General Purpose Standing Committee No. 2

Debate resumed from 14 May 2008.

The Hon. CATHERINE CUSACK [2.33 p.m.]: I congratulate the committee on its excellent inquiry into the operation of the Home Building Service. I know it was harrowing work because there are many victims of the dysfunctional New South Wales home warranty scheme. The repeated claims by the Minister and the Government that these are old cases that have been addressed, and that have somehow been exaggerated by unfortunate individuals who have been frustrated by legal advice they have received, are a complete and utter cover-up of serious dysfunctional problems in the scheme.

The Office of Fair Trading has failed to accept any responsibility for consumer complaints relating to the home building industry. The immediate response of the Office of Fair Trading to consumers who ring up and say, "I need to make a claim on home warranty as my house is falling apart or my builder has disappeared", is the suggestion for them to go away and get a lawyer. People are told to try to fight it out with their builder in the Consumer, Trader and Tenancy Tribunal [CTTT]; they are basically left to their own devices. Most of these people have never had interaction with the legal system. Many of those I have been seeking to assist are children and single parents with jobs. Many of them have been fighting for their entitlements as consumers for three to seven years and are a shell of their former selves.

I shall briefly describe some of the people I meet every week who are fighting the Office of Fair Trading and the Vero insurance company, in many cases because of stupid mistakes made in the Consumer, Trader and Tenancy Tribunal, that they are forced to take to the Supreme Court to have overturned. These people are ordinary Australians, just like you and me, who wanted to build a new home or make extensions to their existing home. Things have gone wrong for them and they now find themselves in an absolutely ruinous fight for their legal entitlements. They enter the process believing they have home warranty insurance and that they are covered. They are then horrified to discover that they are completely on their own, fighting people who are often very experienced in the system. A dodgy builder who has been before the Consumer, Trader and Tenancy Tribunal many times has an enormous advantage over the consumer. Consumers are doing this all by themselves.

There are real problems in the Consumer, Trader and Tenancy Tribunal, and I will highlight those problems should a certain item of business on the Notice Paper ever come before this House. In a disturbing number of cases I find that people of non-English-speaking backgrounds are naively going to the tribunal only to be told by an officer quite arrogantly that he does not like them and will not listen to their case. Those consumers are forced to go to the Supreme Court for a formal ruling that it was wrong for the member to ignore them and their case. They can then return to the tribunal. But they are out-of-pocket every step of the way.

The system requires people who have a problem with their builder to go to the Consumer, Trader and Tenancy Tribunal for an order for rectification. However, if the builder fails to rectify the problem, or if a new matter emerges the tribunal will not consider—they are told that they have one shot at their insurance scheme and that is it—they then have to go to the Supreme Court. Having proved in the tribunal that there is a problem with their house—a wall is falling down or whatever—they then get an order against the builder. But if the builder fails to comply with that order, they must return to the tribunal for an enforcement order and then go to the District Court for a court order. If the builder still fails to comply, they have to go back to the tribunal again.

The Office of Fair Trading will not help them at this point because it claims that until the builder is in liquidation a claim cannot be made on their home warranty. They are then required to take the builder to the Supreme Court for liquidation proceedings. In one of the cases documented by this inquiry builder went off and reinvented himself, Phoenix like, in a new company. The builder, who already had numerous breaches of his licence recorded by the Office of Fair Trading, commenced working as a supervisor in his son's company. Because it was a different arrangement, he could continue business as usual despite all the problems and misery he had caused. Meanwhile, the consumer is still trying to chase up all these matters in the Supreme Court. Finally they go to Vero insurance and say, "I have done all of this work. I am now completely ruined. My children have not seen me for a long time." In one tragic case a man told me that he had been robbed of his children's childhood because he had spent so many nights looking at legal papers. The enormous toll on these individuals cannot be overstated. When I have spoken to them, they cling to their documents, which they know back to front.

This has taken an incredible toll on some people. Many have ended up financially ruined and emotionally exhausted and their relationships have broken down. A gentleman who lives at Cabramatta who won all his court cases against his builder and the Consumer, Trader and Tenancy Tribunal is now virtually bankrupt and lives in a caravan adjoining his house. His father is angry with him for fighting the insurance company, which had offered him an inadequate settlement that he refused to accept on principle. His mother had a stroke when a sheriff's officer arrived with a court order to take away all the family possessions. He now faces four separate legal actions. The bank has taken legal action against him. For the past six years he has repaid a construction loan for a house he cannot live in. Because of increases in interest rates, his repayments are now $4,100. The bank is now foreclosing and he will lose the house that he has fought to have rectified. A solicitor has taken legal action against him for unpaid fees. He also faces legal action from the council. He has been ordered by the Land and Environment Court to fix the house, but he does not have the money to do so. Ironically, this council certified the house. Prior to construction of the two-storey house, the ground was not impacted properly and now the house is sinking and falling apart. Council officers certified every stage of construction. Now the council has taken action against him to fix the house.

