Building Disputes – How they are won and how they are lost

21 Apr 2017

The law is not that mysterious a discipline; by and large, when a decision is handed down, the reasons expounded for loss and victory are based upon common sense and logic. The loss is thus rarely attributable to the fault of the decision maker as his or her judicial mandate is limited to digesting the facts, listening to the arguments, and then following the precedents to divine the judgement. Sometimes decision makers of first instance get it wrong, but the wrong is typically righted on appeal.

So why do litigants lose building cases? Why do some lawyers proceed to trial in circumstances where both parties are confident of victory yet both opponents are mindful of the fact for there to be a victor there will have to be a loser?

Building disputes are invariably characterised by:

defective building work
time overruns
overpayments or cost overruns
monies being owed to builders and contractors

As building disputes are so very technical in nature, It follows that the role of the expert witness is paramount. A lawyer is not qualified to inspect and diagnose the cause of construction failure. It would be negligent for a construction lawyer to presume in such matters, and he or she would not be indemnified by an insurer for venturing into the expert witness terrain.

So there is a case to argue that the role of the expert witness in a construction dispute is even more germane than that of the lawyer. The lawyer after all, in getting a case trial ready, provides the theatre for the experts to persuade a decision maker that their technical diagnoses and costings are more plausible than those of their opponents. Sure there might be legal arguments concerning contractual interpretation and repudiation, but it is the technical diagnostics that shape the size of the award for quantum.

So one’s choice of technical expert is very, very important. This being the case, when one engages a technical expert, it is crucial to look for:

someone in possession of the relevant skill sets, be they costing, engineering, construction or design
an expert with whom one is familiar with; a person that is held in high esteem
integrity, candour and a spine – no one likes surprises, so it’s not about the expert telling you what you want to hear. One needs the truth, and often that does not align with that the client’s position. Hence you need an expert who can stand up for him or herself, won’t be led and backs a position
eloquence, as the expert has to be persuasive in the giving of expert opinion
unflappability, as expert witnesses will be subjected to the blowtorch of cross examination where the advocate will seek to discredit and sometimes humiliate the expert to nullify the effectiveness of the testimony
experience giving testimony in court; the court is no place to “road test” a fledgling for fear of the client becoming the casualty

Alas, unless one has a “road tested relationship with an expert” the only way one can locate experts of higher calibre is by way of word of mouth. Otherwise it can be a lottery, because there is no expert accreditation or registration regime. Expert witnesses are not found in the categories of building practitioner registrants, so they do not come under the jurisdiction of any oversight body like the VBA. Unlike lawyers and doctors, there is no ability to strike an expert off the roll, because there is no roll.

Furthermore there is no recognised qualification in expert witness testimony, nor is there any requirement by law that they be insured. If a lawyer is negligent in a building case, regardless of whether it is due to an overreliance upon expert evidence or other factors, the aggrieved knows the solicitor by law is required to be insured. No such luck for the aggrieved with the expert.

Troublingly, in 30 years of practice, during which time I have been involved in thousands of building disputes, I have never witnessed a plaintiff expert agreeing with a defendant expert on diagnosis and costing. I am not going to speculate on the reasons for the divergence, but the contrary nature of expert evidence has become part of the DNA of building disputes. This is a very serious problem in the dispute resolution dynamic. The inability of the system to facilitate expert opinion convergence of opinion is, in my view, the greatest factor that influences the winning or losing of cases. If the experts can’t or won’t agree on the construction solution or the cost of the solution, how the hell can a matter be resolved?

Choosing the right lawyer

Although there are specialist construction lawyers, the glut of lawyers and the finite and limited amount of work means many solicitors are desperate for work, which drives some to take on briefs that are well outside their comfort zone. A building industry luminary once said to me “lawyers throw their bodies at me to get work.” Unfamiliar with the relevant statutes, case law and contracts and lacking intel regarding where to find the best technical expertise, non-specialist lawyers can flounder. This is particularly true when they come up against a seasoned and battle hardened construction lawyer. Construction law is not an area to dabble in, so if there is a knowledge vacuum in the lawyer of choice, the battler may harbour false hope and be in for a big surprise.

But even if one chances upon a construction law expert, it is critical that the client provides accurate and comprehensive instructions. It is equally critical that the lawyer, flanked by the expert witness, provides a very candid risk assessment in writing of the strengths and weaknesses of the case. A failure to risk proof the case will inevitably culminate in that which proves to be the antithesis of all things one hopes for.

