COP v3.0:introduction; disputes

1.5 Disputes 

Under the provisions of the Building Act and the NZBC, a contractor who undertakes to do work on a building implies that he can produce an effective and sound result which will fulfil its intended purpose.

There is a customer expectation, backed by consumer legislation, that the finished work will leave the building weathertight, and the work done will comply with the NZBC and will be to a standard that is described as “acceptable trade practice”.

“Acceptable trade practice” and “good trade practice” for the Roofing Industry are both described and contained in this Code of Practice. In addition to any contractual or verbal offer there may also be a written obligation given in the form of a warranty. See 15.9 Material Selection

All contractors should ensure that materials they use comply with the requirements and specifications contained within this Code of Practice. All suppliers’ or manufacturers’ product literature should be dated; and where superseding previous literature the dates should be referenced. The user must ensure that suppliers or manufacturers product literature is the latest version published.

Contractors must be satisfied that the product as described in the product literature is acceptable to the Territorial Authority, and contractors must be aware of their liability under law and the contractual documents they have signed or agreed to.

Customer expectation is supported by law that states that the material and product used must be fit for its intended purpose, and the liability of each of the parties is assessed on their ‘failure to warn that the product would not fulfil a perceived function".

Poor workmanship is a common cause of dispute and it is often given as the reason for non-payment between the sub-contractor and contractor or owner. This Code of Practice provides a standard of workmanship and a benchmark for arbitration.

It is in the interest of all parties to avoid the cost and delay of litigation and although there are other voluntary ways to settle disputes, they all require some compromise by those concerned.

One voluntary method is negotiation by calling a site meeting where all interested parties can air their grievances across a table and draw up a programme of rectification and reach an agreement over responsibilities and payment.

Any agreement must be recorded, signed and state what is to be done, how much is to be paid, by whom, by when, and how it will be accepted and checked. If no agreement can be reached then a solution may be found through mediation.

The Weathertight Homes Resolution Services Act 2006 provides for a mediation service to be available to dwelling/house owners with eligible claims. The claiming owner and any of the other parties against whom the claim is made may agree to refer the claim to mediation, with provision for binding settlements by agreement. This service is restricted to leaky homes built within 10 years of the claim.

1.5.1 Mediation 

Mediation is a cost-effective, confidential, and voluntary process where the mediator is the facilitator who assists the parties to come to a negotiated agreement. Mediation concentrates on the parties’ interests rather than on their rights, when often both parties realise that they are partly at fault and wish to resolve the dispute and accept a compromise, as opposed to litigation. Any recorded settlement in a mediation agreement can be enforced as a contract, but if they cannot reach a settlement, they can refer to arbitration or the courts.

A mediator acceptable to all parties is appointed and he should act independently, avoid unnecessary expense and comply with the principles of natural justice. The mediator's task is to help the parties identify the issues and options for settlement and look for a settlement that is equitable to all concerned. All relevant documents including specifications, plans, quotations, and written submissions setting out the basis of the complaint and the rebuttal by the other party must be made available to the mediator.

After an investigation, site visits, and discussion with all the parties, the mediator, using trade benchmarks such as this Code of Practice and drawing on his experience can apportion responsibilities and instruct rectification work be done. This method can provide a quick and inexpensive outcome with costs shared by both parties, but the decision is not binding and must be mutually agreed to.

Informal resolution of disputes does not necessarily uncover the facts; and as material or installation failures are not necessarily publicly disclosed, improvement can be inhibited.

Mediation does provide the opportunity to ‘move on’ and does not always jeopardize business relationships as litigation invariably does.

1.5.2 Adjudication 

The Construction Contracts Act provides for a process of dispute resolution called adjudication, to be the first option if negotiation fails. It provides a thirty-day formal process whereby the adjudicator is appointed by the claimant, and the respondent cannot opt out. The process is designed mainly for payment disputes, but it can also be used for workmanship disputes and is expected to become the normal dispute resolution method in the Construction Industry.

The adjudicator's decision, called a determination, is binding and enforceable by the courts. An unsatisfied party can only appeal an adjudication after complying with the determination. The adjudication is subject to confidentiality, except by mutual consent or if the information is already in the public domain.

The disadvantage of both mediation and adjudication is that the faults are not made known to the roofing industry, who should be able to learn from the mistakes of the past.

Where the amount in question is under $7,500, or $12,000 by agreement with the other party, an alternative method is to file the complaint with the Disputes Tribunal. The parties usually represent themselves, without lawyers, and a compromise outcome is sought by a referee. This method of settlement gives no assurance of an equitable outcome or that the outcome will be based on technical grounds; the main purpose of this court is to seek agreement between the parties.

1.5.3 Arbitration and Litigation 

Arbitration is usually a strict and formal process similar to litigation in which the parties may be legally represented and select and pay for the arbitrator. Arbitrators must comply with the Arbitration Act; their imposed decision is known as an award, and it is final and binding.

The final and expensive alternative is litigation. That usually involves suing for breach of contract, non-payment, non- performance, faulty materials, or non-compliance. Judgment is publicly imposed and usually made by comparison with “state of the art” materials and practice available at the time the contract was signed.

Both arbitration and litigation can be prolonged and the parties’ cost may exceed the amount in dispute.

When the roofing contractor sublets his contract, he assumes the same responsibility as though he carried out the work himself.

To avoid disputes, roofing suppliers and contractors must give adequate instruction, training, and supervision. They should also keep their staff informed of industry developments and with the contents of the New Zealand Metal Roof and Wall Cladding Code of Practice.