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Inflation devalues disputes tribunals

Inflation devalues disputes tribunals

When we get calls from clients involved in a dispute, the first question we ask is not “what happened”: that would be time-consuming and we would have to bill the client. No, it’s “how much is at stake”. If it’s not a lot of money, it’s far cheaper and also quicker for the client to file the dispute in the nearest disputes tribunal, which accepts most claims up to $7500 in value. The tribunal’s jurisdiction can be extended to claims of up to $12,000, but only if the parties agree to the extension. The disputes tribunal offers a quick remedy, which must be fair and just but does not have to follow the letter of the law. No lawyers are allowed unless they are a party.

The problem is obvious: the $7500 cap was set in 2002. Even in the few years since then, inflation has reduced the usefulness of the tribunal. This hurts consumers and businesses as it means they have to go to the district court more often, which usually means lawyers’ fees and other costs. Well, that’s the theory. In practice, unless it’s a summary judgment situation (ie there is no defence that has a dog’s show of succeeding) the client often flags disputes under $25,000.

A recent court case sets out the problem in stark detail. A high court judge was asked to review an order of a disputes tribunal referee. The initial claim to the tribunal was a consumer claim for a small sum relating to the price of home renovation services, but the builder filed a counterclaim for labour worth about $11,000 in the district court. The tribunal’s order included a recommendation (not particularly well worded) that the counterclaim should be referred to the disputes tribunal. As the high court said, the referee cannot force the parties to agree that a higher claim can be resolved by the disputes tribunal. But the referee was entitled to suggest (and did) that the parties have a long, hard think about whether it might be best to resolve their problems in the low-cost disputes tribunal.

I shudder at the cost of taking an $11,000 claim to the district court. As the judge said in the high court, “It is hopelessly uneconomic for a building dispute involving just over $11,000 to be the subject of both a disputes claim and a civil claim, and in different cities.”

Consumer magazine is on to it. It asked political parties running in the upcoming election if they support raising the financial limit for disputes tribunal claims up to $50,000. While only the Maori Party agreed that $50,000 was exactly the right amount, almost all parties felt that raising the limit would improve the system. Responses pointed out that it would give increased access to justice, particularly for people with limited financial resources, and could reduce strain on other court systems.

My view is that the limit should be raised to at least $20,000 as of right, with a limit of $40,000 by agreement. Richard-the-staff-solicitor suggests that the Disputes Tribunals Act provides for the limits to be increased annually in line with the Consumer Price Index. It’s a good idea: this would mean that the value of claims able to be heard by the Tribunal would not be eroded over time by inflation.

As the high court judge in relation to the $11,000 renovation claim said: “The need for a pragmatic solution is obvious.” He’s so right.

Rae Nield is a solicitor specialising in marketing law. This article is intended for general information, and should not be relied on as specific legal advice. You should consult a lawyer for advice relating to your own specific legal problems. Rae Nield can be contacted at raenield@marketinglaw.co.nz.


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