Judge Brown completes Fletcher Homes reviews
19 March 1998
The process established by the Commerce Commission to settle homeowners' allegations of over-valuations of homes built by Fletcher Homes has made good progress Commission Acting Chairman Peter Allport said today.
Of the 590 claims, 125 have now been settled through this process and 109 are progressing. Nineteen homeowners' claims were not settled after mediation.
Mr Allport said that the independent reviewer involved in the process, Judge Mick Brown, has now completed his work and replied to the homeowners who contacted him.
Of the 167 homeowners who asked Judge Brown to review their claim, only 43 gave him their side of the case. He has determined that 33 of these will be included in the mediation process should they choose to be. He decided that the remaining 10 do not belong in the process.
Mr Allport said it was unfortunate that there was now a group of homeowners, all represented by the same law firm, who have missed the opportunity of being involved in the mediation process because they failed to provide Judge Brown with their side of the case.
Each of these homeowners was written to by the Commission and advised that if Judge Brown was to review their cases, then they or their legal representatives must provide the necessary information to him. The law firm involved was advised of Judge Brown's requirements several times.
Mr Allport said 90 percent of those who participated in the resolution process had independent expert advice before choosing to enter into the process, during mediation and, importantly, when deciding whether to accept any agreed settlement.
The Commission began court action under the Fair Trading Act in the Christchurch High Court against Bennett and Associates Limited, Fletcher Homes Limited and Residential Mortgages Limited (RML) in February 1995. Legal arguments from Bennett and Associates went through the High Court and the Court of Appeal. The Commission's views were accepted, and the Court of Appeal decided that the High Court should hear the case.
The Commission alleged homeowners had bought 10 Christchurch homes with inflated valuations as part of a package offered by Fletcher Homes and RML. Bennett and Associates was the valuer involved.
Independent valuations obtained by the Commission were all $10,000 to $20,000 less than Bennett and Associates valuations.
The companies offered settlements to the 10 homeowners involved. All offers were accepted.
The Commission was aware of other homeowners in Christchurch and other areas who were concerned that their houses may also have been over-valued when they bought them. However, all of these homeowners had bought their houses more than three years earlier. The Fair Trading Act has a three-year limitation period - events that happened more than three years ago are not covered by the Act.
Homeowners are free to take their own private legal action under contract law or tort, but this is outside the Commission's jurisdiction. The Commission has jurisdiction in relation to the Fair Trading and Commerce Acts only.
The Commission negotiated a settlement with Fletcher Homes and RML. Under the settlement the Commission would withdraw its court action if Fletcher Homes and RML entered into mediation with the homeowners outside the court action, and the Commission was satisfied that the process was carried out in good faith.
Mediation is additional to homeowners existing legal rights, and does not stop them taking their own court action if they are unhappy with the results of mediation. It is run independently of all parties by Lawyers Engaged in Alternative Dispute Resolution (LEADR).
In addition to the Commission's involvement, there have been allegations of fraud and involving the Mortgage Guarantee Scheme. These allegations are outside the Commission's jurisdiction.
Media contact: Fair Trading Manager Rachel Leamy
Phone work (04) 498 0908
Communications Officer Vincent Cholewa
Phone work (04) 498 0920
Commission media releases can be viewed on its website www.comcom.govt.nz