Fletcher Homes, Residential Mortgages and Bennett and Associates offer compensation to home buyers
Published29 May 1996
The Commerce Commission is very pleased with progress towards an out of court settlement with Fletcher Homes Ltd, Residential Mortgages Ltd (RML) and Bennett and Associates Ltd over allegedly misleading valuations in relation to a first home ownership package.
The Commission has alleged in the Christchurch High Court that the package was based on inflated valuations of homes.
Commission Chairman Dr Alan Bollard said settlement is expected soon and it is important to realise it will be in two parts.
One part applies to court action taken by the Commission over 10 Christchurch properties. This action was initiated just within the three year limitation period imposed by the Fair Trading Act.
The three companies have settled with nine of the complainants and are negotiating with the tenth. If the complainants are all satisfied with the compensation they receive, the Commission intends, as part of the settlement, to withdraw its court action.
The individual settlements involve details of home owners' personal finances and family homes and are confidential between the home owners and the companies.
In addition the second part aims to deal with other home owners who bought homes built by Fletcher Homes, and who have some question about the valuation of the home, even if they may be outside the three year limitation period.
"Our legal opinion, based on a Court of Appeal decision in a different case, is that neither we nor anyone else could take action under the Fair Trading Act if the alleged breach happened more than three years ago," Dr Bollard said. "And that appears to be the situation with these other homeowners."
Individuals who believe they have been misled by actions more than three years ago could take their own legal action under contract law or tort, but the Commission cannot.
While the details have not yet been finalised, the aim of the settlement we are negotiating is to give these people a simpler and quicker procedure for taking their allegations directly to Fletcher Homes.
What is being proposed offers a mechanism for people who cannot take a Fair Trading Act case to negotiate in good faith any matters directly with the companies.
"We are very pleased to see such positive results," Dr Bollard said. "Not only are the individuals on whose complaints we acted to receive compensation, but, also, subject to the settlement being successfully concluded, so are other home owners in similar circumstances who are outside the three year limitation period."
The Commission cannot comment further because the matter is still before the court and settlement negotiations are underway.
"We had not intended to make a media release while the case is still in court and settlement negotiations are at a delicate stage, but we consider it necessary to respond to comments made in Parliament this afternoon," Dr Bollard said.
The Commission began court action in the Christchurch High Court in February last year. Legal arguments went through the High Court and then the Court of Appeal before it was resolved that the case should be heard.
The Commission alleged home buyers had bought homes with inflated valuations as part of an ownership package offered by Fletcher Homes and RML. Both are subsidiaries of Fletcher Challenge.
Fletcher Homes built the homes, RML offered 90 percent to 100 percent finance and Bennett is a Christchurch valuer which valued some of the properties.
Some people who bought the properties later tried to sell them or refinance their mortgages. They found that the sales price or subsequent valuations did not come up to their expectation.
As part of the Commission's investigation, it obtained valuations of what the properties could have been worth when they were first sold by Fletcher Homes. These independent valuations were all $10,000 to $20,000 less than Bennett and Associates' valuations.
Media contact: Communications Officer Vincent Cholewa