Insurers, sometimes known as professional litigants, always insist that their lawyers as soon as practicable provide a written legal opinion that clinically and dispassionately analyses the liability risks and the quantum. Typically an insurance letter of advice template will have the following headings:

Facts and Chronology
Liability and Indemnity
Quantum
Best case Scenario
Worst Case Scenario
Likely Scenario
Reserve

The reserve will be calculated on the basis of the likely scenario.

The letter of advice will be updated regularly and any changes to the risk profile of the file will be factored into the advice. This type of rigour is conducive to no surprise litigation and assists with formulating of settlement offers. Plaintiffs should also embrace the same type of rigour, although it is not common and absent the rigour, a case can run a cropper.

Emotion and false hopes:

Litigation is by definition emotional and stressful, but emotion cannot be allowed to impact upon decision making, nor can ill temper or anger, as these can cloud one’s vision.

For the plaintiff, litigation is by and large about getting paid an amount of money that will place them in the postion they should have been if matters hadn’t gone off the rails. Typically this will mean receiving a sum of monies that will fix defects and resolve associated expenses whilst spending as little money as possible. It’s pure mathematics.

For the defendant, it’s about paying out as little money as possible, period. There is no largess in construction litigation, no generosity and there are no windfalls. So if a litigant thinks they will get a windfall and in bending the lawyer’s ear gets him or her to tell them what they want to hear rather than what they will on balance get, sadness and disillusionment will surely follow. It follows that the lawyer retained must – like the expert – have a spine and reality test.

Over the years I have seen a lot of opponents who harbour unrealistic aspirations either in terms of the payout or the payday. The truth always plays out in a court of law and the result invariably is close the real cost to fix and or complete, the real cost of delays. There’s no padding, no fat, no largess. It is thus incumbent upon the client’s lawyers and advisers to reality test to remove any false hope.

The cost of litigation:

Despite repeated attempts by policy makers to reduce the cost of litigation, success has remained elusive. Construction litigation is very expensive and in their determination to spend less, litigants often choose advocates who charge less but at the end of the day achieve less for the clients. The top practitioners generally have a lot of work on and they don’t compete on the basis of fees. Rather, they compete on the basis of expertise.

Furthermore, the litigation team will typically involve a barrister, a solicitor and an expert witness, which costs a lot of money. The often exorbitant costs sometimes dictate that litigants simply can’t continue with their cases and this can culminate in loss, particularly if they are forced to become lay advocates.

A refusal to settle in a timely manner:

If the parties can’t negotiate and settle their cases at mediation, they lose the ability to maintain control over their destiny. Once a matter goes to trial and a third party – the decision maker – assumes that control and determines one’s destiny, to the victor the spoils. When a case is lost, it’s most often because the parties refuse to settle. The refusal would have been based upon underestimating the strength of the opponents case, naive resolve or pigheadedness, and there is always insufficient appreciation of the dangers inherent in not settling.

Sadly, there is no silver bullet when it comes to resolving building disputes. If such panacea existed, no one would ever lose a case and trial advocates would be out of work.

But maybe, just maybe, these musings provide some assistance to those who are about to embark enter into the theatre of adversarialism.

Lovegrove & Cotton Lawyers to the building industry

For thirty years, Lovegrove & Cotton have represented builders, building surveyors and building practitioners in Melbourne, Canberra, Sydney and Queensland. Doyles Guide ranks Kim Lovegrove as one of the leading construction lawyers in Australia. Justin Cotton, likewise, is a leading Australian construction lawyer and widely respected in the building fraternity as evidenced by his recent elevation to Chairperson of the HIA Industrial Relations and Legal Services Committee, and member of the Regional Executive Committee, for HIA Victorian Chapter. Lovegrove & Cotton can help practitioners resolve any type of building dispute and are preeminent in the area of building practitioner advocacy. If you wish to engage the firm, feel free to contact us via our website or by emailing enquiries@lclawyers.com.au.

Once legal proceedings have been issued in the VCAT for a domestic building dispute, in the overwhelming majority of cases, the tribunal will order that the dispute be referred to mediation.

The tribunal, at no costs to the parties, appoints a mediator. Typically, construction lawyers and or barristers appear at the mediation on behalf of the parties.

Before the mediation takes place, the VCAT will normally make an order that each party must prepare and exchange a position paper.

