, the Commissioner must cause an investigation to be carried out by an inspector, who subsequently produces a report. The report may include recommendations as to how the complaint should be dealt with. After receiving the report, the Commissioner may commence a conciliation process at which both parties must attend generally without their legal representatives present.
Building remedy orders may be made by the Commissioner or SAT if satisfied that the work was not carried out in a proper and proficient manner or was faulty or unsatisfactory. If the compensation or value of the work orders being sought by the aggrieved party exceeds $100,000, the Commissioner must refer the matter to the State Administrative Tribunal, which has jurisdiction up to $500,000.
The Commissioner or SAT can also award compensation in lieu of a building remedy order if it is just and expedient to do so, for example where a builder has shown itself to be incapable of performing any building work to the standard expected of a professional builder, or where the builder has refused to carry out the work.


Claims outside the BCRA

 

For latent defects that are not identified by a consumer within the 6 year limitation period provided in the BCRA, it may be necessary for the consumer to resort to remedies under the building contract, if still available, or a negligence claim against the builder. Such claims would need to be commenced in a Western Australian court,  depending on the value of the claim.
For causes of action based upon a builder’s professional negligence, a consumer will typically have a limitation period of 6 years from the date the damage caused by a latent defect was discovered by the consumer, or was capable of being discovered by the reasonable diligence of the consumer.
 
* The Building Act 2011 defines ‘building work’ as: (a) the construction, erection, assembly or placement of a building or an incidental structure; or (b) the renovation, alteration, extension, improvement or repair of a building or an incidental structure; or (c) the assembly, reassembly or securing of a relocated building or a relocated incidental structure; or (d) the changing of ground levels of land for the purposes of work of a kind mentioned in paragraph (a), (b) or (c) to an extent that could adversely affect land beyond its boundaries; or (e) site work on any land for the purposes of, or required because of, work of a kind mentioned in — (i) paragraph (a), (b), (c) or (d); or (ii) paragraph (a) or (b) of the definition of demolition work; or (f) other prescribed work,
‘demolition work’ is defined as (a) the demolition, dismantling or removal of a building or an incidental structure; or (b) the changing of ground levels for the purposes of work of a kind mentioned in paragraph (a) to an extent that could adversely affect land owned by a person other than an owner of the land on which the building or incidental structure that is the subject of the demolition work is located; or (c) other prescribed work, but does not include work of a kind prescribed for the purposes of this definition as not being demolition work;
‘incidental structure’ means a structure attached to or incidental to a building and includes — (a) a chimney, mast, swimming pool, fence, free-standing wall, retaining wall or permanent protection structure; and (b) a part of a structure.
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Case Note: Du Buisson Perrine v Chan (2016) WASCA 18

Blog & Articles, Estate Planning, Kim Samiotis Perth, Law Case Note, Law Case WA, Perth Lawyers, Tang Legal, Western Australian Court of Appeal, Wills and Estates Lawyers

A decision from the Western Australian Court of Appeal is a precaution to sellers and those drafting contracts for the sale of land, to carefully consider the provisions applicable to terms contracts found in the Sale of Land Act 1970 (WA) (“Act”).

Background

The appeal arose from a dispute between the buyer (Du Buisson Perrine – the appellants) and the seller (Chan – the respondents) of residential property in relation to the seller’s termination of the contract for the sale of the land.
The contract, dated 3 September 2012, provided for a purchase price of $2.09 million with an initial deposit of $150,000 payable in three instalments.
The contract was varied by agreement on four occasions, the last being 27 February 2013 at which time the deposit was reduced to $105,000 and payable by four instalments: $5,000 on 3 September 2012, $10,000 on 19 October 2012, $30,000 on 12 December 2012 and $60,000 on 1 March 2013. Settlement was varied to occur on 7 March 2013.
All instalments of the deposit were paid by the buyer but settlement did not proceed on 7 March 2013. On 21 March 2013 the seller served a default notice on the buyer stating that the buyer was in default under the contract for failure to complete settlement in accordance with clause 3.5 of the Joint Form of General Conditions for the Sale of Land (“GC”). The default notice gave the buyer 11 business days to remedy the default. The buyer failed to complete settlement thereafter and the seller issued a notice of termination to the buyer on 16 April 2013.

