Canterbury builder fined

Canterbury builder fined for failing to supply building guarantees

Gerard James Thomson, the Director of construction business, Flaxmill Ltd, was fined $12,800 and ordered to pay $16,700 in compensation to two of the three complainants for making false representations about providing Homefirst building guarantees to home owners.

Mr Thomson appeared in Christchurch District Court today having earlier pleaded guilty to three charges under section 13(i) of the Fair Trading Act 1986.

The Commerce Commission brought the case against Mr Thomson after three home owners in the Canterbury region complained of not receiving a builder’s Homefirst guarantee when they contracted on the basis that Thomson would apply for the guarantee.

In fact, Mr Thomson never intended to apply for an independent guarantee and, as a result, his customers didn’t receive the protection they were led to believe they had.

In sentencing Judge Callaghan said the contract specifically provided that a Homefirst Guarantee would be applied for and most home buyers, particularly first home buyers, rely on the confidence they can expect from a guarantee such as this.

“[The conduct] cannot be described as simply careless. It is more than that – it is gross carelessness or gross recklessness because of the very nature of the contract that said a guarantee would be applied for.”

“The issue of a Homefirst Guarantee not being applied for has left [complainants] bereft of the comfort of the sanctity of a guarantee,” he said.

Commissioner, Anna Rawlings said Mr Thomson created the impression that his customers would receive an independent CBANZ Homefirst Guarantee for Flaxmill’s building work and this is an important reason why consumers choose a particular builder.

“These property owners should have had the peace of mind that they had a Homefirst Guarantee in place if things went wrong, but they were let down.”

“Two of the complainants discovered faults in Flaxmill’s workmanship which may have been covered by the guarantee, but Mr Thomson’s failure to make the application meant they didn’t receive the independent cover that they should have,” Ms Rawlings said.

The complainants all had contracts which stated that an application for a Homefirst Guarantee would be made prior to the commencement of the work, along with other oral representations made by Mr Thomson about having a guarantee.

When it was discovered that the application was not made, the home owners have been unable to remedy the situation as the Homefirst Guarantee application must be made before building work starts.

“Representations about building contracts need to be scrupulously accurate, not least because of the importance of the purchase. Whether they are making promises orally or in writing, the building services provider needs to do what they’ve committed to do. We also encourage consumers to follow up where possible to make sure they are getting the service they think they are getting,” Ms Rawlings said.

Background
Homefirst Guarantees are provided by the Certified Builders Association of New Zealand (CBANZ). They provide cover where a builder fails to complete the building works or to remedy defects for reasons including the builder’s death, disappearance, insolvency or wrongful refusal to complete the works. In such instances, the insurer pays for the building works to be completed or the defects remedied, up to specified maximum amounts. Homefirst Guarantees provide cover for up to 10 years and may be transferred to subsequent purchasers of a covered property. Applications for Homefirst Guarantees must be submitted prior to building work commencing.

In a previous case taken by the Commission in 2010, two directors of a Christchurch-based building company were fined $15,000 each and were ordered to pay a total of $97,000 in reparation and a further $30,000 for emotional harm reparation for six complainants. The company, Balmoral Homes Limited, misrepresented to customers that they would receive Master Build Guarantees for their work despite Balmoral Homes being suspended from the Registered Master Builder Federation. In other instances, Balmoral Homes accepted payments from a number of consumers for Master Build Guarantees but did not forward the applications and payments to Master Build Services. You can read more here.

ENDS

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