Domestic Building Disputes in the ACT and the Pitfalls of Arbitration within the Residential Context

Forums for the resolution of building disputes in the ACT

Instead, ACT domestic building disputes are governed by the building contract, which often dictates that the dispute must be resolved through arbitration.

Arbitration is similar to court or tribunal proceedings in that an independent decision-maker is appointed to hear arguments from both parties, and the decision or “award” made by that arbitrator is binding. However, unlike proceedings in courts or tribunals, arbitrations are not bound by the formal rules of evidence, or precedents from prior arbitrations. Moreover, arbitration can only involve the parties to the contract, meaning third parties cannot be joined to the arbitration.

If the building contract does not dictate the forum for resolving the dispute, then the dispute can be taken to one of the following courts or tribunals:

• For disputes involving less than $10,000, the ACT Civil and Administrative Tribunal;
• For claims between $10,000 and $250,000, the ACT Magistrates Court or the ACT Supreme Court (though usually the former); or
• For claims over $250,000, the ACT Supreme Court.

Why is arbitration problematic in the domestic building dispute sector?

The referral of domestic building disputes to arbitration is highly problematic, as arbitrators usually charge thousands of dollars per day. This creates situations where an average consumer with a domestic building claim for tens of thousands of dollars must pay $2,000 to $5,000 per day in arbitrator’s fees and room hire costs, in addition to their own legal and expert costs.

For this reason, section 7C of the NSW Home Building Act 1989 and section 14 of the Victorian Domestic Building Contracts Act 1995 have now made it illegal for domestic building contracts to refer disputes to arbitration. This reform was consumer-driven and aimed at ensuring consumers were not excluded from seeking a remedy in relation to domestic building contracts because they could not pay the arbitrator’s fees and associated costs.

Consequently, under any criteria, the cost of resolving domestic building disputes can be higher in the ACT than in Victoria or NSW due to the need to pay arbitrator’s fees.

For a detailed analysis of the process of arbitration and its virtues and shortcomings, written by Professor Kim Lovegrove F.A.I.B., click here.