Primary judgment

The seller commenced proceedings in the Supreme Court of Western Australia seeking a declaration that the contract was terminated lawfully and that it was entitled to the buyer’s deposit of $105,000.

The buyer disputed that the contract had been validly terminated on the basis that the contract was a terms contract under section 5 of the Act and the seller had not terminated it in accordance with section 6 of the Act.

 

Section 5 of the Act defined a terms contract as:

 

“An executory contract for the sale and purchase of land under which the purchaser is –
(a)  obliged to make 2 or more payments to the vendor (over and above any deposit) before he is entitled to a conveyance or transfer of the land: or
(b)  entitled to possession or occupation of the land before he becomes entitled to a conveyance or transfer of the land,

and for the purpose of this interpretation deposit includes any part of the purchase price which the contract specifies as being a deposit and provides is to be paid, whether by one or more payments, within 28 days of the execution of the contract”

 

Section 6 of the Act prescribed the method for termination of a terms contract as follows:

 

(1)  Notwithstanding any stipulation to the contrary, a terms contract shall not be determined or rescinded on account of a breach by the purchaser of any term of the contract unless and until the vendor has served on the purchase a notice in writing specifying the breach complained of and requiring the purchaser to remedy the breach within the time mentioned in subsection (2) and the purchaser has failed to do so.
(2)  The time referred to in subsection (1) within which the purchaser is required to remedy a breach is:
(a)     where the breach  consists of a failure to pay a sum of money – a date stipulated by the vendor being a date not less than 28 days from the date of service of the notice; and

(b)     in any other case – a reasonable time from the date of service of the notice.

 

The primary judge determined that the definition of ‘deposit’ in section 5 of the Act was exhaustive such that any payments made outside the 28 day limit would render a contract a terms contract. As three of the four instalments of the deposit were made more than 28 days from execution of the contract, Her Honour determined the contract was a terms contract.
The primary judge nevertheless found that the contract had been validly terminated by the seller in accordance with section 6 of the Act. In reaching this determination, Her Honour concluded that the breach referred to in the default notice and termination notice was not the buyer’s ‘failure to pay a sum of money’, but rather the buyer’s failure to complete settlement as required by clause 3.5 of the GC.
Her Honour concluded that the breach relied upon by the seller was a breach that fell under section 6(2) of the Act, which required reasonable notice be provided in terminating the contract. Her Honour was satisfied that 11 business days was a reasonable period of notice. It followed that the seller had terminated the contract effectively and could retain the buyer’s deposit.

Competing positions in the appeal

The buyer appealed the decision of the primary judge on the ground that the breach relied upon by the seller in the termination notice was ‘a failure to pay a sum of money’ to which section 6(1) of the Act applied, requiring the seller to give the buyer 28 days’ notice of termination, which it had not done.
The seller filed a notice of contention disputing the primary judge’s decision that the contract was a terms contract. The seller argued that the definition of ‘deposit’ in section 5 of the Act was inclusive and extended to payments made more than 28 days from execution of the contract provided the deposit was labelled as such in the contract. The buyer opposed the seller’s notice of contention by supporting the primary judge’s finding that the definition of ‘deposit’ was exhaustive.

Decision of the Court of Appeal

The Court of Appeal was constituted by McLure P, Newnes JA and Murphy JA.

 

McLure P determined that the primary judge had erred in construing the definition of ‘deposit’ as exhaustive. Her Honour found that the definition of ‘deposit’ in section 5 of the Act first extended the common law meaning of ‘deposit’ to all payments labelled as ‘deposit’ in the contract, and then restricted the common law meaning to apply only to payments made within 28 days of execution.

