Peta and Erin Dougherty are twin sisters who wish to make their first purchase in the property market. They decide to jointly invest in a home in the Eastern suburbs of Melbourne. They plan to live in the apartment for two years, then sell and buy their own free-standing houses.
After an exhaustive search, they find out about a planned development by ‘Prestige Ltd’, which is a small building company that have completed many knock-down-rebuild homes in the Eastern suburbs. This site is close to a large park and a tram depot. After demolishing an old house the company will construct a three floor building comprising 12 apartments. The sisters choose the top floor apartment with views over the park. Their apartment has two bedrooms, two bathrooms with an open plan living, dining and kitchen layout. Their ‘penthouse’ apartment is priced at $630,000. The twins sign the off-the-plan contract on 10th December 2017 with promised completion by 10th December 2018. They are excited by their purchase and visit the site regularly.
Building progress is slow. By June 2019 the roof of the building has only just been installed. Peta and Erin complain about the delay, and are told the contract allows for ‘significant extensions’. The contract also states that the building must be finished by 10th November 2019, at which time Peta and Erin could choose to terminate the contract.
From June to August 2019, there is rapid building progress, however the builder appears to be doing poor quality work. The roof job seems rushed as the roof angle is very acute and the cement roof tiles appear to be laid unevenly. There has only been one coat of paint indoors, and there are numerous dents in the fixtures and fittings in the kitchen and the bathroom. The apartment block is awarded a certificate of completion on October 31st and the sisters move in one week later. Initially, they are happy with the fabulous location and modern appliances. After one month there is a persistent smell of damp, and stains have appeared on the ceiling and exterior walls. Peta develops a respiratory problem that is so severe she is admitted to hospital in early December. The sisters contact the owners corporation committee, headed by Jan Friedman, who is a landlord that rents out two apartments in the complex. Jan dismisses their concerns and redirects them to Prestige.
Jamie, the Managing Director of Prestige, refuses to inspect their apartment as his business is in voluntary administration. He explains that no legal action can be commenced against a company during this time. In fact, he is annoyed at this spurious claim –he was under significant pressure to complete this job, and he knows that his mate that he engaged to finish the roof is a good roofer. The sisters engage a local builder to inspect the scale of the damage. They report that the roof is leaking due to poor workmanship. The damp is affecting the apartment and requires approximately $75,000 of reparations to the whole building.
Jamie is keen to turn Prestige around. The administrator has found an interested party keen to buy the business, as there are future development contracts confirmed by Prestige. The potential buyer of Prestige is undertaking due diligence and is keen to find out the extent of any reparation work for defects of completed jobs. Jamie is aware that if the sale of his business falls through, Prestige will be wound up. Jamie reluctantly agrees to mediation, per the dispute resolution clause in the building contract between Prestige and the sisters.
Maria has been assigned this case by the Melbourne Mediation Centre. She rolls her eyes – this is the second case this week she has mediated, concerning a dodgy builder going bust. This really frustrates her, because her mother had recently lost $30,000 in shares from a bad investment in a construction company. She thinks the industry needs to be cleaned up.
a)Who are the parties to the dispute and what are the respective BATNAs and WATNAs of each party
At the start of the mediation, Jamie became irate and said to Maria “This is an outrageous claim based on lies and I shouldn’t even be here!” He thumped the table, sending papers flying and knocking over a whole jug of water onto Erin. Peta furiously responded by saying “We are not lying! This is a dodgy build that needs fixing and if you’re going to act like this, we’ll go to court.” Maria was relieved to see that Peta could handle herself well, but she knew she had to regain control of the situation, as she wanted the mediation to proceed.
b)Discuss the strategy/ies adopted by Jamie and Maria, and any relevant legal issues.
Whilst picking up the jug from the floor, Maria said to Peta “This is your opportunity to deal with the conflict. Don’t lose this opportunity. My job is help you get this matter amicably settled. Clearly, you have been wronged and through mediation we can find a solution to your difficulties.” The parties begin the mediation. After eleven hours, when the parties are exhausted, a settlement is finally reached. The next day after the mediation Jamie is disappointed as he believes he was pressured by Maria to agree to this settlement. He is not sure that the company can even legally make any payments. Erin wonders where the rest of the money will come from. Both parties contemplate re-opening the matter, but are unsure if this is possible.
c)Discuss the issues raised, including any relevant legal issues.
Part Two: Research essay
You are required to choose ONE of the following essay questions out of a choice of two:“The model of evaluative mediation is efficient and effective. Transformative mediation has no place in court-connected contexts.”
(a)Critically discuss this statement with reference to relevant models and refer to the literature, case law and legislation where appropriate.
“The ‘collaborative practice’ model of ADR will never achieve mainstream success in Australia, because the notion of a ‘non-adversarial lawyer’ is a fiction.”
(b)Critically discuss this statement and refer to the literature, case law and legislation where appropriate.