VCAT and Insurance Claim

Thank you

I had a building and construction lawyer represent me all the way through so hopefully no issues. VCAT outcome represents a trigger for insurance in Victoria insurance policies.

Fingers crossed for insurance being smooth process!

 

It’s a sad state of affairs. Unfortunately the consumer is often the one left in tears and suffering horrible financial loss. It saddens me

 

I will see no money from the builder, but now I can make a claim on Victoria’s building warranty insurance. My expectations have been set at around 50 cents in the dollar recovery

 

Potayto, potahto...

 

I have a friend whose builder has just gone under and is trying to make a claim on the Victoria's DBI but unfortunately her lawyer is doing a classic fee for no service so far.
@PicketFence are you able to share which lawyer you went with on your claim and would you recommend that person,thank you.

Also would love to hear your update on your claim process journey since your last post here.

 

Hi All,
Never made a post before but I also need help. Am in the exact position as your friend @Peppa.

@Terry_w and/or @Picket Fence, if you could kindly recommend a good Melbourne Lawyer that can help manage:
a) Victoria's Domestic Builders' Insurance claim as well as
b) pursue separate complaint to Legal Services Commissioner and/or send a letter of demand to original lawyers for the return of the fee paid for service (similar to @ellejay thread re: lawyers charging for services not rendered)
It would be much appreciated.

If anyone else out there has a good lawyer in Melbourne (preferably affordable and fixed priced) that can help with the above they could recommend, please send through, all suggestions welcome.

Thanks so much!

 

As much as the courts generally get it right, getting to trial is a costly exercise. I got entangled in a matter (which I ultimately defended successfully), but not before significant legal costs, which I have yet to recover from the losing plaintiff. Of course the plaintiff also went down the path of spending significant amounts (in the millions I believe).

 

Hi Picket fence, I am also building townhouses in Melbourne. Is the insurance $300,000 per townhouse or $300,000 per project? How could I find that out? Also, having builder problems.

 

Well done! Congratulations

 

Hi Peterpan,

Be careful on this one. You should hold a domestic builders warranty insurance policy for EACH property (even if these properties being built are currently on 1 title). If you are building 2 x properties, you should have 2 x policies.

Each policy covers up to $300,000 for defects and incomplete works should builder die/insolvent/dissapeared/VCAT order.

Keep the questions coming if you have any.

cheers

 

Hi guys,

Just a quick update on where things are at. No surprises that builder defaulted on the VCAT order to pay me a multi six figure sum. It was 99.99% likelihood of this occurring. Given default of builder, i have made a claim on my domestic building warranty insurance policies.

Given VCAT has already made a determination of damages and costs, the insurer is bound to meet this determination. There is currently some discussions around finer details. However, once settlement has occurred i will be in a position to share more about all of this.

Regards,
picketfence

 

Hi Picket, just checked we do have one insurance policy per property

The maximum policy limit for
claims made under this policy is: $300,000 all inclusive of costs and expenses *

The maximum policy limit for
non-completion claims made
under this policy is 20% of the contract price limited to the maximum policy limit for all claims under the policy*

The builder is taking forever. Whenever we go down and have a look, there is noone there .We call the builder and he says you just missed them . They were having a smoko, or they were having lunch , or they came later.

Our problem is that our payments to the builder are front loaded, meaning that the money remaining is not enough to finish the build in the event we terminate.

My understanding of the above is that we would only get 20% of contract price for non completion.

When would one qualify for the maximum $300,000 ? And will that cover us for legal costs or is that separate?

 

Sounds like your builder is BS'ing you. I've heard it all before.

Here are my responses, however none of this should be taken as advice (usual disclaimer stuff).
* Tradies not being on site is a big warning sign given you are 6+ months behind scheduled completion. He should be busting to complete the project (assuming liquidated damages in contract). I have some concerns on this bit.
* Yes, you only have access to 20% of contract price for non-completion, eg if build was $1,000,000 you could only claim $200,000 in cost over runs (but this has to be verifiable cost over runs). This is intended to cover the cost of having to get a new builder onsite to complete works. Note: a termination of a contract must be done by lawyers! No exceptions!!! The implications on your insurance claim can be enormous.
* You have access to $300,000 per contract in total for all non-completion costs, and defects. Eg. if the concrete slab was poorly constructed and cracked in half you can make a claim for this (extreme illustrative example), in addition to any costs you incur from engaging another builder to complete.
* Yes, it is normal to have contracts somewhat front loaded. This helps builders with their working capital. However, this can transfer risk to the home owner because more money has gone out vs works completed.
* No legal fees and no consultant fees are covered by the domestic builders warranty insurance policy. Total costs for me was circa $40k for this. You will foot 100% of this.

Some general tips:
* Always always always try find a solution with the builder. The legal process is brutal and long. But don't throw good money after bad if you think your builder is going under.
* Please confirm that the builder has a current builders license and site insurance (note: different to warranty insurance). My builder stopped paying insurance and license fees and part way through construction held no insurance/license for my project.
* Under no circumstances advance any money to the builder beyond the relevant stage of works that you have signed off on. Kiss this money goodbye as insurance won't cover it.
* The time to get legal advice is probably now. You may need to look at issuing a breach notice to your builder, stating you may look to terminate and seek compensation.

drop me a line with any more questions.