The first hurdle for the seller was therefore to establish that three of the four instalments fell within the common law meaning of ‘deposit’, namely being a payment made to bind the bargain and provide security for the buyer’s performance of the contract. McLure P considered that the three instalments were so remote in time from the execution of the contract that they could not satisfy the common law meaning of deposit and the contract was therefore a terms contract.

 

Her Honour concurred with the orders of Newnes JA.
Newnes JA considered the intention of the legislature in section 5 of the Act. Newnes JA determined that a payment of part of the purchase price was only considered a deposit if it was classified as such within the contract and made within 28 days. As three of the four instalments fell outside the period of 28 days, His Honour found they could not be classified as a deposit and the contract was therefore a terms contract pursuant to section 5 of the Act.

His Honour then considered the buyer’s grounds of appeal relating to the type of breach upon which the seller relied in terminating the contract and found that the primary judge had erred in reaching the conclusion that the breach was not a ‘failure to pay a sum of money’ to which section 6(1) of the Act applied.

 

Newnes JA determined that the seller’s termination notice referred to clause 3.5 of the GC, which required the buyer to complete settlement. This imported clause 3.7 of the GC which required the buyer to pay the balance of the purchase price at settlement.
There was no evidence that the buyer had breached the contract other than by failing to pay the balance of the purchase price at settlement. On this basis, the breach referred to in the seller’s termination notice was a ‘failure to pay a sum of money’, which invoked clause 6(1) of the Act. As the seller had not provided the buyer with 28 days’ notice as required by that section, the contract had not been validly terminated.

Newnes JA allowed the appeal and dismissed the notice of contention.

 

Murphy JA gave a dissenting opinion on the definition of ‘deposit’, finding the definition was inclusive and extended to payments made more than 28 days from the execution of the contract provided the payments satisfied the common law definition of deposit.
Murphy JA considered that all instalments of the deposit paid by the buyer were a form of security pending completion of the contract and therefore satisfied the definition of deposit in section 5 of the Act.

His Honour reached the same conclusion as the majority concerning the breach referred to in the seller’s termination notice, but nevertheless would have dismissed the buyer’s appeal on the basis that contract was not a terms contract as all payments were classified as a deposit.

Comment

The decision forewarns the sellers of land and their representatives to:
1.      Consider the implications of sections 5 and 6 of the Act before payment of a deposit via instalments is agreed to in a contract or variations to the contract;
2.      Ensure that the notice requirements imposed by a seller have been met when terminating a terms contract;

 

3.      In the case of a terms contract, consider what grounds for termination exist before issuing a termination notice, particularly to determine if the buyer may have committed some other breach aside from a failure to pay money which can be relied upon, i.e. repudiation of the contract.

ABOUT THE WRITER
KIM SAMIOTIS is the Senior Solicitor of TANG Legal. Her areas of practice include Wills and Estates Planning, Succession Planning, Deceased estates and Estate disputes. TANG LEGAL has handled 4000+ successful cases since 2002 and our focused areas of practice are Commercial Law, Dispute Resolution & Litigation, Family Law, Migration Law, Wills & Estate Planning, and Settlements. 
Telephone:           +618 9328 7525
 
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INDEPENDENCY OF PROFESSIONALS

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Australia is becoming more popular as the destination for investors and business migrants from Asia, particularly China, to invest in. In the case of business migrants, they are often required under their visa conditions to invest significant amount of money (ranging from $500,000 to $5 million depending on the type of visas) into “eligible businesses” in Australia.

However, being new to Australia, business migrants are not familiar with businesses in Australia. Moreover, they usually do not speak fluent English and their business affairs in Australia have to be conducted through various professional advisors, such as accountant, migration agent, lawyer, business broker and sometimes their interpreter. It is common that business migrants rely on their trusted advisors to introduce and recommend business opportunities.