The position paper will provide a synopsis of that which is in dispute and will have a request for the type of relief the party has in mind.

The position paper is normally prepared by a construction lawyer.

The mediation will ordinarily be set down for a day. The mediator will give each party, through its lawyers, the opportunity to present a summary of their cases.

After the mediator has heard the summary and the position paper oration, separate and private caucuses are arranged with the advocates and their clients.

Often, expert witnesses attend the mediation.

Mediators typically communicate settlement offers and rejections from the parties as they try to move towards an accord.

Successful negotiations, in the writers’ experiences, take the better part of a day, as it can take quite a while to move traditionally intransigent positions.

A successful mediation requires the cooperation of all the parties, a willingness to move and compromise where necessary, and a mutual desire to put the dispute behind one in order to move on.

If the settlement is successful, the terms of settlement will be written up and signed. Terms of settlement must be prepared with the greatest of care, and all matters that are germane to the dispute must be resolved, committed to writing, and ‘ticked off’ as it were. If the mediation fails, there is a high chance that the dispute will ultimately proceed to a full-blown (often lengthy, and always costly) hearing, unless it is resolved at a compulsory conference.

This piece is prepared by Lovegrove & Cotton, with the assistance of one of our prior law graduates.

Lovegrove & Cotton: Experts in Residential Building Dispute Resolution

As construction law is a complex area, a potential disputant is well advised to engage a well experienced construction lawyer to have conduct of the dispute resolution process. Lovegrove & Cotton have practised in this area for 30 years. One of our lawyers co-authored ‘the Users Guide to the Domestic Building Contracts Act’, Lovegrove on Building Control. The principal of Lovegrove and Cotton, Justin Cotton has 20 years of experience in the resolution of building disputes and this of course includes a wealth of experience at the VCAT.

By Lovegrove & Cotton – Construction and Planning Lawyers

A ‘compulsory conference’ is an effective dispute resolution mechanism for the resolution of domestic building disputes in the VCAT.

A compulsory conference is typically ordered by a tribunal member where other attempts to settle the dispute have failed. By this is meant the mediation that typically would have been ordered at an earlier juncture will not have delivered a resolution to that which is in dispute.

Furthermore, the compulsory conference gives the parties a last-ditch opportunity to settle the dispute before it goes to trial or formal hearing.

One of the writers can attest to the fact that compulsory conferences often settle traditionally intractable positions.

The tribunal, at no costs to the parties, appoints a tribunal member to preside over the dispute. This is a key distinction with mediation, where a ‘mediator’ is appointed by VCAT, who may be a tribunal member or accredited mediator. Typically, construction lawyers and or barristers appear at the compulsory conference on behalf of the parties.

Before the compulsory conference takes place, the VCAT will often make an order that each party must prepare and exchange a position paper.

The position paper will provide a synopsis of that which is in dispute and will have a request for the type of relief the party has in mind.

The position paper is normally prepared by a construction lawyer and will form the basis of the advocacy submissions on the day.

A key difference between a compulsory conference and a mediation is that the tribunal member will often give an indication as regards how the case, were it to proceed to trial, would play out. This may include the proffering of suggestions to the parties regarding the respective strengths and weaknesses of the positions proffered by their advocates.

This inkling can serve as a very good dispute resolution catalyst. A mediator, strictly speaking, is not permitted to provide such inkling; whereas, because the compulsory conference convenor will always be a tribunal member, the fact that they would have heard many trials that have proceeded to conclusion affords them a high level of jurisprudential gravitas.

The compulsory conference will ordinarily be set down for a day. The convenor will give each party, through its lawyers, the opportunity to present a summary of their cases.

After the convenor has heard the summary and the position paper oration, private caucuses are often organised separate with the advocates and their clients.

Sometimes it is useful for expert witnesses to attend the mediation.

If the parties, after completing their submissions, and preliminary interactions with the convenor, consider there is merit in moving towards a negotiated outcome, the convenor frequently has separate confidential dialogues with the adversaries in an endeavour to facilitate a convergent position.

Successful compulsory conferences in the writers’ experience take the better part of a day, as it can take quite a while to move traditionally intransigent positions.

A successful compulsory conference requires the cooperation of all the parties, a willingness to move and compromise where necessary, and a mutual desire to put the dispute behind one in order to move on.

If the compulsory conference fails, there is a high chance that the dispute will ultimately proceed to a full-blown (often lengthy, and always costly) hearing.