 

Did you have legal advice on the contract? If you've set up the contract such that payments are ahead of received value, that could negate your insurance.

And yes, there has to be some element of misalignment for practical purposes - you obviously can't pay daily for value received that day. But if you deviate significantly from standard ratios for the build type, at each stage, this will almost certainly invalidate your policy.

I believe the test is whether, at the completion of each stage, you would have had sufficient $ remaining to be paid, to complete the project. So excluding changeover costs/premiums of getting new builders up to speed, whether you could have gotten another builder to do the remaining work for the $ left in the contract.

If at the end of any stage, you needed significantly more $ to achieve that than the $ left unpaid on the contract, you could find yourself in trouble with your insurer.

 

Hi, thank you for your detailed chronological updates. I am going through a similar situation to you where the builder kept delaying, we found multiple defects and I terminated the contract with the help of solicitors. VCAT hearings set for 5 days this August and I am quite nervous as I have never done this and I also have saved up a lot just for legal fees. The difference is the builder that stuffed me over is still running business as usual however throughout this entire process he seeked no legal advice. I would like to ask:

1 - Did VCAT award you the entire amount you were sueing for?

2 - How long does this proceeding take as 5 days seem like a very long amount of time.

3 - Is there a need for a barrister or can your solicitors just be present with you?

4 - If my builder is still active and the ruling is in my favour, at what point can I claim it under insurance ? (can he refuse to pay me and still keep his license?)

Please keep us updated with you case

 

Hi Sydney/Melbourne, apologies i only just saw this post.

Please see below for my responses. And as always please make sure you get independent legal advice:
1 - VCAT awarded me 100% of all the costs being sought. The builder did not engage with the VCAT process in any way and didn't turn up to the hearing. I was represented by lawyers, building inspector, and quantity surveyor. The weight of evidence was enormous and as such all costs awarded in my favour

2 - My VCAT case was completed in 2 hours because the builder didn't turn up. If your builder is contesting your VCAT claim, then I would expect the VCAT Member (kinda like a judge) will need to make decisions on each aspect of your claim, and will need to hear from any expert witnesses/you/builder. 5 days seems alot, and this may reduced.

3 - I had a solicitor represent me. If this is VCAT i wouldn't have thought a barrister is required. If you are seeking a subsequent 'wind up / liquidation' order then a barrister may be required. But for VCAT purposes a solicitor should be sufficient.

4 - If you get a VCAT ruling in your favour, you and your builder will be issued with a 'VCAT Order'. This Order details who is responsible for what. If your VCAT ruling determines that the builder is required to make payment of $XXX to you, this will be stated on the 'VCAT Order'. If the builder does not make payment within the specified timeframe then this is a 'Breach of VCAT Order', and this is the trigger for Domestic Builders Warranty Insurance in Victoria (for construction contractions signed after 2015).

Best of luck. Happy to answer anymore questions, and i promise to be faster on my replies next time!

cheers

 

*Update*

2.5 years since my builder went belly up + VCAT case + multiple insurance claims + $50k in legal expenses, i can finally put this saga behind me. Insurer has paid out a multi 6 figure sum to settle the matter.

Lessons learnt:
1) The biggest risk to building a home or doing a development is your builder going bust, do your due diligence! A builder going bust can take years to resolve and can ruin peoples lives.
2) The construction/building industry is 80% full of crooks. Fraud, theft, violence, lies, deceit is rife... There are a few good eggs in the game, such as the builder who helped complete my half built house. It is a shame there are so few good ones.
3) Have 20% contingency allowance or risk going bankrupt if your builder goes under.
5) There are only 4 ways to make a claim on insurance in VIC - builder is: 1) dead; 2) disappeared; 3) insolvent; 4) VCAT order;
6) VCAT process against a builder will take anywhere from 6-18 months to conclude.
7) Insurance does not pay for any costs you incur for lawyers, building inspections, quantity surveyor reports, liquidated damages, lost rent etc.
8) If insurance claim is big enough the insurer will engage their own lawyers. These lawyers will do everything in their power to frustrate and delay a process. It took 2 years since original insurance claim to receive payout. It took 1 year since my claim was accepted by insurer for the money to be paid to me.
9) Nobody cares - i spoke to every industry body seeking guidance and support and got zilch. A good lawyer is your saving grace!
10) Do a royal commission into the building/construction industry. It will be found out as the biggest scam in the history of the modern world. The system is designed for a mum/dad building a house to potentially lose everything and go bankrupt, whilst a builder just closes down their company and walks away with no penalty.
11) Celebrate and have a big party when you get a massive payout!!!!! once lockdown is over of course.

Will i do another development? Yes, i have learnt too much to throw that knowledge all away.

I hope everyone stays safe and well

regards,
Picket Fence

 

I'm so glad it's over for you! I hope you get to enjoy a nice glass of something tonight from the confines of lockdown.

Whilst I think the WA system is crap with a limit of $100k payout it was all dealt with in probably 6mths for me and no lawyers needed. I now know to have a HIA contract for each dwelling in a project vs one large contract for a project so that each dwelling can get the $100k.