The important question is: How independent is the advisor?
In Australia, most of the professional advisors, once engaged, owe fiduciary duty to the client which dictates that the professional advisor must act in the best interest of their client at all times and must not involve in transactions that the personal interest of the advisor may be in conflict with the client’s interest. The essence of fiduciary obligations is that the fiduciary is precluded from acting in any other way than in the interests of the person to whom the duty to so act is owed. In short, the fiduciary obligation is one of ‘undivided loyalty’: Beach Petroleum NL v Kennedy (1999) 48 NSWLR 46–7.

Unfortunately, there are situations when this rule is not followed by professional advisors. Take for instance one common scenario, where the professional advisor receives some kind of fees (such as introduction fee or referral fee) from a third party for introducing the client to that third party, and the advisor failed to disclose and obtain consent from the client in relation to such fee arrangement.

This type of arrangement means significant risks are added to the investor’s investment because he could no longer fully trust the independency of the advisor. This may result in the investor investing into a “second-best” project simply because the “second-best” project gives a referral fee to the advisor whilst the better project did not. In the extreme case, however, this may result in the investor investing into a completely unviable project and ended up losing all or most of his investment funds. In the event that the investor is also a business migrant, it may have negative implications on the business migrant satisfying the migration requirements.

This type of arrangement is also problematic for the advisor. Despite the advisor may have acted in the best interest of the client, the advisor may have omitted to disclose his personal interests to the client and obtain informed consent from the client. The advisor may have “innocently” breached the fiduciary duty owed to the client. Such breach may result in a legal claim by the client against the advisor and the advisor facing disciplinary action from the regulatory body.
It is important that the investor and the advisor have clear communication about their respective goals and interests (including potential conflict of interests) prior to the engagement. If the investor “smells something fishy”, he should immediately seek clarification from the advisor.

On the other hand, if it ever appears to the advisor that his/her personal interest may be in conflict of the interest of the client, the advisor should immediately stop everything and seek consent from the client, failing which withdraws himself from acting for the client.

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FAMILY LAW: PREVENT YOUR EX-PARTNER FROM “EMPTYING HIS POCKET”

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After separation, it is common that one of the partners may do all sorts of things to defeat any legitimate claims that the other partner may have in relation to his/her assets, including selling or transferring the assets to overseas or hidden it somewhere without trace. In some extreme cases, a partner may decide to spend or waste all the liquidated assets after separation, not for commercial reasons but to do it simply as retaliation.

The question many people frequently ask is how to prevent this from happening, before it is too late. In a situation like this, applying for injunction in the Family Court is usually the answer. An injunction is a court order to stop someone from doing something or, in some situations, to make someone doing something.

For property issues, you can get an injunction to stop your ex-partner from selling, mortgaging or otherwise dealing with a property. If the property has already been sold or the asset in question is cash, it is possible to obtain an order to ‘freeze’ bank accounts or an order to seize the cash or any valuables. Interestingly, there was a case in the Family Court in which the wife had successfully obtained a court order to seize a black leather briefcase belonged to the husband based upon the reasonable belief that the husband had kept substantial amount of cash in that briefcase – In the Marriage of Mazur (1991) 15 Fam LR 574.

In appropriate situations, the Family Court can also make orders and injunctions that affect third parties including for example an order to stop a trustee to deal with superannuation entitlements or an order to prevent a bank from selling a house.

An injunction under the Family Law Act is available to both married and divorced people, as well as to parties in a de facto relationship, including same-sex relationship. Typically, an injunction application is made on an urgent and ex-parte (meaning that it is made without any notice to the other party) basis. If the matter is particularly urgent, it is possible that the Family Court will hear your application on the same day when you filed the application, sometimes even outside usual court hours. If the application is ex parte, your ex-partner will not know anything about it until after the orders are made by the Family Court, which is designed to prevent the ex-partner from doing anything that may frustrate your claims while you are waiting for the court to hear your application.

Once an injunction is granted and while it is still valid, your ex-partner will be given the opportunity to challenge it. If your ex-partner files an application to oppose the injunction, the Family Court will hear the story from both sides and make a determination as to whether the injunction should remain. However, it is often that the purpose of stopping the ex-partner from taking any drastic actions about his/her assets is achieved by that time.

