Question on HIH Insurance

Extract from Hansard

Legislative Council
29 May 2001

Mike Elliott
Leader Australian Democrats
Member of the Legislative Council

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The Hon. M.J. ELLIOTT: I seek leave to make a brief explanation before asking the Minister for Consumer Affairs a question in relation to the HIH-FAI liquidation.

The Hon. M.J. ELLIOTT: A constituent recently contacted me explaining that he, his partner and four children stand to lose some $120 000 due to the HIH collapse and due to no fault of their own. In June 1997 this constituent signed a contract for a new home with a builder who at the time was a member of the Master Builders' Association, using the association's pro forma contract. Included in this contract was an allowance for an insurance policy with FAI against the failure of the builder. The constituent claims not to have been informed of any choice of insurer, as FAI was the preferred insurer of the Master Builders Association.

On 8 October 1997 hand-over of the house occurred, with the constituent signing an agreement with the builder that unfinished work would continue after hand-over. Through 1997-98 no further work was completed, and a series of defects was uncovered, culminating in the City of Onkaparinga issuing a defect order against the house on 28 October 1998. The issue was subjected to a protracted court battle until on 6 June 2000 creditors placed the builder in liquidation. In July 2000 a solicitor on behalf the constituent lodged a claim with FAI for $78 000 in damages. Prior to this time the builder ceased to be a member of the MBA, without the constituent's being informed.

In February, FAI offered a settlement of less than half the amount lodged. By March 2001, FAI and HIH were placed in liquidation, leaving the constituent's claim outstanding at this time. I understand that, if the house ends up being demolished, it will cost $90 000, and $30 000 has already been accumulated in legal fees in seeking some justice in this matter. I rang minister Hockey's office earlier today to get a clear understanding as to whether or not the federal package on offer would cover these people, and I was told quite clearly that they would not be covered, and that in their view this was a state matter. This young family is just one example of people who face losing everything they have and being left with a considerable debt- perhaps up to $120 000. Will the government do anything to help families in these sorts of situations?

The Hon. K.T. GRIFFIN (Attorney-General): If the honourable member would care to let me have the detail I will certainly have the matter followed up. The position in South Australia is not anywhere near as serious as it is in the eastern states, where there was a very heavy reliance on insurance through HIH. I know that the Office of Consumer and Business Affairs is endeavouring to monitor the developments interstate. There has been some consultation between the Commissioner for Consumer Affairs and his counterparts in other jurisdictions, as well as consultation with the commonwealth. The state has not made any decision about what steps, if any, should be taken in relation to those-

The Hon. K.T. GRIFFIN: I asked the honourable member to give me details of the matter, and I will have the Commissioner for Consumer Affairs talk to them and get a full picture of what has occurred in that context. It is all very well for the honourable member to get his publicity by slapping on the table a whole range of facts in a particular instance. It happens all the time: members do it and I know that. But from my point of view I need to have the details so that I can at least have them looked at carefully to see whether the issues can in some way or another be appropriately addressed.

So far as the government is concerned, no decision has been taken in respect of the way in which builders' indemnity issues will be dealt with in this state. There have been some consultations between the two industry organisations-the Master Builders and the HIA-and the government, and as I say no decision has yet been taken. I will have the matters followed up.