A prominent strata law firm is preparing to launch a class action against the ACT's builders' insurance scheme, alleging it has misled Canberra homeowners about their rights to make compensation claims for construction defects.
Kerin Benson Lawyers' Chris Kerin said he had been approached by owners of houses and apartments, as well as owners' corporations, who are interested in signing up to a potential lawsuit against the Master Builders Fidelity Fund.
The claim would present an opportunity for owners who have been left to foot the bill for defects after the collapse of their builder to finally secure compensation.
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The fidelity fund was established in 2002 to provide owners with a means to secure compensation for defects and incomplete building work in the event their builder dies or goes bust.
But the fund's trustees are only bound to consider claims which comply with strict criteria, including that they are made within the five-year statutory warranty period and 90 days of the builder being placed in liquidation.
Owners and lawyers, including Mr Kerin, have complained the strict criteria makes it almost impossible to make a successful claim. However, one of the fund's trustee's last year revealed it was paying out millions in compensation claims each year.
Mr Kerin's firm most recently represented the Elara apartment owners in their long running, and ultimately unsuccessful, legal battle against the fund.
In December, the Elara owners' appeal to the full bench of the federal court was dismissed on the grounds that their claim did not meet the eligibility criteria.
But while court ultimately didn't find in the owners' favour, the judgment did sow the seeds for a potential separate action against the fund - which Mr Kerin is now keen to pursue.
The judgment stated that the insurance certificates issued to the Elara owners contained a "misstatement" relating to the criteria for making a claim against the fund.
According to the judgment, the terms printed on the back of the insurance certificates issued to owners stated that they needed to "exhaust all relevant rights of action and other legal remedies against the builder" before lodging a claim.
The court found that statement had "no legal basis" and it was "unfortunate, to say the least," that it had been issued to the Elara apartment owners.
The potential class action would argue that the terms printed on the certificates were "misleading and deceptive" and might have resulted in owners not making, and potentially winning, compensation claims.
Mr Kerin, who has advised more than 80 owners corporations in the past decade, said that for that argument to succeed, it would need to be proven that owners suffered a loss as a result of their reliance on the misstatement.
He said the potential class action would be funded by a third party, meaning owners would not have to dip into their own wallets to pay for legal expenses.
The case could be widened to include other arguments, potentially increasing the number of owners involved, Mr Kerin said. One potential argument could surround the fund trustees' interpretation of the requirement that claims been lodged within 90 days of a builder being placed in liquidation.
In a statement, a spokesman for the fidelity fund said the federal court had "conclusively" dealt with the Elara owners' claim in its judgment in December.
The spokesman said no claims had been made against the fund in relation to misleading conduct.
"While the trustees are sympathetic to the Elara owners' situation, the fidelity fund can only respond to those claims which fit within the approved framework," the spokesman said.
