The decision is a major blow to owners, who had estimated the damage bill at Elara at more than $20 million.
The fidelity fund was established in 2002 to provide consumer protection against incomplete building work. Property owners can make claims due to a builder’s insolvency, disappearance or death.
Owners are eligible to make a claim within 90 days of one those events, provided it comes within five years of the granting of a certificate of occupancy for a new unit. Compensation is capped at $85,000 per unit owner.
The certificates at Elara were issued on May 25, 2007, meaning the fund’s trustees were only obliged to consider payouts for claims made before May 26, 2012.
The owners made their first claim to the fund on August 18, 2017, a month after the project’s builder, B&T Constructions Pty Ltd, was placed in liquidation.
Until that date, the owners and the builder had been locked in Supreme Court proceedings amid allegations poor building work had resulted in numerous defects at the Thynne Street complex, including water leaks.
In their submission to the Federal Court, Kerin Benson Lawyers, acting for owners, argued the grounds for it to make a claim against the fund did not exist until the builder collapsed on July 20, 2017.
But in a 44-page judgment handed down on Wednesday, Justice Griffiths said the trustees of the fund were only obliged to consider claims made within the five-year statutory warranting period — which expired at Elara on May 26, 2012.
«Equally importantly, the applicant’s contrary position would give rise to remarkable and presumably unintended consequences,» the judgment read.
«Under [the owners position] a claim could be made against the fund say 20, 30 or 40 years after the statutory warranties expired, when the builder in question either became insolvent or died.»
The owners have been ordered to pay the fidelity fund’s court costs.
The owners’ lawyer, Chris Kerin, said his clients were considering appealing the verdict to a full bench of the Federal Court, on the basis Wednesday’s ruling was made on an error of law.
The owners have 21 days to lodge an appeal.
Mr Kerin would not elaborate on the exact grounds for an appeal, but said the ruling had exposed problems with the fidelity fund scheme.
«The decision deprives the scheme of its usefulness as a consumer protection device because of its narrow scope,» Mr Kerin said.
Mr Kerin said the decision marked «another hurdle» for owners in their long-running battle for compensation.
«Most owners corporations would have given up by now, but at Elara they remain determined for justice to be served,» he said.
Elara apartment owner Dave Allen was disappointed by Wednesday’s ruling.
«We’d hoped that the Master Builders Fidelity Fund wouldn’t fight us on this, and they’d assess our claim on its merits,» he said.
«Like I’ve said before, nobody throughout this process has been willing to stand up and take responsibility — not the builder, not the government and now not the fidelity fund.»
A spokesman for the Master Builders Fidelity Fund said: «The Fidelity Fund was established by the ACT Government in 2002 to provide a highly-regulated consumer protection service. As a result of the rules governing the scheme, it can only respond to those claims which fit with this framework, otherwise it is misapplying its funds and breaching the terms of its trust».
Master Builders of the ACT chief executive Michael Hopkins said he sympathised with the Elara owners, for whom Wednesday’s decision delivered no «remedy to their ongoing problems».
«This case demonstrates the importance of implementing the building quality reforms announced by the ACT Government,» Mr Hopkins said.
Dan Jervis-Bardy is a Canberra Times reporter.