Resolving disputes

What are the options available to you for sorting our disputes if something goes wrong on your building project?

The options

If you see something going wrong with your building project, talk to the architect, designer, builder, or other contractors first. See if you can sort it out by clearing up any misunderstandings.

If you have a serious breakdown in communication, your options for resolving problems or disputes are:

• Disputes Tribunals will deal with disputes up to $7,500, or $12,000 with the agreement of the parties (these amounts may be too low when dealing with houses).
• The Consumer Guarantees Act says any service contracted by a consumer should be carried out with reasonable skill and care. It should be at a reasonable price and fit for its purpose. This law applies to all building practitioners.
• The Construction Contracts Act may have limited use for consumers as it is aimed primarily at aiding the flow of money between building professionals, i.e. contractors and subcontractors.
• The Weathertight Homes Resolution Service (WHRS) for leaky home disputes.
• Master Builders and Certified Builders both provide an inspection and complaints service for disputes over members' work.
• A number of other trade organisations, such as the Master Plumbers Association and the Master Painters Association, offer similar services. See our contacts directory of trade and professional groups.
• You can apply to the Department of Building and Housing for a Determination, if you don’t accept that a Building Consent Authority had reasonable grounds for refusing to issue a building consent, compliance schedule or a CCC.
• Arbitration. The Arbitrators and Mediators Institute of New Zealand can give you the names of local arbitrators and mediators with relevant expertise.
• Court action. This is usually a last (and expensive) approach to resolving problems. If you’ve already gone through arbitration or a Disputes Tribunal this option is usually closed to you.

Note: From 30 November 2007, you will be able to take a complaint about the standard of work of a licensed building practitioner to the Building Practitioners Board. If the complaint is upheld the licensed building pracitioner can be disciplined.

Comparing the different options

The advantages and disadvantages of some of the types of dispute processes are listed in the table below:

Is mediation the best option?

Mediation has more advantages and fewer disadvantages than the other options and is probably the most popular option to resolve disputes. Suppose you have moved into your new home and discover after a short time that the concrete masonry blocks are starting to crack. The builder says it was a problem with the blocks. The block manufacturer says the blocks weren’t put up according to their strict specifications. One way to resolve the matter is to go to mediation.

The advantages are:

• The cost (5 - 10% of full litigation costs).
• The speed – you should get it arranged and completed within one or two months and the actual mediation only takes a matter of hours, or at most a few days, depending on the complexity.

Mediation as a compromise

You need to go into mediation with the understanding that mediation is all about coming to a compromise. You might have to forgo some of what you see as your legal rights in the matter, i.e. they’re wrong and I’m right.

You will be advised that if you and the other party can’t reach an agreement the case has to go to Court, which will cost you in terms of:

• Time and emotional energy.
• Damage to ongoing relationships with the other party – you still want the problem fixed
• Legal expenses.

Even if mediation fails, often the parties will agree to settle, without either admitting they were in the wrong, to avoid the Court process.

The process is confidential

Everything that happens in the mediation is usually confidential so anything said, or produced in writing to support a position, cannot be repeated outside the mediation room. It is up to the parties to decide whether they want the mediation to be kept confidential. The final terms of the settlement are also usually confidential, except where disclosure is required by law or to enforce the settlement agreement.

Arbitration

There may be an arbitration clause in your contract with your builder or designer. Even if there is not, you can still choose to take your dispute to arbitration. Arbitration is governed by the Arbitration Act 1996.

If you are initiating arbitration, you need to sort out your facts, establish the real issue in dispute and decide who could be witnesses for your side. You will need to talk with the other side to decide who should be the arbitrator and the venue for the arbitration hearing. It is advisable to obtain legal advice before you begin arbitration proceedings.

At the hearing you will have the opportunity to summarise your argument and present your witnesses. The other side then has an opportunity to present their case. The arbitrator can award any remedy or relief that the High Court could have ordered.

You are not bound by the arbitrator's decision unless you have a separate written agreement certifying that you have read and understood the arbitration and agreed to be bound by it. There is a limited right to appeal (generally this is limited to appeals on points of law or procedure),

Usually the arbitrator’s fee is paid by the unsuccessful party. But in some cases you can agree beforehand on a formula for sharing the cost.

Finding mediators or arbitrators

The Arbitrators and Mediators Institute of New Zealand can give you the names of local arbitrators and mediators with relevant expertise.

Time limitations

You cannot bring a civil action relating to building work against anyone after 10 years from the date when the work that caused the problem was done. This is stipulated in the Building Act 2004, section 393.