Damages in excess of $1 million have been awarded to seven families after Australian Competition and Consumer Commission representative action against Collings Construction Co Pty Limited and Venture Industries Pty Limited over home-building.
In the NSW Supreme Court on Tuesday, Justice Hunter handed down his judgment, describing Collings Constructions as 'cynical' and Venture as 'predatory' in its treatment of the families.
The ACCC took action both for injunctions and on behalf of the families, alleging misleading, deceptive conduct and unconscionable conduct in breach of the Trade Practices Act. The action began in the Federal Court in September 1993 and was transferred to the Supreme Court in September 1994.
The six defendants were: Collings Construction Co Pty Limited, Wayne Collings, Venture Industries Pty Limited, Harry Kioussis, Penny Kioussis and June Collings. Only June Collings was not found implicated in the conduct..
In his judgment, Justice Hunter said of Collings:
"[Collings Construction] held itself out as a builder or builder supervisor which would oversee the building of the subject works when it had no intention of involving itself beyond design stage. ....[Collings Construction] set about obtaining the commitment of the owners to arrangements with it by constructing a contract price which was superficially and deceptively very competitive when, in fact, it was constructed on a contractual foundation of provisional sum items and provisions for variations, which, in the circumstances ensured that the contract price could be greatly increased during the performance of the works by adjustment of provisional sum allowances and by variation claims.
Justice Hunter also said of Collings:
"[Collings Construction offered] a contract price which was within the prospective clients budget, and superficially, highly competitive, but which in reality, was illusory and susceptible to significant increases. Dealing with a customer whose funds were limited, and dependent usually on loan facilities, I regard this technique of Collings Construction as cynical in its treatment of the customer....Collings Construction was well aware of the propensity of Venture to take advantage of this contract structure by exploiting its provisional sum items and variation provisions and by forcing fresh contracts upon the owners in the knowledge that they were committed to the project through the payment of non-refundable deposits to Collings Constructions.
Justice Hunter also commented of Venture Industries:
"far from being a highly qualified builder of excellence and a craftsman, (Venture) was extremely incompetent, indifferent to the needs and interests of the owners to the point of being a predator rather than the provider of services."
Justice Hunter, in awarding damages for vexation, commented he had no doubt that damages for vexation or aggravated damages should be awarded against Venture.
"In all instances, except in the case of the Quaglias, there was clearly considerable distress and anxiety created by the pattern of conduct of Venture in the way in which it virtually forced contractural commitments upon the owners, deceived them as to the contractual consequences of the documents which they were required to sign and as to the nature of the organisation with which the owners were dealing. ...The damages for the most part I would treat as damages for vexation, except for the acts of harassment, intimidation and damage to property which fit more into the category of damages for aggravation."
"The case serves as a severe warning to people wishing to build a home." ACCC Chairman, Professor Allan Fels, said today.
"These families wanted only to build a home, and instead have suffered years of distress and this protracted litigation. Their problems were at the extreme end of the scale, but unfortunately those experiences are far more widespread in this industry than they should be. The sort of problem areas, illustrated in this case, that families seeking to build new homes should look out for include: underquoting for business, inadequate dispute resolution; complicated contracts and indefinite building times.
"In this case in one instance, a family thought that their house package would cost about $167,000 to build. They ended up paying out about $260,000.
"After the builder told them the house was finished, they moved in. But they found the house was so defective they had to move out again, into rented accommodation, pull the house down and start again. At that time, the insurance was to a maximum of $60,000 - a huge shortfall."