The fourth legal action is from the insurance company. He again beat the insurance company in the Supreme Court earlier this year and the insurance company has appealed that decision. It seems that the insurance company does not care how many times it loses in court. The aim of the game is to financially drain, bully and destroy in order to teach people a lesson: when the insurance company offers an inadequate settlement, take it or be destroyed. This man, who came to Australia as a very young man, has fought his case on principle. I detect in him a measure of disbelief in the way the system operates. I am distressed by my dealings with these poor people. I know that the information I get on my desk is the same information the Minister for Fair Trading gets on hers. I am dismayed that anyone, particularly a Labor Minister, could be so impervious to the misery and wreckage of these people's lives. Minister Burney promised a response to this report early this year. That response has not been provided. I hope a response will be forthcoming by the due date, which is approximately one week's time.

The Hon. ROBYN PARKER [2.44 p.m.], in reply: I thank all honourable members who participated in this debate for their considered and thoughtful comments. I particularly thank the committee members who conducted the inquiry and the Hon. Jennifer Gardiner, the former chair of General Purpose Standing Committee Standing Committee No. 4, which commenced the inquiry. It is relevant to note that since this report was tabled a major building company in New South Wales has collapsed. The Home Building Service, the Minister for Fair Trading and the insurance company, Vero, are under the microscope. The longer this goes on, the more issues arise about the Home Building Service and the Office of Fair Trading and the glaring and obvious deficiencies in the home building process. The frustration of people and the stress and strain on families who are involved with the recently collapsed building company are evident. They try to get solutions, while their buildings fall apart and their bank balances dwindle. Their circumstances are dire. Many are living in caravans. Turmoil swirls around them and everything is beyond their control. As the Hon. Catherine Cusack said, the longer it takes, more people fall into an ever downward-spiralling debt trap.

Almost every consumer who participated in our public forums spoke of incredibly stressful and distressing times that have seen their dreams fall apart. It is hard on families and individuals. We need a better system. This report is a step towards making a better system and improving the Home Building Service. It is not a panacea because there are problems at almost every step. The committee made recommendations to improve the operations of the Consumer, Trader and Tenancy Tribunal. We did not go so far as to recommend that we turf out the home warranty insurance scheme and return to the original scheme. But we highlighted issues relating to the operations of the home building warranty scheme and insurance, which is a policy of last resort. The committee indicated the need for an additional trigger. That is absolutely essential if consumers are to be protected.

The committee also raised concerns about conflicts of interest with the home warranty insurance. Builders are frustrated with the whole process. If they are unable to get insurance, they are financially disadvantaged. I note that at the same time as our report and inquiry into the Home Building Service, the Senate held an inquiry into home warranty insurance. I note also that Tasmania has taken steps to address its home warranty insurance issues. Queensland has a different system to ours in New South Wales. These matters must be addressed and improvements made. The recent collapse of Beechwood Homes has brought these issues to the public's attention. I hope that the consumers and builders who presented to the inquiry have a quick resolution of their matters, which will assist in alleviating their stress. For some of them it is a life-changing issue that they can never repair, but we hope there are ways that their lives can move forward.

The inquiry receives ongoing correspondence and I note that some of the consumers who participated have concerns about the feedback they receive from the Office of Fair Trading. We urge the Office of Fair Trading and the Minister to focus on those cases presented to our inquiry and on ongoing cases following the HIH Insurance collapse, prior to the establishment of the Home Building Service, so there is some resolution and people can get on with their lives.

These are strong recommendations and well received by consumers and builders alike. We hope the Government takes note that with goodwill on the part of the Minister and the Government, the recommendations would go some way in resolving many of the problems within the Home Building Service. We look forward to the Government's response and we certainly look forward, on behalf of consumers, to improvements along the way. There is more work to be done in terms of the Consumer, Trader and Tenancy Tribunal and the home building warranty process: the whole process is under the microscope. I again thank all participants in the inquiry—the committee, the secretariat staff, and all honourable members who have participated in today's debate. I commend the report to the House.

Question—That the House take note of the report—put and resolved in the affirmative.

Motion agreed to.