How Building Cases Are Lost 9

Monday, September 5th, 2016
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If a building dispute runs to conclusion, there will obviously be a winner and a loser. Yet those whom become disillusioned with jurisprudence will be entitled to wonder why there have to be casualties in litigation.

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.

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  1. Branko Mladichek

    Excellent article from Kim and a compelling reading for anyone in a building dispute.
    I find it a perfect image for colouring in from my expert witness experience.
    In a dispute, parties are the promoters, lawyers are the ring masters and experts the fighters in the ring. I agree that the outcome is largely contingent on the quality of your fighter but the reason why the fight takes place in the first place is often because there was no second opinion and no risk assessment.
    If you have the serious illness diagnosis you would want a second opinion from another doctor, so why not in a building dispute. Does not your financial health warrant a second opinion?
    The divergence in cost estimates between experts may be puzzling to some but in the reality, it is inevitable and hardly a mystery as I have set out in my article on Homeone Forum (under building consultants). But there is more. Expert for the builder will usually not allow for "procurement" for delivery of remedy from another builder and will typically not allow 43% margin (30%margin has been accepted as reasonable in VCAT for remedial works and with GST10% becomes 43%).
    Notwithstanding that there may be a gulf between experts estimates when it comes down to the review of individual cost items, many times I have agreed with opposing expert (when it made sense) and many times they went along with mine.
    I agree with Kim that selection of your expert witness is of paramount importance and I have a tip on that in another article on Homeone Forum (under building consultants)
    The best disputes are the ones you can avoid or quickly nip in the bud.
    If you can't then get an expert that will save you money or stop you wasting more.

  2. Mark Whitby

    Good article Kim.

    There is but one more thing to say… and something so few venture to say for some unknown reason.

    The reason for disagreement (as I have written several times on this site) is that there is no thorough definition of defect. This one thing, by itself, could virtually rid us of the need for disputes.

    And as to costs, such a definition will make it perfectly clear as to the required scope of works that complies with the definition… which must include time related issues. Sadly the Domestic Contracts Guarantee Act and Consumer Affairs definitions do not. As to the various Codes for Building Inspections… they are laughable when it comes to defining defect, being more interested (it seems) in disclaiming the building consultant from the need to inspect more than 50% of each and every house, unit, additions project.

  3. Kim lovegrove

    Thank you for your feedback Branko, it is always reassuring when one strikes the right note. Please feel at liberty to share the article if you think that it may be of interest to other readers.

  4. Kim lovegrove

    Mark your point regarding the definition of a defect is on the money, literally and metaphorically. For instance when is a concrete crack a defect or when is it simply a blemish or the consequence of natural desiccation and not sinister. I for one don't know hence the need for an expert. Once we had carriage of a horrible dispute one expert said the converte foundations had to be torn up, the other said they didn't and so much turned on this. You are right there need to more published tolerances and definitions on point. Thank you for bringing this up.

  5. Ross Brown

    Excellent article Kim, with many pertinent points for both lawyers and experts, withsome helpful comments as well.

    A factor which rarely seems to raise its head, but is encountered often, is the inexperience of many experts in building matters, the paying of only "lip service" to codes of conduct, and the unwelcome and unhelpful "clash of ego" where experts seem more interested in their own importance, than in providing assistive evidence to progress the matter.

    Expert evidence that disagrees with an instructing client's preferred position may ultimately act to prevent flogging a dead horse, and hence actually save the client valuable time and money. Better to know earlier than later!

    Branko makes an excellent point with respect to a second opinion. Although expert evidence can be expensive, a second opinion may allow further consideration of issues in the matter in a collegiate environment and may provide useful insight into issues not considered by the principal expert or their lawyers.

    • Mark Whitby

      Ross and Branko,… did you mean second building consultant opinion, because that was unclear.

      I disagree that a second opinion is required unless it is in a specialist field such as fire safety or soil science or truss design / performance, gas fitting, costing or such like. A thorough definition of defect will cut through most incorrect opinion like a knife. Adequate building science knowledge does the rest. Second (building consultant) opinions merely show a lack of expertise in the first one. It's as simple as that. Bring sufficient evidence and experience to the table and opinions are indisputable. One of the roles of the expert building consultant is to get the best in the relevant specialist fields to back up what is obviously a defect.

  6. Great truth Professor Kim Love Grove,
    The concrete slab you are revering to, was a classic miscalculation for the greedy owner as you wrote in one of your great blocs.
    The comments are also well founded and to the point.
    As Aspecialy this excellent write up is so all telling, fit to place it in my website that is if you are not objective to that idea.
    Kind regards
    My dear Friend you done it again ✅✅✅✅✅

  7. Kim lovegrove

    Gerrit feel free to circulate the piece. One thing though I have in many years of practice never seen a case of greed being a motivator. Owners in the overwhelming majority of matters find themselves in desperately challenging circumstances in building disputes and the effect of a building dispute is akin to a 'wrecking ball' financially and emotionally. I sympathise with all of those whom find themselves embroiled in the furnace of a building dispute hence my inclination to write such pieces with the view to maybe assisting with the demystification of this paradigm.

  8. Thank you My friend ✅