The key in an injunction application is usually timing. You are racing against time and sometimes if you acted a little too slow, you may forever lose the opportunity to stop your ex-partner from siphoning the assets beyond your ability to trace it. For this reason, if you have any concerns that your partner or ex-partner may be doing something in secret about the family assets, you need to act now before it’s too late.

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CAN PROPERTY INVESTMENT BE AN “ELIGIBLE BUSINESS” FOR BUSINESS VISA?

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KELVIN TANG is the Principal Partner of TANG Legal. His areas of practice include Investment Law, Commercial and Corporate Law, Property Law and Immigration Law. Relevant to this article, his expertise, knowledge and experience include representing property developers and new migrants with acquisition of property, structuring of investment vehicle, joint venture transaction, and advice on commercial transactions.

Email: [email protected]

Telephone: +618-9328 7525

I am often asked by new and perspective business migrants on whether they can invest in property for the purpose of satisfying the Australian Business Visa requirements. The good news is that it is possible. Investment in property may [emphasized] meet the migration requirements.

I must emphasize 2 important points: (1) Passive investment (and more specifically, provision of rental properties to the public) and smaller “project” based property development will NOT meet the migration requirements; and (2) Even if the migrant’s proposed business in property investment meets the State’s guidelines in bringing in substantial and exceptional benefits and thus obtained nomination by the State or Territory, this itself does NOT automatically mean that the Commonwealth migration requirements are met.

Under the Commonwealth migration regulations, a business migrant must satisfy three (3) conditions under the Act: (1) The business proposed or carried on by the migrant must be an “eligible business”; (2) The migrant must have obtained a substantial ownership interest in the eligible business; and (3) The migrant must actively participate at a senior level in the day-to-day management of the eligible business. If the migrant fails to satisfy these requirements, the Minister may cancel the visa. Hence, business migrant, please BEWARE!

This article briefly examines the “eligible business” requirement. In the case of Zhonghua v Minister for Immigration and Citizenship (BC201102754), the migrant, holder of sub-class 132 Business Talent visa, invested AUD$3,000,000 into a property development project. There were submissions by the migrant that application to re-zone the property was made to develop apartments. However, the Tribunal found that the investment did not pass the initial stage of purchasing the land. No actual development has taken place other than owning the land and making application to re-zone the land. For this reason, it cannot be described as a business. As such, the migrant’s investment did not satisfy the “eligible business” definition. However, what is important from this case is that in the judgment, the following comment was made by the presiding Senior Member, Mr Egon Fice: “… if the development proceeds, it might satisfy the eligible business definition in that it might create or maintain employment in Australia or result in commercial activity and competitiveness within sectors of the Australian economy.”

Further, under the case law, the test of what constitutes an “eligible business” requires more than just satisfying the conditions under the migration regulations. The Courts require that the business has repetitiveness of activities and some permanence characteristics: Puzey v Commissioner of Taxation [2003] FCAFC 197.

For the professionals who assist business migrants with their investment (such as migration agent, accountant, and real estate agent), you should find this article beneficial or at least relevant. Australian Courts have strict expectations that the requisite standard of care is met and professionals could be found personally liable for negligence or wrongdoing if the standard is not met. Here is a thought: What do you need to do (or must not omit to do), in order to meet the requisite standard of care?

For businesses seeking investment capital from the business migrant (for instance, property development company), beware of “representations” (such as statements and forecasts) that you make to the investor, buyer or migrant. If your representations are subsequently found to be false, even if it was not your intention to lie, you can be liable for damages for having engaged in “misleading or deceptive conduct” under the Consumer Act. This is a huge exposure to liability.

There are also cases where migrants have failed the “substantial ownership” requirement due to technical difference between legal ownership interest and beneficial interest. The ownership structure of the project company is extremely important. My next article will examine the ownership issue in more details.

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